Inside the oil and gas ban - which Cabinet is yet to sign off

The Government's decision to ban new oil and gas exploration permits was made by the three coalition parties, not the whole of Cabinet, documents released on Tuesday show.

The documents include emails between Energy Minister Megan Woods' office and the Ministry of Business, Innovation and Employment (MBIE), as well as briefing documents and a Cabinet minute.

The Cabinet minute acknowledges the Government's senior Ministers and the Prime Minister made preliminary decisions on the announcement, but no Cabinet papers have been filed on the subject.

Cabinet papers help ministers make informed decision by offering analysis of policy, including expected impacts and challenges. They are created by government agencies.

In a Cabinet minute on April 9, ministers were told Energy Minister Megan Woods "intends to submit a paper to Cabinet in the near future".

That paper would set out the details of the new policy, "including clarification around the rights of existing permit holders, as well as the fiscal and legislative implications."

Three days later, the policy was announced. There have since been four sitting weeks in Parliament, but that Cabinet paper is yet to be filed.

Dr Woods says she followed normal process.

"The normal practice is in terms of announcing block offers was for ministers to take an oral item to Cabinet. I did that around block offer 2018," Dr Woods told Newshub.

"I also signalled in that oral item I took that we wouldn't be doing further offshore block offers and a full paper will be going through the Cabinet process on that."

Ahead of discussion at Cabinet, the policy was discussed by coalition party leaders from Labour, New Zealand First and the Greens.

Dr Woods acknowledged the politics of the decision in a statement sent out alongside the documents.

"The decision was a political decision, looking out 30 years and taking steps towards 2050 being emission-neutral," Dr Woods said.

The Cabinet minute mentions the Minister will ask the Ministry of Business, Innovation and Employment (MBIE) to consult on the block offer with iwi and hapū, as well as local authorities. 

As has been widely reported, MBIE advises current permits could inform mining for 25 to 50 years. That's because exploration permits give rights to apply for mining permits.

But that's not to say we have plenty of reserves.

MBIE advised the impact of a complete ban on new petroleum permits - including prospecting, exploration and mining - could pose "significant risk" to the security of energy supply, put pressure on domestic gas prices, lead to perceptions of sovereign risk, alter regional and service sector employment opportunities, accelerate the closure of facilities, and risk legal challenge from investors.

According to MBIE, New Zealand has 2020PJ (petajoules to cubic fee) in gas reserves - an estimated 10 years at the current consumption rate. But preliminary figures of reserve levels on January 1, 2018 suggested the gas reserve to production ratio fell below 10 years for the first time since 2003. 

"Decreasing gas reserves will result in higher prices with all gas consumers," MBIE warns.

A briefing from MBIE to the Prime Minister says oil export prices are likely to increase over time too. It says low prices have suppressed companies' interest in exploring in New Zealand with exploration falling "dramatically since 2014".

But now it says the oil and gas industry is recovering. "Industry company margins are improving and they are now looking to increase the level of exploration expenditure."

Threat to global emissions

The ban on further gas permits could lead to an increase in global emissions if New Zealand's methanol production industry is picked up by coal-fired industry overseas.

A company called Methanex uses about half New Zealand's annual gas consumption to produce commercial methanol. 

That company is unlikely to be able to operate at full capacity from 2021, and "not at all after 2026," the briefings say.

Methanol produced by Methanex is used to produce chemicals like acetic acid and formaldehyde, which are then used to make foams, adhesives, solvents - and biofuel.

The briefing says reducing New Zealand's output of methanol will reduce New Zealand's emissions but may increase global emissions "as it is offset with methanol produced with coal".

The briefing says if production was to shift to the US, global emissions would be unchanged - they also use gas in methanol production.

Based on a 2014 survey by Venture Taranaki, there were 4653 full-time workers in the oil and gas industry, most of them in the engineering or specialist and technical services sector.

There were another 236 workers employed directly by exploration and production companies. 


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