We can extract oil from our Far South Basin - here’s how

A seal near one of NZ's sub-Antarctic islands (OurFarSouth.org)
Expedition leader Gareth Morgan (left; OurFarSouth.org)
Members of the Far South party prepare to land
Russian ice-breaker Spirit of Enderby hosted the Our Far South expedition
Our Far South encounters an ice berg
... and more
Approaching the Ross Ice Shelf
Landed
Antarctic penguins on the march (Lance Wiggs)
Angry Bird encounter (Lance Wiggs)
Sealions (Lance Wiggs)
Unhappy feet ( Lance Wiggs)
Expedition member "Abominable Bob" (OurFarSouth.org)
Outside Scott Base (OurFarSouth.org)
"Sad seal" (OurFarSouth.org)
"Happy seal" (OurFarSouth.org)

(This article first appeared March 12, 2012. This repost follows yesterday's news that Shell NZ and partners are to drill an exploration well in the Great South Basin - Editor)

I’ve recently returned from the “Our Far South” trip to the Southern Ocean and Antarctica, a month-long journey led by Gareth Morgan and populated with 49 other opinionated people, many of them scientists and industry experts.

For me, the most pressing issues were pest removal from our sub Antarctic islands, and, more relevant to NBR readers, fair regulation of oil exploration in our 200 nautical mile Exclusive Economic Zone (EEZ)*.

The tender process for oil exploration in our economic zone has a glaring gap where the required tough environmental and safety requirements should be.

This shouldn’t surprise is, as there appears to be a systematic failure by New Zealand regulators to impose and verify industrial safety and environmental standards.

The Pike River disaster is the most visible result that shows we don’t understand safety.

It was an abominable affair where the quest for cash and slack domestic safety standards contributed to a tragedy that was entirely preventable.

The Rena spill then showed we are unable to effectively cope with oil spills near our coast line, but that we are happy to spend decent resources on saving a few visible oil-affected birds rather than saving tens of thousands or more by removing pests from our remote islands.

We need to impose tough standards to ensure we don’t end up with a disaster like Deep Horizon in the Gulf of Mexico.

More dangerous than the north
The effects of a disaster could be devastating. New Zealand’s sub Antarctic region is home to not only important fishing zones, but also to endemic species like the NZ Sealion, and the Yellow Eyed, Snares and Erect Crested Penguins.

Beyond that, New Zealand provides breeding grounds to 25% of the world’s seabirds, including many species of albatross.

It is going to be hard for the prospectors to deliver the required standards.

The Southern Ocean is a level above the once untameable North Sea, which is essentially surrounded by land. The ocean in the south has no land mass stopping the eternal progression of waves around the world, and is powered by the similarly strong Antarctic winds.

The waves are further apart and thus much larger than the ones in the North Sea, and with average wave heights of 3.4 meters are very powerful. A decent storm, and the region has many, can raise wave height to 11 metres, which we were unusually lucky not to experience ourselves on our own voyage south.

The oil industry already knows about rogue waves, which can be three times the normal storm size, with a 25.6m monster hitting and damaging the North Sea’s Draupner oil rig.

No clean-up possible
The power of the Southern Ocean almost certainly requires especially designed drilling rigs with far higher tolerances for severe conditions. Safety margins will need to be high, as we are utterly incapable of dealing with any oil spills in the region, with the ocean conditions, remoteness and expense precluding any clean-up efforts.

Realistic about costs, as well as benefits
Oil prospectors appear to increasingly believe that economic extraction of oil is possible.

However, we need to make it clear to them what New Zealand requires for safety and environmental standards so they can assess costs along with the benefits.

With no chance for clean-up, prospectors should have to demonstrate that the risk of a small or significant oil emission spill falls beneath certain remote probabilities, and that they are able to provide a bond or insurance to mitigate the financial aspects of a spill.

Pipelines?
Oil doesn’t deliver itself, and any successful find will need infrastructure to transport it back to the mainland and offshore.

Will we have storage in the sea and oil tankers braving the large seas?

Will the solution be pipelines across the pristine ocean floor and fishing grounds?

These have been solved before, but to do so in the vast and remote Southern Ocean will be a new challenge for the industry.

