Unsafe assumptions guide expansion of drilling in NZ

A Close Up interview on TV One this week looked at the economic desirability of the proposed expansion of drilling exploration in New Zealand weighed against the environmental concerns. I had just finished my post on the feasibility of renewable energy fully powering the world’s economies by 2050 and it interested me that both the Government and the industry spokespeople chose to make much of the assumption that any change to renewable sources of energy is a long way off. A safe distance, one might say. The assumption was used to buttress the case for expanded exploration. Transport Minister Gerry Brownlee:

“This is a revenue [stream] for the Government that’s very very large. You’ve got to realise that the world is not going to go away from being a hydro-carbon economy literally for decades.”

David Robinson of the NZ Petroleum Exploration and Production Association:

“I’m as keen on the clean green technology as anyone. I’m very much an environmentalist myself. The reality of the world energy supply at the moment though is that renewables struggle to get to 30  percent…the reality is that the world’s oil and gas is what is fuelling the world today and it will be quite a number of years, many decades in fact, before it is replaced by some  of  the newer technology. Which will be wonderful when it happens but for the time being the world is very heavily reliant on oil and gas.”

Rick Boven, economic and environmental strategist, agreed that there was likely money to be made from exploiting oil and gas but pointed to the bad consequences for the climate if this course is pursued around the world, which ultimately meant bad consequences for the economy as well. He pointed also to the economic risk, for example, of a binding global climate agreement which would restrict our output and leave assets stranded.

It’s not my concern to follow the discussion so much as to point up the blandness of the assertion that we will rely on oil and gas for decades to come. Even in their own economic terms it’s hardly a reliable prediction. In climate change terms it’s a recipe for disaster. Obviously we can’t stop using oil and gas overnight, but the kind of aggressive roll-out of energy efficiency technologies and renewable energy technologies that the Ecofys and other reports envisage and common sense demands, puts big economic questions, let alone climate change questions, over the notion that we have a bright future in oil exploration and production. Prudent investors must surely be starting to ask themselves such questions.

The oil world and its political allies may be full of confident assertion. But there are counter currents which they and their investors would do well to heed.

17 thoughts on “Unsafe assumptions guide expansion of drilling in NZ”

  1. In May Germany had a day where it produced 22 Gigawatt’s of energy from its PV solar panels alone; this compared with New Zealand’s total electricity generation of 9.8 Megawatt’s.
    2200 times out entire national effort.
    If you gave me 22GW of peak production and a tiny 9.8MW of demand I would be a pretty poor engineer if I couldn’t figure out how to fit those supply and demand curves together. Heck, a tallow dip guttering in front of half the panels would cover our entire night time demand!

    Its not that it cannot be done, its that THEY wont.

    All we can do about our energy supply is do our own thing, one individual household, one business and one town at a time. Government policy be damned!


    1. Hi Nigwil
      I suspect there is a problem with your 9.8MW figure. That would be only one of Benmore’s 6 machines running at 10% of capacity.
      I believe NZ has the luxury of not having to worry too much about storage for quite a while because of the lakes. But we do need to bite the bullet of installing some excess capacity of wind, solar and run-of-river hydro so that the storage stays as full as possible.

  2. We do not have the luxury of decades to move to carbon neutral energy. Big Gerry and co are trashing our future and that of our children for blind and ignorant faith in `dig and drill` BAU mentality in the pursuit of `growth`.
    In light of the unprecedented melt of the northern arctic and blatantly obvious extreme climatic events world wide I suggest we have less than five years to embark on a path to carbon neutral technology with unprecedented vigor.
    They (Keys and advisers) are supremely ignorant of the fact that the planet does not have a politically convenient timetable. It (the planet) has been there before and will survive this minor incursion of the human race in a relative nanosecond. Question is will we. How lucky do you feel folks.

  3. The Greens have captured the environmental slot however, they won’t face the problem when it comes to numbers of people.
    for example:
    Lowe (1997) analysed the availability of good quality soils and the average person’s resource use, and came to the conclusion that 4million was the optimal population, a figure that has now been passed

    yet the Greens approach to immigration is “primarily humanitarian” and “based on an objective analysis of a sustainable NZ” …. they ignore the figure above as an inconvenient truth. Claiming “oh but if we have policies restricting population we face political oblivion” doesn’t gel with their hard line approach to the foreshore and seabed, smacking etc.
    It is kind of silly to be advocating for government spending and population growth on the one hand while stomping on irrigation for dairying on the other.
    Basically the mix of environmentalism and old fashioned socialism is a mess and fiddling while Rome burns

    1. This a problem for Green parties the world over.

      The question to ask yourself is, as usual ‘and what would I do in their position?’ Commit electoral suicide and simultaneously confirm my enemies’ descriptions of me as a Malthusian? Well, you’d hardly be likely to be in Parliament in the first place, would you?

