By Neil Ritchie

INCREASING costs associated with more government regulations, as well as the usual uncertainties of the oil and gas industry, got a good airing at the 2014 New Zealand Petroleum Summit.

Todd Energy commercial and planning manager David Salisbury said while recent offshore exploration had been disappointing, the overall level of activity, from initial work on new blocks, including seismic surveys, to appraisal work and development drilling, was good news.

“Methanex is on full throttle,” he said regarding the Taranaki methanol plants of Methanex New Zealand being back to near maximum production levels.

“But the industry needs to look at itself regarding what there is (left) to do offshore Taranaki with its difficult geology,” he added.

Mr Salisbury said New Zealand joint ventures tended to “rush into” offshore drilling generally because of the country’s distance from major offshore service centres.

TAG Oil New Zealand country manager Max Murray said the costs of being a small industry in a remote location meant additional challenges for the “rig clubs” were often created when rigs and/or seismic vessels were known to be coming “down under”.

New Zealand Oil & Gas (NZOG) chief executive Andrew Knight said the nation was “still f lush with gas” following upgrades to government reserves, but it was worrying the last significant offshore discovery was the initial Tui oil discovery of 2003.

Origin Energy upstream chief executive Paul Zealand said his company believed the Caravel-1 wildcat well drilled off Canterbury early this year by operator Anadarko Petroleum and Origin was “a successful well”.

But several more wells needed to be drilled to build better confidence levels. “We need to keep moving forward and de-risking the prospect.”

The industry also “needed to embrace the uncertainty” of New Zealand’s geology, he added, with reference to the nation’s offshore potential beyond Taranaki.

“There is a lot of prospectivity but these are frontier, almost virgin, regions,” he said.

Greymouth Petroleum group general manager Harry Crighton said onshore Taranaki geology could also sometimes be complex and frustrating but that there were still worthwhile shallow opportunities yet to be discovered.

NZOG vice-president and commercial manager John Bay said that with the additional costs of meeting increasing regulatory standards it was becoming more important, particularly for smaller companies, to have several well resourced joint venture partners.

“It’s almost become too expensive for small players by themselves now, particularly offshore.”

He cited the example of Denver resident Randall Thompson who, through his company Global Resources Holdings, made a successful Acceptable Frontier Offer in 2006 and was subsequently awarded the first Deepwater Taranaki basin lease PEP 38451.

After some initial subsurface studies and seismic surveys, Global Resources successfully farmed out stakes in the permit to current operator Anadarko Petroleum and South Korean company Hyundai Hysco.

“Randall would probably not be able to do something similar these days,” Mr Bay said.

Mr Salisbury said if New Zealand saw international investors leaving then there was probably something wrong with how or what the industry or government was doing. “But we are seeing international investors arriving . . . so we know we are doing all right.”

Octanex director and lawyer James Willis provided probably the most entertaining address, talking about the “rise and rise of green tape”.

As an example, he said Maari oilfield operator Austrian giant OMV had endured “a tortuous path” with its NZ$3 million environmental assessment application to the recently established Environmental Protection Authority to drill the Whio-1 exploration well in lease PEP 51313.

The EPA had been “astonishingly pedantic” with its requirements, wanting independent reports done on such things as the likely impact on sea birds of offshore rigs operating and the possible impacts on marine reptiles, such as sea snakes and crocodiles, even though no such marine reptiles normally resided in Taranaki waters.

Seabed-dwelling marine bristle worms also came under scrutiny regarding possible impacts on their populations from the presence of offshore rigs. Mr Willis likened this to construction companies having to consider the impact on earth worms, slugs and slaters from earthworks for new building projects.

He also said the ignorance of those outside of the industry “could be breathtaking” and cited a Maori television program quoting a kaumatua (elder) saying OMV was going to “break open the sea floor with (seismic) sonic booms” to gain access to petroleum off the west coast of Northland.

However, Environmental Defence Society chairman Gary Taylor warned the industry to take care. “Railing against the regulators does not build confidence,” he said.

But Shell New Zealand senior business advisor Chris Kilby said problems with new legislation and regulatory bodies, including the EPA, should be “ironed out” within a few years.