Comparing oil and gas to munitions

January 10th, 2014 at 2:00 pm by David Farrar

Pete George blogs:

Dunedin City councillor Jinty MacTavish suggests oil and gas is unethical, and she wants council guidelines that rule out using staff time or resources on anything deemed to be unethical.

Her exact words are:

Working to attract unethical industry to our city (and expending ratepayers’ resource to do so) feels to me a highly dubious activity for Council to be engaged in. I would very much hope we wouldn’t do it for cigarettes or munitions – what’s the difference with oil and gas, when science tells us the fruits of that industry will also erode the livelihoods of, and cause misery for, millions of people?

I can only presume that Cr McTavish lives up to her noble principles and not only does she refuse to smoke or own guns, but she also refuses to travel on any vehicle that uses oil, and go to any house that uses gas.

It’s one thing to oppose a specific project, but McTavish says the entire oil and gas industry is akin to munitions and causes misery. Surely then she is not such a hypocrite that she allows herself to benefit from them?

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The secret report that has been online for two years

November 22nd, 2013 at 12:00 pm by David Farrar

Labour proclaimed:

Documents obtained by Labour show the Government has kept secret the real risk of an incident including a major oil spill occurring at the depths of Anadarko’s proposed Kaikōura drilling site, Labour Leader David Cunliffe says.

“The Government has constantly told the public deep sea oil exploration will be safe.

“However, documents obtained under the Official Information Act show Environment Minister Amy Adams had international research 13 months ago showing there is a 70 per cent probability of a ‘reportable incident’ occurring within a year at the 1500m depth of the Kaikōura well.

This so called secret document has been held in a top secret location – the world wide web. It’s been there for the last two years. Someone should introduce Labout to Google.

“This research shows while existing shallow water sites such as Taranaki carry a risk of only around 10 per cent, the risk is dramatically increased at deeper levels.

“Amy Adams went to great lengths to keep this information from the public. In fact, she told Parliament there is a ‘very low risk’ of a large scale oil spill occurring.

Which there is. Labour are conflating an oil spill with a reportable incident. To do this, you need to be either very stupid or very misleading.

PEPANZ set the record straight:

 “Communities are calling for more responsible information about deep sea drilling. Instead, Labour Leader David Cunliffe’s announcement today is riddled with inaccurate assertions which are harmful to the oil and gas industry here in New Zealand and potential investors looking to come to our shores.

 “Labour claims they have ‘unearthed’ secret documents hidden by the Government – the truth is you can find the report online here. Or use Google.

 “They claim there is a “well /drilling site” in Kaikoura – again, this is incorrect. Anadarko has planned seismic surveys for the area – but that’s as far as it goes.

 “Taking information out of context or using images without the commentary and research it was published with is misleading and does not contribute to a balanced conversation that our country needs to have about energy.

“For example, a graphic used in a report written by Academic, Mark A Cohen, which Labour is referring to, used on its own suggests the deeper you drill offshore the probability of an incident grows to up to 70%. But when reading the report in its entirety it is clear that those statistics are about the number of incidents reported – injuries, falls or spills. The 70% does not refer simply the probability of a large oil spill – in fact it is saying the more people and machinery you use – the more chance there is of a cut finger, injury, fire or any other incident that you would see on a construction site anywhere.

So if someone drops a wrench on their foot, bruising it, then Labour is trying to make you think that is equivalent to a major oil spill!

This is akin to conflating the crime rate with the homicide rate.

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How likely is an oil spill?

October 23rd, 2013 at 1:00 pm by David Farrar

The Herald reports:

New oil spill models have depicted the dramatic impact deep-sea blowouts would have on New Zealand, spreading across our most important fishing ground and hitting Auckland’s iconic west coast beaches.

The report, commissioned by Greenpeace and produced by data science agency Dumpark, sought to gauge the blow-out effects of two planned deep-sea drilling locations off the North Island’s west coast and the South Island’s east coast.

But an industry spokesperson last night slammed the study as inaccurate, “fear-mongering” and “science fiction”, while Government officials also described such a large-scale spill as unlikely.

This got me thinking. How likely is a large spill? Is it 5%? 1%? Less than 1%?

The Deepwater spill of course is the worst case example. But how likely is such a major spill. I found out that there are in fact over 4,000 rigs in the Gulf of Mexico. And Greenpeace is freaking out over one proposed exploration by Andarko.