How it can be done
It is possible to explore and produce oil in our far south.

And while we can never eliminate the risk of a major spill, the right controls will make that event highly improbable.

The controls include not just best operating equipment, but also responsible companies that are truly committed to safety.

BP made it apparent that their public safety rhetoric wasn’t matched by internal practice and values, and players involved in any successful exploration bid need to be scrutinised carefully.

This scrutiny isn’t one-off, but requires a continuous series of audits, perhaps involving permanent observers on rigs.

The parent company and contractors will have truly embraced a Zero Harm approach for workers and the environment, and will not compromise in the name of production.

The industry calls these sorts of imposed measures a “license to operate”, but   New Zealand’s prospecting and mining license to operate terms are soft or simply unwritten.

We need to offer exploration companies known environmental and safety requirements for exploring and producing oil in the region.

Wait the industry out
If those requirements prove to be uneconomic, then let’s wait the industry out, as the price of oil continues to slowly rise, the cheaper fields begin to be exhausted and the relative benefit and safety of drilling in our EEZ becomes clearer.

More than token royalties
We also need to share the benefits, and not simply clip a token amount of royalties.

With the government owning four large energy companies, why can’t we use them to expand into partnerships with foreign operators?

Norway’s Statoil had a mandated 50% share of any business in the early years of offshore drilling there, and they grew with the success of the fields in Norway’s economic zone.

That mandate has now been dropped as the government saw benefits in a competitive market, but Statoil is now not only a successful multinational headquartered in Oslo, but also provides security for Norway’s super fund.

Twin challenge
Our twin challenge is to ensure that we have safe sustainable drilling, but also that we capture the benefits as a nation. 

It seems as if we now have great potential for oil, but before we embark in earnest let’s start addressing safety and our share. 

Lance Wiggs is an independent consultant providing management, strategy, growth and valuation consulting to industrial, media and internet based businesses. He blogs at Lancewiggs.com.

* The article refers to the Campbell Plateau and other regions still in New Zealand's 200 nautical mile economic zone. (data.gns.cri.nz/geoatlas/images/nz_cont.jpg). Antarctica mining is uneconomic as the ore is low grade (as far as anyone can tell), meeting the environmental and safety requirements would be wildly expensive and it is totally banned by the Antarctic Treaty System.

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

25 Comments & Questions

Commenter icon key: Subscriber Verified

NZ obviously has much untapped mineral wealth.
We would like to see govt pursue it's extraction much more vigorously.
liberte

Reply
Share

And damn the consequences as long as we get economic growth?

Reply
Share

We tried having Government-owned exploration, production, urea, methanol, synfuel, etc.

That was Muldoon's Petrocorp. Not a huge success.

Reply
Share

The proposed oil rig/s in the Great South Basinb are a financial and environmental disaster waiting to happen... people argue we havent got the technology nor knowhow to get the good oil BUT over $1,000,000,000,000 buys a lot of knowledge and technology... yep that's OVER 1 TRILLION DOLLARS of oil...
and NZ Inc will get only 5% and that will be slowly over a 50 year period IF we are lucky and there is no 'rogue wave' or hurricane disaster in trhat 50 years... of course $50 Billion sounds like a lot but not when it's compared to $1,000 Billion (A Trillion)
WHY are we not leveraging off the value of the known volume of oil to do it ourselves?
Well GUESS WHO is secretly banking fat offshore commissions for their 'roles' in stealthily selling out NZ inc and now the good oil from under us all?
I mean, have you ever heard of a Merchant Bankster or his mates working for a salary? or even for free as the so called #1 would have us believe? (says he donates his salary to charities...)
The big fat gravy train has been delivering commissions thick and fast into certain peoples offshore bank accounts and by way of ncreased shareholdings in offshore entities as we speak...
Just to name a few of the 'kickbacks' paid in the last 2 years... the SCF plunder, the Christchurch 'fundraising, planning and rebuild', the 'sale' of Pike River, the AMI scam insurance deal, the Federal Reserve and World Bank loan commissions, the coming electricity company selldown backhanders, then there's the secret commissions for the oil... We are talking about over a TRILLION in oil value in todays dollar terms after all!
And environmentally NZ couldn't even deal with the relatively small Rena spill and wrekage, so the how the hell will we deal with a rogue oil rig!!!
Oh well never mind your grandkids won't care that it happened right under your nose, and you did NOTHING, now will they...
We ALL collectively hold the KEY to this nations future (not just the nations leaders whose decisions are based on the Merchant Banksters BEST FRIEND called... GREED)
It is time for the real KEY to be revealed... so we can unlock the trap door we have been locked in by and reclaim this nations FREEDOM!

