Cleaner hydrocarbons needed for transition

The drilling rig Ocean Patriot was the last seen in Otago waters, in 2006, followed by the drill...
The drilling rig Ocean Patriot was the last seen in Otago waters, in 2006, followed by the drill ship Noble Bob Douglas in 2014. Photo: Supplied
The announcement by Austrian energy company OMV of an oil and gas drilling programme off the coast of Otago-Southland will no doubt galvanise opinion about the merits of mining carbon-based energy sources in our waters.

But before deciding if you're for or against the prospecting, it's worth considering what's at stake for New Zealanders and the southern region in particular.

OMV plans to drill up to three exploration wells and up to seven follow-up appraisal wells in the seafloor of Great South Basin, southeast of Dunedin (but will only proceed with the appraisal wells if the exploration well findings are favourable).

These plans follow initial exploratory work that was conducted under permits granted before the Crown Minerals (Petroleum) Amendment Bill was passed in November 2018, legislation that ruled out issuing any new offshore permits.

OMV's plans are possible because they are covered by pre-existing permits, which the Government has said it will honour, although they are subject to an application to the Environmental Protection Authority regarding proposed marine discharge.

Of course the fact OMV has announced this next phase suggests its initial work has indicated the potential for commercially viable hydrocarbon reserves. But the process of realising that prospect is a lengthy, complicated and very expensive one, with no certainty of outcome.

And the clock is running out, because OMV must relinquish its permit if it has not drilled by July 2021.

In the era of heightened climate change awareness, the idea of mining for hydrocarbons may seem an anathema. Indeed, nearly everyone agrees we need to move away from fossil fuels.

But we also need alternative cost-competitive energies to move to - and in sufficient quantity to fuel our homes, our lives and our economy. That future is still some way off.

There's no way we can remove fossil fuels from our economy in the immediate future - it's going to take some time. Responsible hydrocarbon extraction and cleaner-burning hydrocarbon technologies have an important role to play as we move towards a net zero carbon future.

Many New Zealanders may not be aware that our proven gas reserves are modest, with production volumes forecast to diminish from 2021 onwards.

Given that our chances of finding alternative gas supplies rest on activities like OMV's, we should be supporting its activity.

Should the prospect in the Great Southern Basin prove viable, it would help New Zealand in its quest for cleaner fuels and energy self-sufficiency at affordable levels. The more energy we produce here, the less we have to import - at considerable environmental cost, and potentially from sources with far lower environmental standards than OMV's.

OMV's mining activities also offer significant economic benefits in terms of employment - hundreds of jobs are likely to arise in relation to their work - as well as significant contribution to the country's GDP. It pays taxes and royalties here. In short, it represents significant investment in the local and regional economy.

But what of the potential down sides of its activity? The application now before the EPA will no doubt provide greater transparency around potential environmental impacts of OMV's exploration drilling. But what we know now is that the physical impact of a well on the seafloor has been likened to that of a large ship's mooring.

Further, significant progress in drilling, well capping and spill-containment technology in recent years greatly alleviates concerns about potential damage from spills and leaks.

Austrian-based OMV is a responsible corporate citizen with an excellent environmental record and its operations comply with New Zealand's stringent environmental and health and safety regulations. It consults community stakeholders and iwi extensively, and supports community and environmental initiatives.

Nearly all New Zealanders want to lower emissions, but it's critical we do so in a planned and managed way to ensure our economy and our living standards do not suffer, while being mindful of our environmental responsibilities. South Island-based hydrocarbon prospects like OMV's offer exciting possibilities that could enable us to do that, while delivering real benefits to our region.

 - Virginia Nicholls is the chief executive of the Otago Southland Employers' Association.

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