Oil explorers fear EEZ Bill will derail drilling plans

Monday 13th February 2012 1 Comment

Oil explorers say the timing of the Exclusive Economic Zone bill currently going through Parliament carries a serious risk to their plans to sink new oil wells in 2012 and 2013, and they warn resource consent hearings will need to be efficient because of the industry’s high costs.

Among those affected is Anadarko NZ, the local arm of one of the partners in the Deepwater Horizon deep-sea oil rig disaster in the Gulf of Mexico in 2010. Anadarko said last year it was targeting deep-sea exploration off the Taranaki and Canterbury coasts over summer 2012/13.

However, a target implementation date of July 1 for regulations stemming from the EEZ and Continental Shelf (Environmental Effects) Bill runs across Anadarko’s timetable for spending up to US$50 million for its half share of the cost of bringing an offshore drilling platform to New Zealand.

“Drilling is expected to begin in October 2012 and last through March – April 2013,” says Anadarko in its submission to the local government and environment select committee, which began hearings on the bill last week.

While the bill allows existing activities to continue for up to six months after new EEZ regulations come into force, without a marine consent, Anadarko says this would subject the latter part of its planned programme to consent requirements, based on current timings.

“This would have the effect of shifting the goalposts part way through a crucial part of Anadarko’s exploration process,” says the company, which must commit to a drilling rig in the second quarter of this year if it’s to drill this summer.

“We are concerned the legislation and the regulations will not be finalised before we must hire a drilling contractor,” Anadarko says. “Therefore, we will have unknown regulatory requirements.”

Local explorer and producer New Zealand Oil & Gas raises similar concerns in its submission on the bill, saying “a proposal that has already been reviewed by the Environment Protection Authority in the interim period but has not yet commenced should be considered an ‘existing activity’ and should not have to go through a duplicate process.”

NZOG is also seeking a deep-sea rig for drilling in the offshore Canterbury prospect known as Barque, which is adjacent to the Carrick-Caravel prospect, which Anadarko is exploring in partnership with Contact Energy’s Australian majority owner, Origin Energy.

Anadarko suggests the “grandfathering” provisions on previously unregulated activity be extended to 12 months, rather than six as proposed.

NZOG also expresses concern about the continued absence of draft regulations, which will determine how the new regime for New Zealand’s vast economic zone works in practice.

While Anadarko criticises the bill for being unclear as to whether it covers petroleum mining, NZOG argues that seismic surveys, exploration wells “should be designated automatically under the new rules as “permitted activities.”

However, “development projects arising from an oil gas discovery should be classified as discretionary activities’, requiring a greater level of public and EPA scrutiny.

Anadarko recommends the New Zealand regulations on deep-sea oil exploration should draw heavily on global best practice.

“Offshore exploration and production is a truly international industry which is well-established in many other jurisdictions, including those which share New Zealand’s environmental values and approach,” its submission says.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 13 February 2012 at 10:19 pm B.Casey said:

This uncertainty undoes the excellent work done to encourage major international oil and gas exploration companies to put New Zealand prospects high up on their competing investment horizon. Let's hope Minister Phil Heatley gets on top of this urgently and with pro-active dialogue with the companies involved.