9 Jan 2010

Dunne defends removal of offshore tax 'anomaly'

9:09 pm on 9 January 2010

The Government is defending its block on operating expenses being claimed by New Zealand oil companies prospecting overseas.

Greymouth Petroleum says the change left it stranded in Chile after it had initially been encouraged by the Government to invest there.

It says a rig lay idle at huge cost for more than a year because of the tax change, and in the end it only went ahead with prospecting because of a deadline set by the Chilean government.

But Revenue Minister Peter Dunne defends the change. "We felt it was an anomaly," he says, "for New Zealand taxpayers to be stumping up for tax losses incurred by New Zealand mining companies drilling offshore."

That was costing Inland Revenue millions of dollars, Mr Dunne says. He says the law change was supported by both sides of the House.

Oil and gas flowing in Tierra del Fuego

As it turns out, Greymouth Petroleum has found what it's looking for in Chile: it says oil and gas are flowing from its Rio del Oro 1A well, in the southern region of Tierra del Fuego.

A Chilean subsidiary, PetroMagallanes, plans further evaluation and says the field is commercial.

But Greymouth Petroleum is still unhappy that it could not get a tax credit on money lost during the exploration phase, while the rig stood idle.