Guarded optimism in the petroleum sector
David Darby, NZP&M Manager Commercial Analysis & Investment, reflects on recent conferences and the perception of the NZ petroleum sector.
The past few months have seen two major conferences for our local industry: the Australian Petroleum Production and Exploration Association (APPEA) conference in early June and the New Zealand Petroleum Conference in March. Both events emphasised for me the resilience and adaptability of the petroleum industry. The feeling in the conferences was one of guarded optimism. The local exploration scene is showing a successful adaptation to the “new norm” of the oil price environment, and a desire to get on with business after retrenchment in 2015. The growing role of gas in an exploration portfolio for a carbon-constrained world was also a common theme in the conferences.
In New Zealand, ensuring our investment environment remains stable and that our offers to market are steady and predictable are the keys to attracting interest. The launch of the Block Offer 2016 by Energy and Resources Minister, Hon Simon Bridges at the NZ Petroleum Conference continues the regular acreage offers that we have followed since 2012. This year’s tender includes 525,515 km² of onshore and offshore acreage. APPEA remains a major “shop window” for the Block Offer and it was good to see the level of interest in New Zealand opportunities shown by Australian and Asia-Pacific explorers.
Speaking at the NZ conference, Suzannah Toulmin from Wood Mackenzie put the Block Offer into international context. With the global industry cutting budgets - including exploration spend, which is less than half of its 2014 peak - times are tough everywhere. However, Suzannah highlighted that NZ remains an attractive place to explore, with its low above-ground risk and favourable fiscal terms. And although the lack of recent drilling success is a concern, she emphasised the significant untapped potential recognised in NZ. At APPEA her colleague Matthew Howell also spoke on NZ, highlighting the quality of the explorers who have taken acreage over the past few years.
At the NZ conference I had the pleasure of delivering a talk expanding on the 2016 Block Offer, and highlighting NZ’s positioning as an exploration investment destination. It was great to be able to draw on work by Canada’s Fraser Institute confirming NZ’s attractiveness (we place 14th out of 126 jurisdictions on their relative ranking of countries for investment attractiveness). I was also able to reference work from Wood Mackenzie benchmarking NZ as having the lowest above-ground risk of all countries analysed, with fiscal terms exactly on trend with global perceptions of our prospectivity. My colleague Jono Weir gave an excellent talk in the same session, drilling deeper into the geology and available data of each of the 2016 Block Offer release areas, including discussing our latest Petroleum Data Pack.
The NZ conference programme was full of great material. To pick a handful of highlights for me, it was good to see discussion in the industry about the impact of the Paris climate change targets on our sector. And it was great to see the emerging outputs from government R&D in the Crown Research Institutes, such as GNS Science, and universities. Work from Rupert Sutherland of Victoria University outlined the “big picture” of our enormous north-west frontier basins, and the work by the GNS Science team on the Atlas of Petroleum Prospectivity, which is going to be a landmark dataset for NZ.
Helen Neil from NIWA presented some game-changing work on the natural hydrocarbon seeps on the East Coast of the North Island, including evidence for a working thermogenic petroleum system in the area. Turning to the private sector, seeps also featured in Chris Uruski’s talk, presenting OMV’s regional evaluation of the East Coast. And Lex Simons from Woodside grabbed everyone’s attention with the sheer scale and diversity of opportunities being identified from the Toroa dataset in the Great South Basin.
Both conferences were full of new insights and a renewed sense of momentum, particularly in the local exploration patch. I left the conferences feeling optimistic that despite the challenging oil price environment, we’re well placed to see the 2016 Block Offer continue the successful trend from past years.
Manager Commercial Analysis & Investment
New Zealand Petroleum & Minerals