One site gives some stats:

 Improvements in technology and better government oversight have made drilling inherently safe. In fact, since 1975, offshore drilling has had a 99.999 percent safety record [source: EIA]. The amount spilled has decreased from 3.6 million barrels in the 1970s to less than 500,000 in the ’90s. Believe it or not, more oil actually spills into U.S. waters from natural sources and municipal and industrial waste than it does than from offshore oil and gas drilling. As far as the toxic chemicals are concerned, specialists say most of them are at insignificant levels since discharges are regulated by state and federal laws. The mercury released, for example, isn’t enough to be absorbed by fish [source: Jervis].

So if I recall $2.2 billion is being spent in NZ on exploration. Do we want to turn that down for worry about the 0.001%?

Surely the debate should be about do we have the right risk management framework in place, not about trying to ban an entire industry.

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Hooton on the Norway model

June 24th, 2013 at 10:00 am by David Farrar

Matthew Hooton writes at NBR:

In the 1960s and ’70s, Norway’s mainly left-wing governments decided to make their country of four million rich.  In 1963, they asserted sovereign rights to North Sea natural resources; exploration began in the mid-’60s; a state-owned petroleum company, Statoil, was launched in 1972; and the profits, taxes and royalties later put into the government’s petroleum fund, set up in 1990.

The fund is now worth approximately NZ$860 billion, or around $172,000 per Norwegian.  By 2030, it is forecast to be worth as much as NZ$4 trillion, or around $800,000 per Norwegian, and exists primarily to pay generous superannuation.

Meanwhile, Statoil has evolved into a classic mixed-ownership model company, with the government owning two thirds and the remainder trading on the Oslo and New York stock exchanges.  It is now the world’s 38th largest public company with a market value of NZ$98 billion and profits of $15.6 billion.  This is more than the entire NZX.

The thinking behind Norway’s approach is that a country’s natural reserves are intergenerational property, they are worth nothing under the ground, and the industries are inherently unsustainable: eventually, even if far in the future, the field will run dry.

The best strategy, therefore, is to get it out of the ground as soon as possible, monetise it, but avoid an economic sugar rush by investing the money for future generations.

As opposed to the competing strategy of never ever dig anything up or drill for anything.

Oil is already New Zealand’s fourth largest export earner, after dairy, meat and wood. The government collects around $400 million in royalties each year, plus another $300 million in company tax.  The present value of future royalty income alone, just from known reserves, is an estimated $3.2 billion.

Relatively conservative MBIE studies suggest that, if exploration continues to grow at current rates, royalties could yield another $5.3 billion in present value terms.  If there is faster growth in exploration, the estimate is $9.5 billion.

Even that may be conservative.  It has been suggested the value of our offshore oil reserves could be in the trillions.  Solid Energy isn’t a very good precedent right now, but New Zealand could choose the Norwegian Statoil model to secure that wealth.

Currently, oil royalties just go into the consolidated fund, to pay for everything from welfare payments to Wellington arts festivals.

The risk Mr Weake identifies is that, if large oil deposits were found, the temptation for a government would be to put the money into something to help it through the next election.  He argues we should establish cross-party agreement now on what we would do with that wealth.

He is surely right.  God knows what decisions a desperate John Key and Bill English would make – let alone a desperate David Shearer and Russel Norman – if we struck oil in the lead up to a close 2017 re-election campaign.

I am sure Russel Norman would refuse to spend any money earnt from dirty oil!

So here’s some friendly advice to the minister: have a chat with Mr Weake and his industry colleagues, take a trip to Oslo and the North Sea, face down the crypto-anarcho-neosyndicalist Greens, achieve consensus with Labour, and get New Zealand’s equivalent of Norway’s oil fund and even Statoil up and running before the election.

One could call it Kiwioil!

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Excellent news

June 23rd, 2012 at 2:00 pm by David Farrar

The Herald reports:

A High Court bid by Greenpeace and a Maori tribe to quash a permit granted to Brazilian oil giant Petrobras for exploration off the East Coast has been thrown out.

The applicants claimed the Government failed to meet environmental and consultation obligations under the Crown Minerals Act, Treaty of Waitangi obligations and international law.

Justice Warwick Gendall said their claims for judicial review failed on all counts. Not only that, he said that if he had found an error of law in the process he would have taken the rare step of not granting relief.

In effect, he is saying he would not have overturned the permit because of the time delay in the applicants’ issuing proceedings.

The challenge was not made until 15 months after the permit had been granted, by which time Petrobras had spent at least $8 million, and the time between the notification of the relevant block on offer and the challenge was two years nine months.

It is good the court found there were no merits to the claims, but also noted the extreme bad faith in filing so late in the piece.

