The Economic Development Ministry unit has released a review by an unnamed independent consultant into the likely regulatory impact and compliance costs associated with the replacement Minerals Program for Petroleum (MPP) 2005.

The review says retaining the status quo has been discarded on the grounds that the current program does not actively promote petroleum exploration and development, and does not adequately meet public policy objectives.

The preferred option tightens some aspects of current legislation - specifying all onshore and near-shore Taranaki acreage be allocated using staged work program bidding only - while relaxing other aspects - extending the first well commitment to three years, and four years in “complex acreage”.

Other proposed features of the preferred MPP include:

• A competitive work program assessment, where two or more applications are received for the same acreage within a five-working day period, under a “priority in time” allocation procedure.

• Allowing a mining permit that has been surrendered or revoked to be allocated by cash bonus bidding in addition to other methods, such as being part of a blocks offer or via “priority in time” applications).

• Requiring evidence that an applicant has the financial and technical ability to complete at least one exploration well without needing to attract farm-in partners.

• Giving existing permits holders the option to continue to operate programs in their entirety under the parameters of the existing MPP, unless or until they elect to move to the new MPP regime in its entirety.

The study says 86 companies (including subsidiaries) are involved in NZ petroleum exploration or development.

Thirty-five are too small to drill without partners; 44 are medium-sized, with sufficient capital to drill onshore wells without funding partners; and only seven are large enough to have the necessary capital to drill onshore and offshore alone.

The study says the preferred MPP reflects the changed royalty regime for “new” petroleum fields discovered between June 2004 and December 2009; and that lost royalty revenue associated with these incentives could be NZ$30 million per annum.

However, the narrow definition of “new” will exclude the recent Radnor discovery, the Cardiff-2 well presently being drilled and, it seems, most onshore and offshore wells in any petroleum basin if they are drilled into already known prospects or structures.

The study also says royalties should not be payable “on petroleum removed from an approved underground petroleum storage facility and upon which a royalty has previously been paid”.

The MPP’s promotion of exploration and development “will send a strong positive signal to international investors and may further strengthen the government’s relationship with industry”.

Companies holding current permits will have the option to continue operating under the existing regime, “but it is expected that many will shift to the replacement MPP in order to benefit from the royalty incentives”, concludes the study