“There’s a way to go yet, but it’s great to see some pragmatic responses to PEANZ initiatives,” Patrick told EnergyReview.Net from Wellington today.
“They are listening and keen to do something. The lowering of royalty rates for gas earlier this year was good; now there’s the waiving of tax for non-resident offshore operators; and it’s great that they are also considering faster amortisation of development costs,” Patrick added.
New Zealand Oil & Gas exploration manager Eric Matthews also welcomed the waiving of the tax rule. “It’s positive, very good, definitely better than that artificial limitation that has been a big problem in the past,” he told ERN from Sydney.
Matthews said the move could also help the drilling and testing of the Kiwi-1 well in offshore Taranaki licence PEP 38460. “The 183 days’ limit is looming rather rapidly, September 17, I think. It will be great to have extra time if things do not go according to plan with this well.”
Operator New Zealand Overseas Petroleum, NZOG and other partners are presently drilling Kiwi-1 in the northwest of PEP 38460 and hoping the Ocean Bounty will make a fourth commercial discovery.
Both Patrick and Mathews said multi-permit, multi-well programs would now be more likely, given the buoyant state of the kiwi exploration sector.
Patrick said Peanz was also pushing for faster amortisation of development costs, which Matthews agreed should help project economics of offshore finds such as Tui, Amokura, Pateke and, hopefully, Kiwi.
PEANZ also wanted the transferability of tax losses. While dry-hole costs could be deducted immediately, that was useless for a new player that did not have the taxable revenue against which to offset those losses, Patrick added.
Finance Minister Michael Cullen yesterday announced the scrapping of the “183-day” tax rule”, meaning non-resident, offshore rig operators will be exempted from paying company tax in New Zealand on their profits for the same period as the gas exploration royalty incentives, from June 30, 2004 to December 31, 2009. The changes are to be introduced next November.
