Methanex New Zealand managing director Harvey Weake said yesterday afternoon that he did not know if his company would be at the next biennial conference, given that its New Zealand operations had gone from 100% capacity to 10% capacity in the last two years, with the associated $NZ1 billion loss of foreign exchange earnings.
It had closed the giant Motunui methanol twin-train complex and now only ran the smaller Waitara Valley plant intermittently.
“The Crown Minerals focus is about right. It’s about quality data and niche targets,” Weake said.
But exploration and production activies were still constrained and investment in New Zealand remained “stubbornly modest”, he said.
He warned that New Zealand manufacturers would continue to move offshore, which would further depress foreign exchange earnings and decrease natural gas demand.
“New Zealand must continue, with increasing urgency, its oil and gas exploration, and must face the challenges of possibly importing energy,” he said.
Horizon Oil chief financial officer Michael Sheridan said New Zealand’s petroleum fiscal regime was Crown Minerals’ most effective tool for attracting more investment.
He suggested the government consider reviewing petroleum royalty rates to ensure they encouraged the development of marginal discoveries.
Contact Energy’s fuels and major contract manager, Liz Kelly, was more blunt, saying some major gas users were now questioning whether gas remained an attractive fuel.
“The next two years will be critical for the gas market in determining the long term health of the industry,” she said.
The government should limit its involvement in the New Zealand energy scene to policy issues, according to Kelly.
“I strongly urge the government not to meddle in oil and gas regulatory matters as it does in the electricity market,” she said referring to the Electricity Commission and recent Commerce Commission intended rulings on national electricity grid owner-operator Transpower.
She also urged the industry to stop its “infighting and bad behaviour”.
“Front page headlines only force the government to act and that’s not good for anyone.”
Australian Worldwide Exploration asset manager Eric Matthews said that during the past two years Crown Minerals had gone a long way to accommodate industry concerns. He applauded the initiatives regarding lower royalty rates for new gas discoveries, government-funded seismic acquisition and processing, and internet access to petroleum data.
But he said further measures were needed to ensure New Zealand could close the looming gas gap scheduled to occur later this decade.
Ad valorem royalty rates should drop from 5% to 1% for gas, differing tax rates regarding whether offshore rigs were in New Zealand waters for longer or less than 180 days should be eliminated, and there should be more flexibility regarding the fulfillment of work program obligations, according to Matthews.
The accounting profits royalty (APR) should be decreased from 20% to 15% for the first $NZ750 profit for offshore and the first $NZ250 million for onshore developments.
The New Zealand government should also bring the treatment for tax losses into line with that of the Australian government. There should be an uplift of exploration costs with regard to the APR, in line with Australia’s resource rent tax.
Crown Minerals group manager Adam Feeley admitted: “We have not done everything right and we have been bullish on work program standards and forthright in using revocation notices”.
However, he said Crown Minerals would “continue to approve extensions to work program commitments within reasonable limits”.
Feeley said it was possible the government could review the Crown Minerals Act, or even consider underwriting offshore rig programs if several joint ventures agreed between themselves, and with the government, to coordinate exploration activities.
Matthews had earlier said the world rig market was getting so tight that contractors were now requiring one company to commit to using a rig for at least a year. Such a $US100-200 million commitment was beyond any single player in New Zealand.