Some environmental groups was to ban anything that has any environmental risk. Mining, fracking, drilling – ban it all. That is a route to poverty. Have a look at Australia. GDP growth in Western Australia is something like a staggering 16%, while in some of the large states, they are actually in recession. You can’t criticise the Government for the growing gap with Australia, and oppose the industries which are generating the wealth in Australia.

Of course risk to the environment should be mitigated and minimised. But it can never be eliminated.

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Oil subsidies

March 19th, 2012 at 4:04 pm by David Farrar

The Herald reports:

President Barack Obama is calling anew on Congress to end tax subsidies for the oil and gas industry, saying America needs to develop alternative sources of energy in the face of rising petrol prices.

Obama said in his weekly radio and internet address that he expected Congress to consider in the next few weeks halting US$4 billion ($4.85 billion) in tax subsidies, something he hasn’t been able to get through Congress throughout his presidency. …

Industry officials and many Republicans in Congress have argued that cutting the tax breaks would lead to higher petrol prices, raising costs on oil companies and affecting their investments in exploration and production.

Obama is on the right side of this one. Just as I am against subsidies for bio-fuels (especially as they caused mass starvation with crops being converted to bio-fuels from grain), I am against subsidies for oil.

We should not shelter people from higher petrol prices. That is a market signal that supply is becoming more difficult, and will encourage investment in other technologies, plus encourage greater use of other forms of transport.

As for investments in exploration and production, you do not need subsidies for that. As petrol prices increase, then exploration of new reserves becomes economically viable.

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Arctic drilling facts

February 29th, 2012 at 9:22 am by David Farrar

A useful article in Stuff:

Oil drill ship Noble Discoverer is heading from New Plymouth for the Arctic, north of Alaska, to explore for what could be a super-field for oil giant Shell.

The Chukchi Sea off Alaska could hold the equivalent of 4 billion to 77 billion barrels of oil, but it is likely to be gas and light oil condensate. …

Shell plans to drill up to six wells in the Chukchi Sea during the next two northern summers. Noble Discoverer will drill within the Burger Prospect, which is about 90kms off the North Alaskan coast in shallow water of just 42 metres. …

Earlier this month the US Government approved Shell’s oil spill response plan for the Chukchi Sea, which was seen as a milestone on the way to offshore drilling this northern summer. The plan includes a new Arctic capping and containment system to be trialled before drilling starts.

In the wake of the Deepwater Horizon oil spill in the Gulf of Mexico, Shell was required to prepare for a “worst case” oil spill nearly five times that of their previous plan. It also needs access to a rig capable of drilling a relief well that could kill the well if needed.

In a major government caveat, Shell must also stop drilling in any hydrocarbon bearing zone 38 days before November 1, so if there was an accident, all capping, response and well-killing work could be finished in open sea before ice forms in Chukchi waters. That government move reduced the drilling window by about a third.

US Interior Secretary Ken Salazar said this month that Alaskan energy resources held great promise and economic opportunity, but exploration had to be cautious and “under the strongest oversight, safety requirements and emergency response plans ever established”.

So the drilling has been signed off by the Obama administration, with extensive safety and response requirements.

The reality is Greenpeace is against any drilling for oil pretty much anywhere. They want it left on the ground, and for us to abandon travel which involves oil. Now that is a legitimate view, but I’d be more impressed when Lucy Lawless starts taking diesel ships to travel overseas for her Hollywood career, rather than jet planes.

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Goff-s moratorium u-turn

October 17th, 2011 at 11:46 am by David Farrar

This cartoon by Blunt is very timely as Goff has just done a u-turn and backed away from his previous call for there to be a moratorium on deep sea drilling.

Listen to Goff on Radio Wammo below.

He now says he is not against off shore oil prospecting but there has to be safeguards. Well who the hell would disagree with that? Ironically there were no safeguards around drilling in the EEZ until National and the Greens voted for some last year, and Labour voted against!

Listen to the interview from 3 minutes on as Goff tries to explain why he said he was against a moratorium last week, then announced Labour would have a moratorium and now tries to say that all he is after is some safeguards!

I’m glad Goff has backed down as a moratorium was the worst sort of populist crap, and also would have probably resulted in closing down a number of operations in Taranaki.

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A desperate opportunism

October 14th, 2011 at 2:00 pm by David Farrar

Patrick Gower at 3 News reports:

The Rena’s oil is polluting plans for New Zealand’s deep sea oil drilling.

The Government wants it to go ahead, but Labour has now decided that what has happened here proves the risk is too big.

So Phil Goff has promised Labour will put a moratorium on any deep sea drilling.

