Oil And Gas Exploration Ban

More research required on to perform an analysis

Apr 19, 2023

In 2018 the government banned all future offshore oil and gas exploration in NZ waters. The aim of this was to ween New Zealand off oil and gas over the next 30 years (which is when the existing permits expire)1.

Out of concern for the Taranaki economy, there was to be a National New Energy Development Centre set up, costing $27m to establish and a further $20 million for clean energy research2. The National New Energy Development Centre (now called Ara Ake3) will employ 45 people and help create new businesses from emerging energy technologies. While 45 FTE’s isn’t going to save Taranaki’s economy, the idea is that it will enable a new, green technology that will.

What Has Ara Ake Achieved So Far?

Ara Ake is also the sponsor of the EVolocity programme in Taranaki, which encourages students into STEM (science, technology, engineering and mathematics) careers which focus on sustainability and climate change4. I suggest you take a 30 second look at the EVolocity programme to make up your own mind about it’s value in replacing the oil and gas industry.

Ara Ake had reached an agreement in principle to partner with US-based Elemental Excelerator, which funds start-ups and fledgling businesses who build energy solutions5. As far as I can see, this appears to be just a joint marketing project - I couldn't find any sort of output resulting from the partnership other than joint advertising of a competition (mentioned below).

Ara Ake ran a competition for businesses to present their green energy prototypes, which would mean winning the opportunity to present to potential customers and up to $250k of funding (though the terms of this funding seem vague). This prize was split between 3 companies (making it a negligible amount of funding for such a venture). Winners were:

Ansa who presented a technology to map where electric devices are, in order to make it possible to know where best to position charging facilities.
[OPINION] As a person with an IT background, this doesn't seem revolutionary to me - it seems like it could just be done with existing GPS technology and a GIS database.
Future Grid (an Australian company) who provide software solution to manage the uptake of distributed energy tech to help manage power grids.
Gridsight Pty Ltd (an Australian company) who seem to have a very similar solution to Future Grid.

None of the above software solutions are appropriate to replace energy sources, but may help power company's reduce costs.

Ara Ake also produced reports and guides and relating to energy. You can read about them here to make an assessment of their value.

The one thing of note that has come out of Ara Ake is Azura Wave Energy, a project that has put wave energy capture off the coast of Hawaii. However, looking at this article which came out around the time of Ara Ake’s conception, it seems that the technology was in development already (since 2012) and assistance raising funds seems as though it was just to ensure that one party in the development could keep it's shareholding (quote "EHL co-owner Peter Jannings says the company needs the money to match the contribution of its US joint venture partner.").

What Effect Has The Oil Ban Had?

I failed to find any information (negative or positive) on the change in the amount of oil or gas being extracted off NZ’s coasts.

[OPINION] There’s talk coming from opposition to the ban about coal being used in lieu of gas, which burns less cleanly. I didn’t bother looking into the change in coal consumption habits of NZ vs gas because I didn’t have any good information about a change in the gas supply due to the law change… and that analysis would be a lot of work, also I’m quite exhausted from reading through all the Ara Ake waffle to try to find anything of meaningful value in there. Sorry. I’ll consider re-writing this at a later date, but would greatly appreciate input if anyone can source authoritative information on the subject (please leave a comment).

Analysis Opinion

$45m is a lot of money to spend to make a government department that helps entrepreneurs put together pitch decks and introduce them to investors and 45 fulltime employees is a lot of people to do that.

I say this speaking as an investor (with a multimillion dollar green portfolio in private equity investments)… entrepreneurs have a tough time putting together a pitch. There’s a lot involved, from preparing legal documents, complicated valuations, protecting IP, making a pitch that makes sense to an investor, making the business investable, etc. It’s a hard task, but a $45m government department with 45 FTE’s seems overboard to assist a handful of companies that will need this assistance. Also there are other private companies with access to business networks and high net individuals and venture capitalists that can do this already, such as Snowball Effect.

In summary, I’m not convinced that anything of value has come out of Ara Ake at all.

As for the effect on the oil and gas exploration ban, I don’t know if it’s had any effect. I need to do more research. I have a strong suspicion that it’s made no difference to date because the oil and gas extraction is still happening and exploration will almost certainly be re-instated by future (probably National) governments. I say this because without the replacement of oil and gas as an energy source, banning exploration will ultimately result in importing oil and gas which will require more oil to power the import infrastructure… Who knows what will happen in the coming years, but it seems unlikely that we will have enough green energy in time to replace oil and gas before existing permits start to expire.

One might argue that even if we reduce the amount of oil and gas that’s mined at the environmental and economic cost of importing it, we’re still reducing the environmental impact. However that’s not a valid position because oil supply is in abundance and throttled by cartels, meaning that they will just increase their supply to compensate for our drop, resulting in higher costs and more fuel burned than there otherwise would be.

Another argument is that this policy puts pressure on the private sector to produce green solutions. However, Ara Ake’s lack of success to date shows that NZ doesn’t have the R&D skillset to come up with such an advancement. Also, NZ is such a small drop in the ocean that we don’t have any influence on foreign suppliers to drive such pressures.

I would love to hear some more positive perspectives on this topic because I would love to be able to view this policy as having had some success. Please feel free to comment on the subject, ideally with your evidence-based perspectives and I’ll try to incorporate these into the article if I get around to rewriting it.

What Did The Romans Ever Do For Us?

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