Hon Simon Bridges: Block Offer 2015 release

Minister of Energy and Resources

30 March 2015

Good morning,

It is great to be with you today and can I warmly welcome our international guests. May you have a wonderful time in New Zealand.

Over the last couple of years we’ve been hearing a lot about the idea of an 'energy trilemma'. As the World Energy Council puts it, we need to balance the tensions between the need for energy security, society’s need for accessible and affordable energy, and the need for environmental sustainability.

Energy diversity will be the key to achieving all these aspirations in the right balance. While the world must progressively transition towards a low carbon future, it can’t and won’t happen overnight.

This is why New Zealand takes a long-term view, with a mixed and balanced approach to our energy future, which sees us pursuing opportunities in both renewable and non-renewable energy.

Earlier this month I spoke to the Downstream conference about New Zealand’s competitive edge relative to most of the world, particularly given our abundant energy resources. I spoke about our competitive advantage in renewable energy.

We are a world-leader in geothermal energy, we have world-class wind generation, our hydroelectricity is extensive, and our abundant forestry resources have incredible potential as a resource for bioenergy.

But the role of non-renewables, including oil and gas, should not be understated.

As I have said before, oil is our nation’s fourth largest export, produces significant incomes for many thousands of workers, not to mention the hundreds of millions that go to the Crown each year to pay for essential infrastructure and services New Zealanders expect and deserve.

All of this comes from one petroleum basin, Taranaki, but we have 17 others that are underexplored – and I want to see that change.

I repeat, energy diversity – both renewables and non-renewables - will be key to achieving both New Zealander’s and the world’s aspirations as we transition to lower carbon economies.

It would be artificial today if I didn’t mention the sharp fall in the oil price globally. For New Zealand and, I suspect, the world economy this development is on the whole very positive, benefiting consumers and businesses alike.

Of course the fall caused –perhaps primarily – by international energy companies’ success in technological innovation and new exploration leading to strong oil and gas supply – has also meant a variety of responses from the upstream sector including reduced budgets for exploration activities in the short to medium term.

Be clear however: the fundamentals haven’t changed. Energy companies can - and must - look past the immediate and take a long term view if they are to fulfil world energy aspirations into the future.

In short, surety in petroleum production tomorrow requires continued exploration today.

I am also confident that the opportunities New Zealand has to offer remain a compelling proposition for both existing and new participants.

Our geology offers interesting mature opportunities as well as exciting frontier ones. Our infrastructure is excellent. And our policy and regulatory regimes are both to highest environmental and health and safety standards. They’re also very attractive, given its efficiency, predictability and transparency.

I believe the unprecedented momentum we have seen in recent years will continue.

And in that vein, I am very pleased this morning to announce the areas that will be part of Block Offer 2015.

When we introduced the annual Block Offer and the Petroleum Action Plan, our goal was to increase exploration activity in the petroleum sector by building an efficient, predictable and transparent tender process.

The Block Offer approach offers potential investors a regular, annual opportunity to build portfolios featuring multiple basins with varying levels of maturity.

Since 2012, the National Government has granted 35 exploration permits throughout New Zealand by way of the annual Block Offer. We’ve attracted new operators to our shores including Chevron, Statoil, Woodside and ONGC Videsh, which indicates to me that we have captured international attention in a relatively short period of time.

As I have said, the last three Block Offers have shown that New Zealand has a compelling and interesting proposition.

As in the past, this year’s tender features a mix of onshore and offshore areas. These areas were selected based on industry nominations, prospectivity assessments and follows extensive consultation with iwi, hapū and local authorities.

Block Offer 2015 includes three onshore release areas: one in the Taranaki Basin and two in the West Coast Basin. There are four offshore release areas, in the Reinga-Northland Basin, Taranaki Basin, Pegasus Basin, and Great South-Canterbury Basin.

The total acreage included in the tender is just over 429,000 (429,298) square kilometres. This includes about 4,000 (4,093) square kilometres onshore and 425,000 (425,205) square kilometres offshore.

As in the past, we will give industry six months to prepare your most compelling bids for this tender. All bids are due by 30 September 2015.

The guidelines for making a bid are clearly defined in the Invitation for Bids, which is available on New Zealand Petroleum & Minerals’ website. My intention is permits will be announced in December this year.

Now, let’s turn to the areas included in Block Offer 2015.

Let’s start with the offshore release areas.

The Release Area in the Northland- Reinga Basin covers 186,000 (186,181) square kilometres.

While we have seismic data for this basin dating back to the 1960s, the basin is large and still relatively unexplored. It is believed to be prospective for oil and gas, and it shares a lot in common with the Taranaki Basin.

The potential of this frontier basin is now beginning to be understood; Statoil were awarded their first permit in the basin for Block Offer 2013, and successfully bid for a second permit for Block Offer 2014.

In contrast, the Taranaki basin has a strong history of success. And there is significant potential remaining both for oil and gas discoveries. Block Offer 2015 includes one release area in offshore Taranaki that includes over 53,000 (53,253) square kilometres.

Two permits were granted in offshore Taranaki for Block Offer 2012, and two again for Block Offer 2013. Four more were granted for Block Offer 2014. Clearly, the industry is aware of offshore Taranaki’s potential.

The Offshore Release Area in the Pegasus and East Coast basins covers a fraction over 44,000 (44,015) square kilometres covers.

These two basins are considered among New Zealand’s most exciting. Both are prospective for oil and gas. The Pegasus Basin is relatively unexplored, and the offshore East Coast Basin is under-explored.

Two permits were granted to Anadarko in the Pegasus Basin for Block Offer 2012. Last year’s Block Offer saw three 15-year petroleum exploration permits granted in these basins to a joint venture between Chevron and Statoil, and one to OMV.

Block Offer 2015 includes an offshore release area of almost 142,000 (141,757) square kilometres across the Great South and Canterbury Basins. The Great South Basin has seen exploration activity since the early 1970s. Both basins are considered prospective for gas condensate and oil.

Since the first Block Offer, when Shell received a permit in the Great South Basin, we have seen continued interest: Block Offer 2013 saw Woodside and NZOG each granted permits in this basin.

Now, to the onshore release areas.

Starting with Taranaki, an area of just over 1,000 (1,039) square kilometres will be released. As noted earlier, Taranaki is New Zealand’s first petroleum success story. The basin is prospective for oil, gas and condensate, and has been producing oil and gas commercially since the early 1900s.

The Taranaki Basin includes 20 producing fields. 11 of the 35 permits granted over the last three years have been in onshore Taranaki. Clearly its potential is still great.

Finally we have two onshore release areas in the onshore West Coast Basin – one of about 2,000 (2,007) square kilometres and the second of over 1,000 (1,046) square kilometres.

The West Coast Basin is prospective for oil, gas and coal seam gas with discoveries dating back to the early 20th Century. Last year Mosman received two permits in the West Coast basin for Block Offer 2014, in addition to their existing permit at Petroleum Creek.

In conclusion, New Zealand’s mixed and balanced approach ensures energy diversity for our people and also, through our exports of renewable expertise and non-renewables, for the world.

Petroleum and the Block offer process we have successfully employed in recent years are integral components of this.

I am committed to the Block Offer approach and we will continue to change and evolve it over time so that the strong momentum we have seen continues.

I am pleased to announce Block offer 2015 open and that we are also opening industry nominations for Block Offer 2016 today, which I intend to launch in twelve months’ time. I look forward to your bids.

ENDS

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