Unsafe assumptions guide expansion of drilling in NZ

By Bryan Walker 22/09/2012

A Close Up interview on TV One this week looked at the economic desirability of the proposed expansion of drilling exploration in New Zealand weighed against the environmental concerns. I had just finished my post on the feasibility of renewable energy fully powering the world’s economies by 2050 and it interested me that both the Government and the industry spokespeople chose to make much of the assumption that any change to renewable sources of energy is a long way off. A safe distance, one might say. The assumption was used to buttress the case for expanded exploration. Transport Minister Gerry Brownlee:

“This is a revenue [stream] for the Government that’s very very large. You’ve got to realise that the world is not going to go away from being a hydro-carbon economy literally for decades.”

David Robinson of the NZ Petroleum Exploration and Production Association:

“I’m as keen on the clean green technology as anyone. I’m very much an environmentalist myself. The reality of the world energy supply at the moment though is that renewables struggle to get to 30  percent…the reality is that the world’s oil and gas is what is fuelling the world today and it will be quite a number of years, many decades in fact, before it is replaced by some  of  the newer technology. Which will be wonderful when it happens but for the time being the world is very heavily reliant on oil and gas.”

Rick Boven, economic and environmental strategist, agreed that there was likely money to be made from exploiting oil and gas but pointed to the bad consequences for the climate if this course is pursued around the world, which ultimately meant bad consequences for the economy as well. He pointed also to the economic risk, for example, of a binding global climate agreement which would restrict our output and leave assets stranded.

It’s not my concern to follow the discussion so much as to point up the blandness of the assertion that we will rely on oil and gas for decades to come. Even in their own economic terms it’s hardly a reliable prediction. In climate change terms it’s a recipe for disaster. Obviously we can’t stop using oil and gas overnight, but the kind of aggressive roll-out of energy efficiency technologies and renewable energy technologies that the Ecofys and other reports envisage and common sense demands, puts big economic questions, let alone climate change questions, over the notion that we have a bright future in oil exploration and production. Prudent investors must surely be starting to ask themselves such questions.

The oil world and its political allies may be full of confident assertion. But there are counter currents which they and their investors would do well to heed.