Oil ban puts New Zealand on a 'black list' for investment, service companies claim

Friday, 19 October 2018

The Kupe oil platform, in offshore Taranaki. A Parliamentary select committee has this week heard submission on legislation which would end the offering of new offshore oil permits.

A body representing seismic testing companies is demanding more than $100 million in compensation for its members if the Government passes a ban on issuing new exploration permits.

On Friday the International Agency of Geophysical Contractors presented on the final day of submissions on changes to the Crown Minerals Act to give effect to the ban on new permits the Government announced in April.

IAGC members claim they have invested heavily gathering data on areas not covered by exploration permits. While this has led to claims that the business model is highly speculative, MinterEllison partner Rachel Devine, representing IAGC before the environment select committee, said the Government encouraged companies to seek data to make the block offer process competitive.

'They've spent money in reasonable expectation that the regime would be the way it is, it's been set up to entice them to come in and do these things for the benefit of the New Zealand government,' Devine said, claiming that the legislation would strip the companies of property rights they had spent $104 million acquiring.

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Mark Dunphy, chairman of Greymouth Gas, presents at the environment select committee on Parliament on Thursday. Dunphy, who is suing the Government in part over legislation which would end new offshore block offers, said the decision was responsible for falling business confidence and sovereign risk concerns about New Zealand internationally.

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'Passing this bill will put New Zealand on a blacklist of countries with sovereign risk,' she said.

A spokesman for Energy Minister Megan Woods said the Government did not believe it had breached its statutory obligations to prospectors, so did not see a case for compensation

In preparing the submission, IAGC members 'were all discussing how New Zealand was closed for business. That's not just the oil and gas sector, that's about data companies. If this bill is passed they do see real sovereign risk associated with doing business in New Zealand'.

'It's not realistic that the Government thinks this is going to go unobserved,' Devine said, adding that she had 'personally seen through several boards considering the law change…who are now considering New Zealand to be one of those blacklisted countries that changes laws arbitrarily, over night, without compensation'.

On Thursday, Mark Dunphy, chairman of Greymouth Gas, called for IAGC members to be compensated, and warned international oil companies which hold permits in New Zealand were unlikely to drill given the treatment handed to the service companies.

Dunphy, a member of the NBR rich list who is suing the Government over a decision to award a permit to a Chinese company which he claims submitted an inferior bid to Greymouth's, told the committee the legislation had damaged confidence in New Zealand both here and overseas.

'The bill, it's process and passage, has heightened business concerns, caused declining business confidence, and raised sovereign risk concerns in New Zealand and internationally,' Dunphy said, adding that passing the bill would not bring renewable technology closer, while a weaker economy which would result from the bill would reduce New Zealand's options.

'If passed, it will represent an ill-timed, ill-considered, undemocratic shot in the foot for New Zealand.'

A spokesman for Energy Minister Megan Woods said there was no statutory requirement for areas subject to prospecting permits to be offered or granted for exploration or mining permits.

'On this basis the Government does not see any grounds for compensation.'

The spokesman rejected the closed for business argument.

'It's important to remember that we have protected all existing permits and permit rights, and we have been clear we will not be changing the process for moving from an exploration to a mining permit. There's 100,000 [square kilometres] of existing permits, an area roughly the size of the North Island, available for exploration,' he said.

'These decisions are made on economics – companies look to how profitable it may be to drill. A number of companies already have upcoming drilling programmes planned for the next two summers.'

National energy spokesman Jonathan Young said the prospecting undertaken by IAGC members had been 'an integral part of the block offer system' which the Government had profited from.

'The Crown basically don't think they have a legal claim on them but I would certainly say there's an ethical one there, especially if this is damaging New Zealand's reputation.'

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