The New Zealand oil and gas lobby is pushing the government to back exploration efforts by taking on some of the financial risk if new oil & gas sources aren’t found, potentially leaving taxpayers on the hook. Energy Resources Aotearoa, representing oil and gas producers, asked Energy Minister Simeon Brown for government support to help manage the risk of new gas exploration, according to a letter released under the Official Information Act.
The Push for Government Support
In the letter, Energy Resources Aotearoa suggested that the government could underwrite or hedge part, or even all, of the risk involved in exploration efforts, arguing that this approach would fairly reflect the risks imposed by Labour’s now-reversed 2018 ban on issuing new permits for offshore oil and gas exploration. The group claims that the ban negatively impacted investment, resulting in declining gas supplies. Resources Minister Shane Jones has said he’s considering options to support gas exploration but emphasized that no decisions have been made yet.
Green Party co-leader Chlöe Swarbrick voiced strong opposition, describing the request as “deranged.” She argued that the best way to lower household energy bills would be to invest in renewable energy rather than continuing to support fossil fuels. “Why would our democracy be underwriting an industry that has no future?” she said. Swarbrick added that community-owned renewable electricity generation could have a massive impact on reducing household bills.
Energy Resources Aotearoa also floated an alternative proposal, suggesting the government could guarantee demand for gas from new offshore fields. John Carnegie, the group’s head, argued that recent moves to un-ban offshore exploration and ease financial security requirements for oil and gas wells wouldn’t be enough to reinvigorate the petroleum sector. He said the government should consider options to “tilt the risk equation in favor of new exploration and appraisal.”
Concerns Over Oil & Gas Subsidies and Climate Commitments
The push for government support has drawn criticism, especially given New Zealand’s recent climate commitments. At the COP29 climate summit, New Zealand joined a coalition of countries pledging to phase out fossil fuel subsidies. Climate Change Minister Simon Watts announced that this initiative fits with New Zealand’s leadership of the Friends of Fossil Fuel Subsidy Reform Group and its role in the Agreement on Climate Change Trade and Sustainability.
Parliamentary Commissioner for the Environment Geoff Simmons also warned the government against providing direct or indirect subsidies for fossil fuel exploration. He highlighted concerns over plans to lower financial security requirements for oil and gas companies, which were originally put in place to cover decommissioning and cleanup costs. The commissioner warned that relaxing these requirements too much could leave taxpayers responsible for billions in cleanup costs, effectively acting as an implicit subsidy.
Shane Jones, however, has not ruled out government intervention. He indicated that the government might still be open to finding ways to support exploration efforts despite the criticism.
Past Precedents and Future Implications
Energy Resources Aotearoa pointed out that government underwriting of exploration isn’t without precedent in New Zealand. The group referred to the 2004 decision by the Helen Clark-led government to compensate Genesis Energy if new offshore gas fields failed to supply a unit at its Huntly power station. At the time, the move drew criticism from both the head of the Electricity Commission and then-National leader John Key for being an inappropriate market intervention.
Swarbrick argued that this past approach isn’t worth repeating, noting that gas production peaked before the 2004 deal and New Zealand still faces energy shortages. “The fact that previous governments kicked the can down the road on electricity affordability isn’t a reason to kick it further now,” she said.
The broader context of this debate is the upcoming emissions reduction plan for 2026-2030, which is due before Christmas. While the plan has been praised by the fossil fuel lobby as a “sensible” approach to climate policy, independent assessments have warned that the government’s strategy is risky and may fall short of meeting climate targets.
Energy Resources Aotearoa’s praise for the government’s approach to emissions reduction highlights a stark contrast between the fossil fuel industry’s goals and climate advocates’ concerns. As the country grapples with how to balance energy needs, climate goals, and economic growth, the debate over underwriting gas exploration is likely to remain a contentious issue.
