Resources Minister Shane Jones

A defiant Resources Minister Shane Jones has responded to Saturday’s environmental protests by ending Labour’s offshore oil exploration ban and calling for long-term contracts with any successful explorers.

The purpose would be to prevent a future Labour Government from reversing any licence the explorers might hold.

Jones sees a precedent in the original 1973 Maui gas contract, which saw the Crown not only become a 50 per cent shareholder in the Maui field but also commit to purchasing a substantial amount of gas from the venture each year.

But, as he told POLITIK last night, he has yet to convince his National and ACT Cabinet colleagues of his proposal.

They may well be nervous after Saturday’s big protests in Auckland and other centres.

Organised by Greenpeace, the protests were ostensibly against the Fast Track Consenting Bill but were clearly also against the Government’s proposed  relaxation of Labour’s tough environmental regulations across the board, and they were particularly focused on Jones.

One sign called him “Shame Jones, the Minister of Arrogance.”

But despite all the noise, the Auckland protest attracted only 20,000 against the 43,000 who marched down Queen Street in 2010 to oppose mining on conservation land.

That protest forced the Government to back down, but at least yesterday, Jones was far from backing down and was amping up the Government’s proposals to reverse some of Labour’s environmental legislation.

Most notably, he announced that the former Labour Government’s last-minute amendment to the Mining Act in July last year, which limited the Government’s role to “managing” mining, would now revert to its original wording to “promote” mining.

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It is in that context that Jones wants to see long term contracts in place with any successful gas explorer.

“I think it’s time that we reprise the old Maui gas contract,” he told POLITIK.

“Who is going to invest in New Zealand’s gas industry in the absence of a solid contract on the other side?

“in the recent past, users of gas have been disincentivised from relying on gas.

“So if you’re a big investor on the supply side and you’re going to spend hundreds of millions, you want an ironclad guarantee that there’s 20 to 30 years worth of utilisation.

“I’ve thought for a long time that suppliers must have the confidence despite any  change of government that they will have customers and I  think that’s really what promote has to mean.”

Jones said any contract could go out to 2050.

“That  is a long time contingency measure so that as electricity demand grows, the lights don’t go out.”

Already, Transpower has warned that there could be blackouts this winter because of the shortage of natural gas and La Nina threatening lower-than-usual hydro lakes.

“The combination of reduced non-hydro generation and increased demand means we are more reliant on hydro generation to meet the forecast 2024 energy demand, which increases the risk of running out of hydro storage under low hydro inflow conditions,” Transpower’s Winter Outlook published in January said.

“One of the primary reasons for reduced thermal availability in 2024 is the reduced gas production forecast, which reduces the gas available for thermal electricity generation.”

Jones said the Government needed to reprise the 1973 Maui contract and explore whether it would provide the level of confidence that gas investors would be looking for. They are deeply fearful that a new government could unilaterally overturn their rights.

Jones said yesterday that the ending of the ban on offshore generation had been the first step towards restoring investors’ confidence.

“But rebuilding investor confidence in New Zealand’s petroleum sector will require more than removing the ban,” he said.

“Our job as the Government is to provide the right policy settings to enable the sector to get to work, and that’s exactly what we aim to achieve through these amendments,” Mr Jones says.

“Some of our current settings are a barrier to attracting investment in exploration and production because they are overly costly and onerous on industry. Some obligations lack necessary flexibility, and compliance obligations are uncertain and unclear.

“As well as removing the ban, we are proposing changes to the way petroleum exploration applications are tendered and allocated, aligning the petroleum decommissioning regime with international best practice, and improving regulatory efficiency.”

“I want a considered discussion about how we use our natural resources to improve the security and affordability of energy and resources supplies, stimulate regional economic development opportunities, and increase New Zealand’s self-sufficiency to

Energy Resources Aotearoa CEO John Carnegie welcomed the proposed changes, which, he said,  showed that the government had been deliberate and thoughtful about balancing any risks through appropriate regulatory oversight.

“The changes proposed will help restore investor confidence and will be welcomed by the Taranaki region, providing a boost to their local economy through increased investment and job creation,” he said.

Jones made it clear that the prime aim of relaxing the gas exploration ban was to deliver more gas to the electricity industry.

He was critical of the existing electricity generation companies, saying that not one of them had come up with a robust solution to the dangers surrounding blackouts, “other than the benighted Genesis that has to continue importing coal.”

The obvious long-term replacement for coal and gas to supplement hydro is geothermal energy.

(Solar and wind cannot be a complete replacement because it cannot be guaranteed that they can produce 24 hours a day, every day).

Last week, with Contact Energy’s new Tauhara plant finally up and running, geothermal generated 21 per cent of the country’s electricity, with hydro producing 49 per cent and thermal 17 per cent.

Wind contributed 10 per cent.

The New Zealand Geothermal Association has told the Committee considering the Fast Track legislation that various plans exist to increase the country’s geothermal generation capacity by around 25 per cent. Though that may reduce the pressure on the Huntly thermal plant, it is clear it will be needed for some time yet.

All Jones can do now is hope that yesterday’s announcements attract some new investment in gas exploration and that that exploration is successful.

Otherwise, Huntly will have to continue to burn coal.