City in race to host supply base

The race is on as Dunedin vies with Invercargill to secure hosting rights for an oil and gas base, after confirmation oil giant Shell plans to drill a test well in search of natural gas off the Otago coast.

Shell's plans to drill as part of a joint venture, probably in the summer of 2016-17, came as another oil giant, Anadarko, prepared to begin drilling its own test well, 60km off Otago Peninsula, next month.

News of Shell's plans was met with excitment and concern in Dunedin yesterday, some city councillors calling for the red carpet to be rolled out and others warning against welcoming the ''unethical'' industry.

Dunedin Mayor Dave Cull - who remained personally opposed to the increasingly difficult search for fossil fuels - said he was nevertheless ''cautiously optimistic'' the city could benefit from Shell's plans.

He was encouraged the company was prepared to invest up to $200 million in its search for natural gas, and not oil, off the city's coast.

However, with the test drill not scheduled until 2016, and any full-scale extraction - if it eventuated - a decade away, he cautioned against too much excitment, too soon.

''What comes out of it, in terms of job creation and business and economic development, will depend on the size of what they find.

''If they are going to be drilling, this is pretty good, and clearly Dunedin is very well placed to offer the services and facilities that they might need,'' he said.

Some councillors were quick to celebrate, Cr Andrew Noone saying it was ''fantastic news''.

''It's now a two-horse race, so we have got a 50% chance of securing a supply base,'' he said.

Deputy mayor Chris Staynes agreed, saying news of Shell's test drill was ''great'', while Cr Andrew Whiley described Shell's announcement as ''simply awesome''.

All three men hoped the industry would eventually provide a much-needed boost for the city's ailing economy, but Cr Staynes also suggested Dunedin could do more to secure hosting rights for any logistics base that might follow.

That should include considering an extension of Dunedin International Airport's runway, at a suggested cost of about $20 million, possibly shared between the council and central government, he said.

Cr Staynes planned to raise the idea in due course, and said it was an incentive the council could offer to encourage Shell and Anadarko to establish their bases in the city.

The move would allow larger jet aircraft to land, which the industry could use - among other things - to ferry emergency equipment to the area at short notice, he said.

Extending the runway had been considered before, and deemed uneconomic, but could stack up if the city secured hosting rights as a logistical base and the economic benefits that came with it, Cr Staynes said.

It might even help Forsyth Barr Stadium attract more big musical acts, adding to the economic benefits, he said.

The idea won support from Otago Chamber of Commerce chief executive John Christie, who said yesterday it would be a ''really good thing for the city''.

Mr Cull also said the idea would be worthy of consideration if a case for it could be made, such as improving emergency response times.

Royalties from oil and gas revenue could help cover the debt-servicing costs associated with such an investment, but only if the Government agreed to share them with councils, he said.

The council would ''certainly consider'' investment in infrastructure or other incentives to support the industry in Dunedin, but the oil companies' needs would only become clear in time, he said.

However, other councillors maintained their opposition to the industry, including Cr Aaron Hawkins, who said the council had a ''moral obligation'' to protect the interests of future generations.

''I don't think it's fair to clamour over a few jobs now and leave our grandchildren to pick up the tab environmentally and economically.

''Frankly, I think that's a very selfish way of looking at economic development.''

Cr Jinty MacTavish agreed, saying the city would not spend money to try to attract the ''unethical'' tobacco industry, and should avoid the oil and gas industry for the same reasons.

''It's an unethical business and I wouldn't like to see Dunedin setting out to attract it.''

Oil Free Otago also reiterated its opposition to ''short-sighted'' drilling in a statement released yesterday.

Despite that, Port Otago chief executive Geoff Plunket said Shell's announcement was ''very positive'', and the two companies were in regular contact.

Port Otago, like the rest of the city, was ''well placed'' to host a logistical base, Mr Plunket believed.

Mr Cull agreed, saying Port Otago's round-the-clock service would be attractive to the oil industry, while the city's mix of engineering businesses, infrastructure, hospital and aviation services also suited the companies' needs.

South Port chief executive Mark O'Connor agreed, telling Radio New Zealand it was ''highly likely'' it would make more sense to service initial drilling plans from Otago.

Of the other city councillors spoken to yesterday, Crs Neville Peat, David Benson-Pope and Richard Thomson expressed either concern or outright opposition to the drilling plans, while Crs Doug Hall, Hilary Calvert, Mike Lord and Lee Vandervis welcomed Shell's plans.

Crs John Bezett and Kate Wilson could not be contacted.


Drilling in the South
• Texas-based international oil and gas company.
• What: Deep-water test well 60km off the coast of Otago Peninsula, at the bottom of the Canterbury Basin.
• Value: $130 million
• When: February 2014

Shell (with OMV New Zealand and Mitsui E&P Australia)
• Joint-venture partnership between three companies
• What: Exploration well in Great South Basin liscensed area; exact location to be determined
• Value: $100 million- $200 million
• When: Summer 2016-17




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