25 Sep 2018

Official oil and gas analysis is 'flimsy' - Peters

1:08 pm on 25 September 2018

The acting prime minister is dismissing an official report estimating billions could be lost by halting offshore oil and gas exploration as flimsy.

Winston Peters

Winston Peters Photo: RNZ / Richard Tindiller

Legislation was introduced to Parliament yesterday despite the Ministry of Business, Innovation and Employment (MBIE) warning the move could cost the country billions of dollars in lost tax and royalty revenue.

The ministry analysis estimated a cost to New Zealand of $7.9 billion in lost tax revenue between 2027 and 2050, but noted that would depend on future oil prices and interest rates.

It also cautioned that the ban could potentially increase global greenhouse emissions.

"The transfer of production to other countries that have higher emissions footprints may result in an increase in global greenhouse gas emissions, although the timing and scale of this impact are uncertain," officials said.

Acting Prime Minister Winston Peters told Morning Report MBIE's analysis is flimsy.

"If NASA had have got their calculations in any way like this, Neil Armstrong would be still flying around trying to find the moon. This is a very, very bad piece of so-called analytical work."

He said the government's decision wasn't based on the data but its calculations for where it wants to take its economic and carbon footprint in the next 20-30 years.

"It's not the first time governments have been subject to officials getting it dramatically wrong."

He said this policy ends the reliance on this industry while preparing new plans for the future to decrease the reliance on fossil fuels.

Using fossil fuels less will lower emissions, he said.

Energy and Resources Minister Megan Woods told Morning Report the government has to start planning for communities which have been reliant on fossil fuel exploration to move to new sources of income and jobs.

Ms Woods said there is uncertainty over the figure and the effect on emissions.

Governments do not always agree with advice from their officials, she added.

"We are keeping and honouring all the existing exploration permits that will see drilling potentially until the 2060s," she said. "But what we have to be doing is planning for those communities that rely on fossil fuels as their source of revenue and jobs.

"We are not a government that is prepared to cross our fingers and hope for the best. We know that we need to start that long-term transition planning now and that is exactly what we're doing."

The report acknowledges it has not been able to take account of technological changes here and in other countries which will reduce emissions and dependence on oil and gas, she said.

"All the evidence is pointing to the fact the Chinese have peaked their emissions ahead of their Paris targets. I was in China last week - the speed at which that economy is decarbonising and looking to renewables is phenomenal."

Petroleum Exploration and Production Association of New Zealand CEO Cameron Madgwick said the decision is clearly a political one and the numbers are "pretty robust".

"Some of the ranges in the report are up to $23 billion ... that was the equivalent of employing 5000 more nurses and 5000 more teachers for 35 years. These are significant sums of money that New Zealand is going to miss out on.

"Whichever way you look at it, whether it's the midpoint $7.9 billion, the $23.5 billion highpoint, or the $1 billion low point, these are lost revenues for New Zealand, and New Zealanders, that will need to be found somewhere else," he said.

To reduce emissions you need to reduce the demand, he said.

"One of our very large users of gas in New Zealand creates methanol and they use gas to do that," he said. "The next most logical producer of methanol globally, which is a growing commodity, is from China using coal. Coal has twice the emissions of gas. This is simple science.

"It's time for an urgent reconsideration of this. This was clearly a political decision made without the benefit of any robust science or evidence. That's now clearly available from their own trusted officials."

The National Party said the decision to go ahead with a ban is "appalling".

National leader Simon Bridges said estimates of the economic loss to New Zealand due to the government's new approach on oil and gas were greatly underestimated.

He said even taking the midpoint of $8 billion was not looking at the whole picture.

"So in fact in terms of jobs, in terms of growth and profits, we're actually talking about tens and tens of billions that are lost to us. And there comes a point in time, if you do things like that, and if you haven't got other things happening, it has a real affect on our country, on how we go and the prosperity that we have."

Mr Bridges said in light of the economic damage this policy would cause, he was urging the government to reconsider.

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