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Singapore-based BMI Research, a Fitch Group company, said the country's oil and gas production would remain in a ``structural downtrend'' in coming years, given the dearth of new discoveries, ``floundering exploration'' outside the mature Taranaki basin and decline of existing fields.
New Zealand has been promoting parts of 20 separate offshore petroleum basins around New Zealand for exploration, all of which are considered frontier prospects - high-risk and high-cost.
``This could have significant ramifications for some of New Zealand's most gas-intensive industries.
``The chemicals and food processing sectors appear the most vulnerable to risks of a potential gas shortfall and these sectors would need to find new feedstock, or downsize operations as New Zealand's gas supplies deplete,'' the BMI report said.
New permits issued have plunged from 15 exploration permits in 2014 to just two in each of the past two annual block offers by government permitting agency NZ Petroleum & Minerals.
Several major companies have exited New Zealand in the past two years, including Anadarko, Petrobras, Statoil and Mobil. Shell continues to seek buyers for its New Zealand assets.
The BMI report said exploration and production in New Zealand had a ``bleak outlook'' during the next decade. Annual crude oil production would be down 10% each year and natural gas down 3% annually.
``Exploration interest remains almost exclusively confined to the mature Taranaki basin, and government efforts to stimulate interest in its 18 other petroleum basins have achieved little to date,'' the report said.
BMI predicted ``rapid output declines'' over the next decade from many major fields, including Maui, Kapuni, Pohokura and Waihapa.
``All have been active for over three decades and [are] set to see a cutback in costly maintenance works in the coming years''.
The report noted Prime Minister Jacinda Ardern was looking to ``chart a pathway away from fossil fuels'' and given the failure to improve exploration around New Zealand the Government may even scrap the annual block offers altogether.
Declining gas production was a ``major concern'' for the country.
New Zealand lacked any means to import gas and its remote location, high project costs and small market with below par growth did not justify large investment in expensive lng import projects.
``Inevitably'', New Zealand would have to deepen its dependence on imports, favouring refined fuels over crude feedstock, due to limited refining capacity.
In the short term, imported fuels could be more cost-competitive against local products, BMI said.
New Zealand Oil & Gas still has live deepwater permits off the coast of Oamaru, but despite having a new majority shareholder in Ofer Global, it has yet to attract a major joint venture partner to undertake a drilling programme. NZOG has estimated the Barque prospect off Oamaru contains 11 trillion feet of gas and 1.5 million barrels of oil or gas condensate liquid.
Report author Peter Lee, Oil & Gas Analyst, BMI Research, based in Singapore.