Latest / The SME Stream / John Carnegie: Energy Resources Aotearoa CEO urges the Government to underwrite oil and gas exploration risks

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John Carnegie: Energy Resources Aotearoa CEO urges the Government to underwrite oil and gas exploration risks · The SME Stream

• 0:00
  Speaker 1: In an oil and gas lobby group has written to
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  Speaker 1: Energy Minister City and Brown asking him to consider underwriting
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  Speaker 1: oil and gas exploration by private companies. The argument mounted
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  Speaker 1: by Energy Resources Altered Or is that we need something
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  Speaker 1: like this to get oil and gas prospectors back to
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  Speaker 1: New Zealand after the last governments offshore oil and bass
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  Speaker 1: exploration gan ban scared them off. Green Party Colia Chloe
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  Speaker 1: Swarbricks has gas production peaked in twenty fourteen and underwriting
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  Speaker 1: exploration for more would be quote deranged. John Carnegie is
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  Speaker 1: chief executive of Energy Resources Altered Or and he's with us. Now, Hi, John,
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  Speaker 1: Hey Jack here, you don't yeah, well think so, So
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  Speaker 1: just explain to us what exactly were you proposing.
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  Speaker 2: Well, actually, just before getting into that, we're a pan
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  Speaker 2: energy sector group. We represent the entire value chain of
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  Speaker 2: the energy sector. So we proudly represent the oil and
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  Speaker 2: gas sector, but we also represent electricity producers and distributism
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  Speaker 2: fueled distributors. But look in terms of your question, but
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  Speaker 2: I actually think in terms of for your listeners, it's
• 1:08
  Speaker 2: important to put what we've asked for in context. And
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  Speaker 2: they're two points. The first is we've actually got an
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  Speaker 2: energy shortage and some, in fact might call it a crisis,
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  Speaker 2: and we felt that during the winter it's caused havoc
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  Speaker 2: to industry and households. And actually we might think we
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  Speaker 2: didn't have blackouts, but we did because they were managed
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  Speaker 2: behind the scenes by two of our major exporters. So
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  Speaker 2: you know, now, what we need now is policy settings
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  Speaker 2: that encourage investment and new exploration and appraisal to unclog
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  Speaker 2: the closed pipeline and deliver affordable, secure energy. And the
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  Speaker 2: second point is actually that gas producers were actually damaged
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  Speaker 2: badly by the twenty eighteen exploration ban, and so what
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  Speaker 2: we're talking about is actually just re leveling the playing field.
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  Speaker 2: Governments all over the developed world are setting fixing settings
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  Speaker 2: to ensure they've got a reliable pipeline of secure and
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  Speaker 2: affordable energy. And in fact, I think just last week
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  Speaker 2: or the week before, this government invested sixty million dollars
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  Speaker 2: in deep geothermal research. And while that's great, it doesn't
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  Speaker 2: solve the now problem and we need natural gas for that. Yeah.
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  Speaker 1: Okay, so to egectly what you asked of the minister,
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  Speaker 1: just explain to us what you proposed in terms of
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  Speaker 1: the government underwriting exploration.
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  Speaker 2: Well, look, we didn't have a firm view on the
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  Speaker 2: type of mechanism the government could choose. But look, the
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  Speaker 2: Minister has for months been talking about the need to
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  Speaker 2: offer gas produces some form of protection via bonds or
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  Speaker 2: I think the Minister mused publicly about long term contracts,
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  Speaker 2: and actually for months we've been publicly agreeing. So in
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  Speaker 2: fact that only Radio and New Zealand seemed to be
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  Speaker 2: surprised by our letter and our suggestion that the Minister
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  Speaker 2: the government do what he has been suggesting. In fact,
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  Speaker 2: actually we're mystified why it's taking so long. I mean,
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  Speaker 2: the bottom line for us JACK is that oil and
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  Speaker 2: gas expiration companies are worried that any investment they make
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  Speaker 2: in New Zealand could be eroded or stripped away if
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  Speaker 2: the government changes. So you know, this isn't a To
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  Speaker 2: call it a subsidy would be a complete mischaracterization. It's
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  Speaker 2: effectively like the government taking an insurance policy out against itself,
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  Speaker 2: against its future self that promises no adverse rule changes
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  Speaker 2: that would again damage the sector.
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  Speaker 1: But what would happen if you didn't find anything? Who'd
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  Speaker 1: be on the whole.
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  Speaker 2: That's the risk that would be borne by the sector.
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  Speaker 1: Born by the textpayer as well.
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  Speaker 2: Right, No, no, not at all. This is this is
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  Speaker 2: this is an underwright that would only protect the sector
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  Speaker 2: from pernicious future policy changes. This government has said, and
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  Speaker 2: in fact they're in the process of reversing the oil
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  Speaker 2: and Gas band, which we applaud, but we've already had
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  Speaker 2: the opposition saying they're going to put it back in.