      Once there you can tackle issues like seabeds and smacking. And Climate. The fact that population control is the single biggest step that could be taken, bar none, to reduce climate impact in the medium to long term hasn’t gone away, of course. Particularly in the affluent West.

      Frankly, I don’t think we’re intelligent enough as a species – not just as elected politicians – to solve that problem, and anyone under 20 today is probably going to live to see the ‘crash and burn’, ironically made possible by your friendly Democracy, the greatest social institution ever developed (no, I’m not being sarcastic!) that simply inherently could not make the genuinely hard decisions.

      Isaac Asimov had a great way of pointing it out. If I live in a flat with a population of 2 people and 2 bathrooms I have ‘Freedom of the Bathroom’. I can do what I like in there, when I like. But if there’s 20 people crowded in the flat I can believe in, and declaim, and proselytize, and vote for, ‘Freedom of the Bathroom’ until I’m blue in the face, it simply cannot happen. Social organization – either highly-structured and relatively egalitarian, or, more likely here, rigidly hierarchic and grotesquely distorted – must take over. Or we can tear the flat apart fighting for them.

      Politics really is the art of the possible. That’s not the Greens’ fault. And just because some things should happen does not make them possible.

  4. The question to ask yourself is, as usual ‘and what would I do in their position?’ Commit electoral suicide and simultaneously confirm my enemies’ descriptions of me as a Malthusian? Well, you’d hardly be likely to be in Parliament in the first place, would you?

    Once there you can tackle issues like seabeds and smacking. And Climate. The fact that population control is the single biggest step that could be taken, bar none, to reduce climate impact in the medium to long term hasn’t gone away, of course. Particularly in the affluent West.

    That is a disingenuous defeatist argument.

    The Greens are pursuing policies that are pro population increase,.
    Arguably the dpb + state housing (ie no fault welfarism) creates an incentive for people to breed on other peoples resources, at a certain point. The inescapable fact is these people ( the Greens) are reborn from groups like the Alliance and Unemployed Workers Union.
    Another example , I recall Keith Locke saying it was “every woman’s right to give birth” when he is talking within the context of a welfare system.
    It isn’t as though there aren’t better ways, for example Gareth Morgan’s Big Kahuna. The Greens would oppose that , however as they believe in welfare on demand.

    One way of tackling population is to link it to real issues as can be seen in the declining quality of life for those at the bottom of the pyramid in our major cities plus the economic effects of a low wage economy providing infrastructure for new waves of migrants. Do we just gloss over the fact that very few have space for a vege garden?

    Another way to tackle population issues is to recognise over population in so many of the worlds countries and question whether we owe it to accept economic refugees from these countries. The Greens are here again most unpersuaded that boat people are escaping overpopulation.

    Here’s how to argue population limits:
    “When a family falls on hard times, and has to devote lots of energy to stabilizing the situation, and then decides to have another child (whatever the other merits of the case) that will almost invariably worsen the family’s economic position. It is a folksy comparison and breaks down at some points, but NZ is in some respects that family: choosing to have lots more kids, as it were, just when were in a position to capitalize on the good positioning reforms put in place by successive governments in the late 1980s and early 1990s. In that story, housing is more than a symptom but less than a cause.

    1. That is a disingenuous defeatist argument.

      No, it isn’t.

      For a start, you’re claiming it is insincere, which it isn’t, and laying claim to a knowledge of the state of mind of others, which you clearly don’t possess.

      Secondly you’re claiming it’s ‘defeatist’, whereas I’d say it’s merely realistic. Thinking the world should work the way you want it to is a trick that never works. There’s a reason why there are 7 billion people in the world, and that number is only going to get larger, despite the fact that we’re all the worse off for it. You’ve stated it yourself – and arguably made your own attitudes patently clear – in the following –

      Arguably the dpb + state housing (ie no fault welfarism) creates an incentive for people to breed on other peoples resources, at a certain point.