Reply
Share

Rant, rant, rant. Take the meds quick, before you turn completely delusional.

Reply
Share

There ain't no freedom in a subsistence economy, Kieran. Your current great lifestyle it brought and bought for you my capitalism. There is no free lunch.

Reply
Share

I agree Mark but at what expense to human life and the environment? Is there no room for rational debate here?

Reply
Share

The truth cannot be hidden forever,
Oh well never mind your grandkids won't care that it happened right under your nose, and you did NOTHING, now will they...

Reply
Share

Good on you for recognising that going for oil is a judgement about risk, which will be best served by strong regulation. My only quibble is the suggestion we did poorly on the Rena spill. Actually, it was pretty quickly cleaned up. If the normally prevailing winds had been blowing the oil to the west, there wouldn't have been a drop of oil on east coast beaches. As it was, the clean-up was fast and effective.

Reply
Share

Allow Lance a small off-line rant on his favourite topic. The man is a superstar. He has the knowledge, the wit and the balls that many, like Kieran John have had ground off them over many disappointments.
Let's take the 50% route of the leading nation in the world, Norway, forget about the greenie promises of what tomorrow MIGHT bring and nail this opportunity....with the best environmental controls ever. Get the Norwegians involved....they understand this stuff, have done it and aren't greedy for more. They already have more than they need....no crappy teeth there with dentists paid like rockstars. No dole queues a d very little baby bashing too.
John Key, sack your totally irrelevant and arcane 'scientific adviser' and send a Beemer around to pick up Lance and put him in the next door office in the Beehive. What a start that would be.
If the BS greenies and Gorons don't like it....arrange for retired Interislander ferrys and accommodation on barges for them to monitor the progress. I suspect they'll prefer to sit in Cuba Street and whine instead....while we move up alongside Norway at the top of the world....without all the social dysfunction which is growing like a cancer her...through lack of the appropriate amount of wealth to chuck at it. Amen

Reply
Share

If the prevailing wind was "..blowing the oil to the West..", it would have covered the Eastern beaches. Have a quick look at a chart/map

Reply
Share

Get on with it already!!! .... all this talk about GSB oil and not a drip to drink.

Greenies and envirocrats are full of problems and excuses .... show us the solutions!

Showboating around in a frozen wasteland is not doing anything for anybody ... just more money wasting.

Reply
Share

and your solutions to the issues are ???

Reply
Share

oops, good point Paddy - I meant to say that if prevailing westerlies had been blowing, there would have been no eastern beach foulings. As Maritime NZ's oil disaster response plan notes, the greatest risk for NZ is of oil spills to the west of NZ being blown, by westerlies, onto the west coast. In fact, this has never happened despite decades of oil production offshore Taranaki.

Reply
Share

NZ should create a regulatory environment like the Swiss, a mineral extraction environment like the Aussies and an oil/shale environment like the Middle East.

The money should stay in NZ.

The working class become Middle Class.

NZ becomes World class.

No more LieBore Party
No more Green Party and anti-West UN Agenda 21 (which the watermelons support).

Simple.

Reply
Share

So Who is paying you to say this?

Reply
Share

I'm trying to imagine an oil pipeline which was safe against a single-point failure.

I think it would have to be double-walled, with the space between pressurized, and a plan for emptying it in a hurry if the pressure in the outer compartment fluctuated unexpectedly.

I have not yet imagined an equivalent level of protection for a drill-string, and am not sure that it would be possible.

Reply
Share

So Who is paying you to say this?

Anonymous | Monday, March 12, 2012 - 5:42pm

reply:

Not Agenda 21's local government quisling wing the ICLEI.

Not Maurice Strong or the UNEP.

Not Greenpeace who support Agenda 21 and who could more accurately be called RedWar.