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  Speaker 2: Now who would invest under those conditions? So the problem is, well, well,
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  Speaker 2: you know, there's certainly plenty of gas out there, and
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  Speaker 2: New Zealand is ripe to be explored. Investors are loath
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  Speaker 2: to invest. They have no confidence to invest that their
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  Speaker 2: investment today will be kept whole tomorrow if a new
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  Speaker 2: government comes in. And so actually, again the beauty of
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  Speaker 2: this is that there's no if policies don't change, then
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  Speaker 2: this is a completely costless policy. It would never get triggered.
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  Speaker 2: But it is, as I said, like a guarantee.
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  Speaker 1: So okay, I'm just going to read the leader here,
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  Speaker 1: so quote this is what you say. Our preferred option
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  Speaker 1: is for the Crown to prioritize new gas exploration. The
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  Speaker 1: most efficient means of covering the security of supply risk
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  Speaker 1: is some form of risk reward arrangement. This would entail
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  Speaker 1: the government underwriting gas exploration and appraisal, whereby the government
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  Speaker 1: takes part or all of the risk if natural gas
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  Speaker 1: should not be produced, while sharing some of the reward.
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  Speaker 1: If it is so, just to be totally clear, under
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  Speaker 1: that wording, if you were to explore for gas and
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  Speaker 1: not find any, wouldn't the government then be on the hook?
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  Speaker 2: Well, no, the idea is that you know, here's because
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  Speaker 2: here's the risks are quite nuanced. Check.
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  Speaker 1: Sorry, just to be totally clear, because you were saying
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  Speaker 1: that you were saying you want to stop like a
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  Speaker 1: government of the day in the future saying, oh, you
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  Speaker 1: found gas, sorry to bear, We're not going to let
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  Speaker 1: you extract that gas because we're going to reintroduce this thing. Yeah,
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  Speaker 1: but the of that would suggest that the word this
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  Speaker 1: is that should natural guess not be produced, but it
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  Speaker 1: wouldn't be produced if you didn't find it, right, Well,
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  Speaker 1: that's right, So the text player would be potentially be
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  Speaker 1: on the hook for that risk as well.
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  Speaker 2: Well. I mean, this is one of the one of
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  Speaker 2: the options that we've put forward. It's one of a
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  Speaker 2: number of options.
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  Speaker 1: I mean, you haven't found you haven't found gas in
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  Speaker 1: the past though eh like there was last time found.
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  Speaker 2: In fact, the most recent discovery was the Tutor Way
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  Speaker 2: field in twenty twenty, so there is penny of gas there.
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  Speaker 2: And part of the problem with the band is that
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  Speaker 2: there are gas rich basins off the east coast of
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  Speaker 2: both islands that were effectively sterilized by the ban, preventing
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  Speaker 2: the future expirations. So you know that, as I said, Jack,
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  Speaker 2: the damage to the sector has been severe, and you know,
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  Speaker 2: it's it's actually extraordinary that, you know, what other country
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  Speaker 2: would the future of a sector be banned, and then
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  Speaker 2: the country, having realized that we need the product, has
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  Speaker 2: come back to the sector to say come and help
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  Speaker 2: us out. We need you to secure our energy future.
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  Speaker 2: And so the sector is standing by ready to help.
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  Speaker 2: It's just gun shy.
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  Speaker 1: So how has the Energy minister responded?
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  Speaker 2: Well, well, the energy well, in fact it's the Resources minister.
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  Speaker 2: Minister Jones, like the Energy Minister, he's committed to keeping
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  Speaker 2: the lights on an energy affordable. We haven't heard back
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  Speaker 2: from the ministers at this point, but I do know
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  Speaker 2: that Minister Jones has publicly and often said he's keen
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  Speaker 2: to atone for the harm the oil and gas ban
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  Speaker 2: has done to the industry, And I guess that was
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  Speaker 2: the point I was making. What other industry has its
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  Speaker 2: future band, has its investment pipeline strangled, and then it's
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  Speaker 2: called on to help when a country realizes it needs
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  Speaker 2: their help to ensure reliable, affordable energy.
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  Speaker 1: It's like a compensation for the way in which that
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  Speaker 1: band was introduced, is what you're suggesting.
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  Speaker 2: Pretty much. And you can't make this stuff, you know.
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  Speaker 2: I couldn't make this stuff up, you know. It's the
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  Speaker 2: damage has been severe, and now the country realizes how
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  Speaker 2: much we need natural gas to help us actually as
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  Speaker 2: we journey towards the lower emissions future.
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  Speaker 1: Hey, thanks for your time, John, We appreciate it. That
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  Speaker 1: is Energy Resources Altered or Chief Executive