      Well, we’re all breeding on other peoples resources – including nice middle-Class people who pay their way, thank you – particularly those resources that future generations won’t have access to because of us, and also because the global economy allows contemporary resources to be stripped out of other countries and boxed up and sent to us because we’re educated Westerners and hence are more equal than others, don’t you know? And when folks at the losing end of the global economy and the despotisms it tends to foster try to go to where all the nice things end up – well, let’s just say there are plenty who are happy to sit in judgement of them, shall we?

      I only have to open an idiotic – and unrequested – glossy handout from my health insurance company to discover that we’re all – particularly, no doubt, those of us not on welfare – entitled to family holidays in Thailand or Belize. Because it’s ‘nice’ there (i.e. plenty of the locals speak English), and we’re worth it. In fact, we should go; it’d be ‘good’ for us.

      Here in Australia the (alleged) conservatives brought in a very-generous baby bonus to specifically encourage the very thing you’re lamenting, which is also considered by thoughtless people of all stripes to be ‘nation building.’

      Blaming ‘the Greens’ for the fact that we’re no smarter or more restrained than any other species when it comes to exploiting all the available resources and then some is just a justification of personal bias. Lamenting that it’s somehow unfair that the only people who are concerned enough to to something about an issue are not to your taste is absurd.

  5. Andrew, you are right of course. We are 9.8 GW not MW, but still Germany was generating with PV 2.2 times our total generating capacity, thus proving what is possible where there is a political and social will.

  6. We, as a species, don’t really have to worry how declining energy use or declining population will be ‘achieved’ do we? We don’t really have to ‘plan’ for a more austere future.

    There is no need to fret about the inadequacies of Political Systems, of Occupies or Springs, of Economic Instruments and Birth Control programmes. Whatever we create will simply be swept away by the rising tide of natural forces to which all species from yeast to beast are, in the end, subject to. As individuals we may manage to defer the worst by heading for hills (each in his own way) but as a global organic organisation humanity will come and go. Mostly go.

    We are so far into overshoot and facing such an obvious and inevitable decline in critical resources that the ‘progress’ of our civilisation over the distressingly near future – when viewed in an historic context – will look like we have collectively jumped off a cliff.

    That’s if any body bothers to look back and count.

  7. Exploration and production drilling should be distinguished from one another both in terms of wealth creation and environmental hazards. Exploration often involves many dry wells before any resource is found. Production can only be be considered after resources are verified and become reserves. The time-line can be many years.

  8. If currently known hydrocarbon reserves are already enough to tip the world’s climate past what humanity has evolved to live with, finding more is only giving us the chance to play Russian roulette with a few more bullets in the cylinder. Some more petrodollars to a few rig workers and their suppliers, another few hundred square miles of ocean with deaf biota, but pumping and burning the stuff should be out of the question.

  9. Dave Robinson is wrong to suggest that investment in the oil industry will bring net benefits to the NZ Economy.
    The returns at present are nothing compared to the farming, tourism and manufacturing sectors which employs many times over for each dollar invested. The highest return on investment in the energy sector is in efficiency and then renewable energy forms, all of which diminish our need for fossil fuels, and increase our resiliency in the face of soaring fuel costs. The International Energy Agency has made it quite clear that we have passed the peak of conventional oil, and non conventional oil like deep sea oil and and oil and gas from fracking is now very expensive, high risk and with a lowering EROI energy return on each dollar invested. New Zealand customers will also still pay the same international price on oil fuels extracted within New Zealand. The oil from any large discovery would most likely be processed offshore as our refinery would be unable to handle the volumes, and local employment would only result through services.

    Investment in fossil fuels is also diverting precious capital from projects that might reduce our carbon intensity and allow long term sustainability. Extreme weather events are showing up through insurance costs and are now occurring over areas ten times greater in extent to that of 5 decades ago. Flooding events cover areas the size of some countries, and the melting of the northern ice cap is occuring 50 years ahead of model prodictions.

  10. Tourism is almost all about diesel, jet fuel (and these days) Chinese drivers.
    If you want efficiency you start in the cities and towns. That requires careful planning and steady growth rather than mass arrivals which cause a population growth fuelled boom (similar to Melbourne’s), straining infrastructure for the low wage taxpayer.


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