An oil spill was always going to have political fallout. That means photo opportunities and politicians fighting each other on the beaches.

“I don’t think Phil Goff wandering around with a bucket and spade is actually going to fix the problem,” says Prime Minister John Key.

Mr Goff is already digging into other issues; like the Government’s desire for deep sea drilling.

Today he revealed that if Labour gets into power, there will be a moratorium on deep sea drilling until it can be deemed safe.

Now this sudden snap policy is because a cargo ship steered full speed into a reef. Is Labour going to also announce a ban on all cargo ships?
The moratorium is a cheap gimmick anyway as any actual new deep sea digging would be years and years away anyway, so there is nothing to stop. Labour were more sensible back in 2010 when they said:

“Then there was the review of health, safety and environmental legislation for offshore petroleum operations. Now a report on health and safety found that there was room for improving the existing framework and that events in the Gulf of Mexico would further inform safety standards.“New Zealand should look to overseas best practice standards, and it should also be mindful of the unique factors of our own environment when it comes to deep-sea drilling.

“Most New Zealanders want a greater assurance that the Health and Safety Standards for deep-sea drilling and a comprehensive test in favour of the environment is central to reforming the legislative framework for offshore petroleum operations. While I welcome the call for submissions on this question, the Minister needs to balance industry concerns with the wider public.

“The country needs an ambitious plan for increasing investment in renewable energy schemes, clean technology, and an improved health and safety standards regime for all mining operations.

It is all about safety standards, not about making policy up on the spot in a desperate attempt to win votes.

Goff’s reaction to 9/11 would probably have been to ban planes, as without planes thne they could not have been hijacked and flown into buildings where their fuel exploded.

UPDATE: Maybe Goff meant that the existing off shore drilling in Taranaki should be immediately suspended? I wonder how that would go down in New Plymouth and what are the views of Labour’s New Plymouth candidate on this policy? I can;t imagine it will help him win the seat, but maybe that is the deliberate strategy from Goff?

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The Rena leaks further

October 11th, 2011 at 12:31 pm by David Farrar

The NZ Herald reports:

An oil spill from the stricken cargo ship off the coast of Tauranga has increased in size “several times over” due to a new breach in a main fuel tank.

Maritime New Zealand said between 130 and 350 tonnes of oil leaked out of the Rena this morning.

It had previously estimated a spill of between 20 and 30 tonnes.

A spokesman said the massive new spill meant oil was now spewing from a main fuel tank on the vessel.

He said oil was continuing to leak from the tank and was heading south west towards Mt Maunganui.

“One of the main tanks has been breached. It is very significant in the scheme of things.” …

Maritime New Zealand says the Rena’s orientation on the reef has changed by about 4 degrees, and that as a precautionary measure, further non-essential crew members had been taken off the ship with assistance from the Navy.

Incident Controller Rob Service says the oil’s been reported on Mt Maunganui and Papamoa beaches, but is likely to eventually extend as far south to as Maketu.

It’s highly likely that oil will enter the harbour area, and Maritime New Zealand says this can’t be prevented due to very strong currents -but it will be cleaned up.

Mt Maunganui is a stunning beach. I went there often when I was younger, and still get to enjoy it occassionaly when visiting friends in the area. I hate the thought of such a lovely beach being drenched in oil.

350 tonnes of oil is a shit load, and will take a significant period of time to disperse, and even longer to have its impact neutralised. It does pale in comparison I guess with the Gulf of Mexico oil spill which was around 610,000 tonnes or 1,750 times as big as this.

There is focus on whether Maritime NZ reacted as quickly as it could have. I don’t know enough to judge, but I would make the observation that there have been other issues with that entity which have not filled me with huge confidence. The Government could do well to ensure that after the boat is salvaged or sunk and the clean up done, that there is an independent inquiry into the response by Maritime NZ. No need for a full commission of inquiry, but it would be good to establish if we can do better in future. It is impossible of course to prevent an accident of this nature, which is why we need to focus on how to mitigate the consequences in future.

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The Press on Rena

October 10th, 2011 at 4:00 pm by David Farrar

The Press editorial:

As might have been expected, the Green Party has jumped on this incident to advance its campaign against exploration for oil in deep waters off New Zealand. This is just political opportunism. There can be no comparison between a properly run deep-sea drilling operation, far offshore and subject to rigorous environmental safeguards, and an accident in which a ship has hit a well-charted reef a few hundred metres off the coast. As the Prime Minister said, the only connection is that both are at sea.

How it hit such a well charted reef is yet to be determined. Hopefully there will be some accountability for what has happened.

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