Not Adbusters.

Not the oil/gas/financial services industry.

I'm motivated purely by the certain knowledge that reality is an objective absolute. I leave warm fuzzies for children, sociologists, Fabians and eco-marxists.

Reply
Share

Don't forget Pike's design was constrained by DOC limitations, including no track up to the ventilation outlet, limited number of exploration holes from on top of the reserve, major pain concerning how the coal was to be accessed , hence such a long entrance shaft, and other considerations. These limitations should be studied by the Royal Commission to see what other unintended consequences were of DOC's anti-mining mindset, and that of the greens who work there. Remember it was the greens who were against treated timber, and that's turning into a $30 billion problem.

Reply
Share

A recent report noted that the vast majority of the hydrocarbons in the Great South Basin were in fact Natural Gas with only limited amounts (20%) of condensate (oil).
That makes it a whole lot easier to keep it safe. There are known to be at least 12 - 20 reservoirs across serveral thousand square kms so it will be a fragmented operation over many years, much like Taranaki. But LNG is much easier than oil to deal with which is probably why Taranaki's offshore ops have been so benign. The oil there is only a by-product of the LNG extraction, and it still provides 50% of NZ's needs.

Reply
Share

oil will not be extracted from these wells both Shell and Anadarko beleive that it will be Gas and Condensate which will be the predonimant product in these area which provide a far safer drilling prospect

Reply
Share

all oil and gas comes in the form of condensate (there is no such thing as an oil or gas well) but any find will be gas heavy. And yes - I agree - a gas find would have much less environmental risks than an oil heavy condensate find.

Reply
Share

...a country overall much left of centre than New Zealand - and the wealthiest country on a GDP per capita basis - largely on account of its oil and gas programmes.

Our well intending labour and green parties - whose social programmes I fully support - would do well to remember how much revenue oil and gas brings in (royalties on top of corporate taxes) and how these revenues can achieve the twin goals of social spending on the welfare state and a balanced budget - a rarity in the developed world.

The oil and gas train sailed about 100 years ago - NZ shouldn't still be refusing to get on. Further - natural gas is far cleaner than NZ's heavy use of coal. Emissions in the United States have dropped dramatically (even below their Kyoto protocol levels had they stayed in!) on the back of natural gas from shale fracking displacing coal - not some hard core left wing clamp down on the industry. In fact - there is no doubt emissions and global warming would be worse in the absence of fracking in the united states - far worse.

Reply
Share

An excellent article, as usual from Lance. Perhaps we could now have a reasonable, non-emotional, logical discussion that could create a consensus that most New Zealanders would support (ie economic growth that provides jobs and propserity for all without risking the health and safety of workers and the environment on which brand New Zealand and our lifestyles depend).

Reply
Share

Most Countries would jump at the prospect of an oil industry. Look at countries like Brazil and Norway. Oil brings prosperity.
The fact that we are looking at riches and we are being encouraged to turn away speaks of the power of the green lobby in this country.
The real issue is how come there is so much green commentry in the NZ media.
The news managers tend to be unknown but by favouring one side or another they have a huge influence in what we think.

Reply
Share

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7868 0.0013 0.17%
AUD 0.9225 0.0006 0.07%
EUR 0.6300 -0.0004 -0.06%
GBP 0.5008 0.0013 0.26%
HKD 6.0990 0.0099 0.16%
JPY 93.0030 0.4230 0.46%

Commods

Commodity Price Change Time
Gold Index 1196.6 -2.970 2014-11-26T00:
Oil Brent 79.4 -0.640 2014-11-26T00:
Oil Nymex 73.7 -0.340 2014-11-26T00:
Silver Index 16.6 0.000 2014-11-26T00:

Indices

Symbol Open High Last %
NZX 50 5455.4 5474.7 5455.4 -0.57%
NASDAQ 4760.2 4788.0 4758.3 0.61%
DAX 9990.7 9990.7 9974.9 -0.34%
DJI 17812.2 17833.8 17814.9 0.07%
FTSE 6723.4 6723.9 6723.4 -0.45%
HKSE 23982.3 24117.2 24004.3 -0.07%
NI225 17340.2 17471.9 17248.5 1.23%