New Zealand Herald: Oil drilling plan comes with warning

May 8, 2013

By Grant Bradley
New Zealand Herald
Published date: April 30, 2013

Offshore blocks offered to international drillers as expert reminds industry of high risks.

New Zealand is about to open huge tracts of its offshore territory as a troubleshooter called in to reform rules covering the United States oil explorers gave a blunt warning over regulations covering the industry.

The Government is opening up more than 190,000sq km of the Taranaki, the East Coast, Northland, Canterbury and Great South Basins to oil and gas explorers in the latest blocks offer.

Two of the areas were offered last year and were among several not taken up.

Energy and Resources Minister Simon Bridges said New Zealand continued to face tough competition from other countries to lure explorers from distant places. The industry also regarded the withdrawal of Petrobras and Apache from New Zealand as a setback.

“My sense in talking to people is that they’re very interested – I’m optimistic we’ll get good take-up in this blocks offer but it’s a very competitive world we live in,” he said at the Advantage NZ: 2013 Petroleum Conference in Auckland.

Michael Bromwich, the former US prosecutor who was selected by the Obama Administration to beef up offshore drilling regulations, said officials and the industry were in a “trance” over the risks of a well blowout before the Deepwater Horizon accident which killed 11 workers and resulted in five million barrels of oil being spilled into the Gulf of Mexico.

Deepwater drilling – which could happen off the Canterbury and Taranaki coasts if exploratory wells are successful – were high-risk activities by their nature, he said.

Oil companies were good at responding to disasters, said Bromwich, a keynote speaker at the conference.

“It’s not entirely altruistic. They realise that an accident or a couple of accidents really do tremendous damage to the environment and human life and can really create a cloud,” he said. Rules had been stagnant in the United States in the leadup to the 2010 accident and he oversaw a complete overhaul of regulations which has led to reforms around the world, including new health and safety and environmental rules in New Zealand.

Prime Minister John Key said new regulations being brought in in June would be world class.

“This Government is very clear, we won’t let cowboys operate here in New Zealand.”

Bromwich said he was not familiar with the New Zealand regulatory environment, but he said regulatory regimes needed to be adequately funded. He had also tried to attract the best and brightest to join the new regulatory bodies, which he no longer heads.

Meanwhile, Bob Daniels, senior vice-president international and deepwater exploration for Houston-based Anadarko, said the firm operated with the prospect of governments changing everywhere in the world.

Any Labour-Green government would take a less industry friendly stance than the current Government which has just passed laws to crack down on protesters who impede explorers. Daniels said governments were subject to change. “That could change the regulatory environment that we work in but that’s not something that we can control so we try to best manage through it and make sure our investments have enough protection on the downside that if there is a change that costs us something we can sustain through that.”

He said if there was an accident in New Zealand at an Anadarko well, it would respond.

Access to well containment gear – capping stacks – was compulsory in the United States and they were deployed around the world in industry centres, the closest of which is in Singapore.

Drilling down
* $1.8b oil exports last year
* 31 wells are slated for drilling this year
* 80 wells are under consideration.

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