The government blamed last year's electricity crisis on the ban and moved to repeal it with urgency. However, with a dry winter around the corner, progress has stalled.
It's exactly 50 years since the last big chunk of baseload power added to the national grid began to be researched prior to construction (Clyde Dam). I was involved as an inconsequential bit player in the early days. While the current market model has its strong points, it's unlikely to deliver what NZ needs to grow industry and the economy over the long term - generation projects at scale. Only a heretical 'hybrid' model with direct government participation to provide the financial and timeline heft is going to work.
Thanks Tony! Do you think our mixed ownership gentailers can play the hybrid role?. They have conformed to market disciplines for the last 11-12 years, it's time for government to push back and require greater levels of capital investment in generation and storage.
Gentailers are too risk-averse and fiduciary-minded to do what needs to be done. Let's bring the Infrastructure Commission in to the sector as something more than an advisory agency and then levy the gentailers to amortise the big ticket, fast-tracked projects. I have zero confidence in the market as it currently exists, and I have zero confidence in the government's move to farm out to a consultancy in London the future shape of our electricity system. The consultant and all their NZ advisors are from inside the silo, the existing paradigm.
Great article thanks. It is important to understand that Labour did not ban offshore oil and gas. They simply removed the requirement for the government to offer blocks for exploration.
Reversing this should be simple. However this is insufficient to encourage investment in drilling. Why - because the previous government introduced sovereign risk in that the NZ regulatory regime is now unpredictable, subject to wild swings and can’t be trusted for long term investment. The chilling effects of this extend well beyond changing a few words in a paragraph of legislation.
Significant incentives will be required to attract any future large investment in domestic gas.
Thanks for making that distinction and I believe you are right about the sovereign risk factor, although I suspect that diminishing risk tolerance preceded the ban itself. No doubt the significant expenditure on exploration that took place from 2020 to 2024 (with nothing to show for it) didn't help.
I don't think there is sufficient parliamentary support for significant incentives, from both the left and the right, especially not for an industry that just generated windfall returns in 2022-23 and is beginning to shrug off much of its own appetite for transition.
I believe we still had a reasonable risk tolerance until the Arden announcement. This likely lead to the abandonment of the Beach Energy drilling off the coast of Oamaru.
2022 - 2023 was a high activity drilling period but this was all in field and not new fields. It was not a high revenue period. The golden days were just before the GFG and due to oil prices and the Tui field doing very well at that time.
Globally I agree there is a trend of oil companies divesting there renewable businesses and redirecting capital to there core activities. This is due to subsidies removal and low rates of return on renewables. It’s pressure from investors driving this.
It's exactly 50 years since the last big chunk of baseload power added to the national grid began to be researched prior to construction (Clyde Dam). I was involved as an inconsequential bit player in the early days. While the current market model has its strong points, it's unlikely to deliver what NZ needs to grow industry and the economy over the long term - generation projects at scale. Only a heretical 'hybrid' model with direct government participation to provide the financial and timeline heft is going to work.
Thanks Tony! Do you think our mixed ownership gentailers can play the hybrid role?. They have conformed to market disciplines for the last 11-12 years, it's time for government to push back and require greater levels of capital investment in generation and storage.
Gentailers are too risk-averse and fiduciary-minded to do what needs to be done. Let's bring the Infrastructure Commission in to the sector as something more than an advisory agency and then levy the gentailers to amortise the big ticket, fast-tracked projects. I have zero confidence in the market as it currently exists, and I have zero confidence in the government's move to farm out to a consultancy in London the future shape of our electricity system. The consultant and all their NZ advisors are from inside the silo, the existing paradigm.
Great article thanks. It is important to understand that Labour did not ban offshore oil and gas. They simply removed the requirement for the government to offer blocks for exploration.
Reversing this should be simple. However this is insufficient to encourage investment in drilling. Why - because the previous government introduced sovereign risk in that the NZ regulatory regime is now unpredictable, subject to wild swings and can’t be trusted for long term investment. The chilling effects of this extend well beyond changing a few words in a paragraph of legislation.
Significant incentives will be required to attract any future large investment in domestic gas.
Thanks for making that distinction and I believe you are right about the sovereign risk factor, although I suspect that diminishing risk tolerance preceded the ban itself. No doubt the significant expenditure on exploration that took place from 2020 to 2024 (with nothing to show for it) didn't help.
I don't think there is sufficient parliamentary support for significant incentives, from both the left and the right, especially not for an industry that just generated windfall returns in 2022-23 and is beginning to shrug off much of its own appetite for transition.
I believe we still had a reasonable risk tolerance until the Arden announcement. This likely lead to the abandonment of the Beach Energy drilling off the coast of Oamaru.
2022 - 2023 was a high activity drilling period but this was all in field and not new fields. It was not a high revenue period. The golden days were just before the GFG and due to oil prices and the Tui field doing very well at that time.
Globally I agree there is a trend of oil companies divesting there renewable businesses and redirecting capital to there core activities. This is due to subsidies removal and low rates of return on renewables. It’s pressure from investors driving this.