Explore the exploration application process. Resources to support RevUp!

Transcription

1 Explore the exploration application process Resources to support RevUp!

2 Key Documents How the government manages the industry Block Offers Document Name Link Overview of the petroleum and minerals sectors Why look at it? To understand the part petroleum and minerals plays in the economy To understand the regulatory system A critical part of the process for the oil and gas sector that businesses are exposed to 2

3 What are the characteristics of the affected business population? Industries operating in New Zealand waters The main industries include fisheries, petroleum, tourism, shipping, aquaculture and seabed minerals exploration. Fisheries, shipping, aquaculture and tourism are subject to their own regimes, which are outside the scope of our project. Size of petroleum and seabed mining operators in New Zealand waters Petroleum operators tend to have budgets worth billions of dollars. Operational costs can be very high. For example, it can cost up to $1 million per day to keep an exploration rig operating. Petroleum operators also tend to have operations throughout the world with some of their smaller investments in New Zealand. Seabed mining operators tend to be smaller than petroleum companies. They may be wholly reliant on single operations at a time, rather than spreading their risk across a wide portfolio. Location of operations Petroleum operators tend to be global. Many have existing New Zealand-based operations with head operations in other countries. Petroleum operators weigh up resource prospectivity, political stability and ease of doing business when deciding where to invest. With these considerations in mind, petroleum operators tend to spread their risk across a wide portfolio. In New Zealand, Taranaki is the only producing petroleum basin. However, exploration both historically and currently has taken place in areas off Northland, Waikato, East Coast, Wairarapa, Canterbury and Otago. Because seabed mining operators tend to be smaller, they have less of a global span. In New Zealand, exploration for seabed minerals has taken place on the Chatham Rise and offshore Taranaki. It is understood there is also seabed mining potential in the Kermadec and Colville Arcs (a large part of which will soon be protected by a sanctuary), the Sub-Antarctic Islands and the offshore West Coast. Compared with petroleum, seabed mining is less established worldwide. This may present opportunities for entrepreneurs to develop solutions through the Accelerator for the entire sector. New Zealand in a global context Compared with the Middle-East, North Africa and North America, New Zealand has relatively low prospectivity for oil and gas reserves and is also relatively unexplored. New Zealand is generally described as a small producer with a largely unknown prospectivity. However, part of New Zealand s investment proposition is that we rank highly in terms of ease of doing business, political stability, lack of corruption and quality of life. More about New Zealand s petroleum sector can be found here. 3

4 Seabed mining is new to New Zealand. Exploration has taken place in certain areas but at a smaller scale than in other countries. Although seabed minerals exploration has taken place, mining for seabed minerals has never occurred in New Zealand s waters. What are the pain points of the affected business population? New Zealand s regulatory system Like in most jurisdictions, petroleum and minerals operators must obtain multiple approvals from different regulators, including resource access, environmental consent and health and safety approval. These approvals are managed by different regulators and operators are required to engage separately with each regulator. Other jurisdictions have addressed this complexity by developing a more seamless business-to-government customer interface, such as through appointing case managers to help applicants through their numerous regulatory steps. The lack of overarching support from the New Zealand government can leave operators unclear about what regulators will specifically require of them as part of applying for approvals. It can also make the regulatory system seem excessively complex. It can also create uncertainty for applicants as to whether they will gain approval to undertake activities. These issues are significant because applicants consider all of these matters when they are deciding whether or not to invest in New Zealand. The marine management challenge is reflective of an issue that exists for a range of industries that need to engage with government. Therefore, any product that emerged from the Accelerator could equally be applied to other sectors, such as onshore resource uses. An improved business-togovernment interface is likely to interest potential investors, who may benefit from cost savings and reduced resource implications. New Zealand s marine consent regime In recent years, the Government has implemented a new regulatory regime for New Zealand s Exclusive Economic Zone (EEZ). This has included the creation of new legislation and a new regulator, the Environmental Protection Authority (EPA). Since then, five marine consent applications have been considered by the EPA. Three of these were for existing petroleum activities, which the EPA granted consent for. The two other applications were both from seabed miners. Both applications were rejected. In light of these decisions, government officials are now considering how uncertainty about the process, such as information requirements and likely conditions, could be reduced for applicants in the future (we can t provide certainty that an application will be approved). For example, officials are considering whether greater sharing of information between agencies earlier might have enabled the New Zealand Government to have given the unsuccessful applicants a more detail on their information requirements sooner. 4

5 The Government s main concern is the impact that uncertainty about the regulatory system may be having on New Zealand s investment proposition. We are particularly concerned about the impact on the seabed mining industry and the potential for petroleum activities in basins where activities have not happened previously. More information on the regulatory regime can be found here. What is the regulatory process that businesses experience? Regulatory process The typical steps that operators go through as part of undertaking activity in New Zealand are outlined below. It s important to note that applicants may apply for and receive the following approvals in any order. Timeframes for obtaining approvals can vary depending on the quality of information submitted by applications, capability within regulatory agencies and other factors. Petroleum 1. New Zealand Petroleum and Minerals (NZP&M) target desirable operators in the international market. NZP&M does this by attending international petroleum conferences 2. Applicants apply for exploration permits through the annual Block Offer process. As part of this, NZP&M assess an applicant s (i) financial capability (ii) proposed work programme (iii) the geological prospectivity of the resource and the potential return to the Crown. A Crown minerals permit grants a holder the legal right to access Crown-owned resources so long as they meet the conditions of their work programme. An exploration permit holder also has the first right to apply for a petroleum mining permit over the same area. 3. Environmental consent most petroleum prospecting and exploration activities are permitted in the EEZ. This means they do not require consent from the EPA. However, petroleum exploration drilling is a non-notified discretionary activity, which means an application for a marine consent does not need to be publicly notified. All other petroleum activities in the EEZ require a notified marine consent. Applicants undertaking activity within 12 nautical miles of the coast will need to follow the rules of the relevant regional plan, which are administered by regional councils. Regional plans will specify the requirements for obtaining resource consent within each region. If the Environment Minister deems an activity within 12 nautical miles to be nationally significant, then the application may be heard by the EPA instead of the regional council. The nationally significant threshold is relatively new and since it was introduced there have been no applications within 12 nautical miles to possibly trigger the nationally significant test. Environmental consent processes are likely to involve a hearing, which may be managed by an independent board made up of one EPA board member, retired judges and other experienced professionals from the natural resource sector. The hearing is open to the public and may involve verbal 5

6 submissions from scientific experts, members of the public, iwi and other affected stakeholders. 4. Health and safety applicants will also require health and safety approval from WorkSafe NZ. The Health and Safety at Work Act was introduced in 2015 and contains significant changes for petroleum and minerals operators. 5. Code of Conduct for Minimising Acoustic Disturbance to Marine Mammals from Seismic Survey Operations the Code is voluntary but petroleum operators signed up to it only require a non-notified consent for exploration activities in the EEZ. All petroleum operators in New Zealand waters are signed up to the Code. 6. Discharge and dumping regulations these are managed by the EPA and relate to the safe disposal of contaminants and waste during petroleum and minerals activities. 7. Decommissioning this relates to the removal of facilities and restoration of the natural environment once the operation is complete. There are presently no requirements around decommissioning, so this is a newly emerging area of policy development. However, petroleum operators may soon be required to have decommissioning plans in place before the end of a well s life. There will be also ongoing monitoring and compliance requirements for all of the regulatory approvals outlined above. Seabed mining 1. NZP&M may also target desirable seabed mining operators as described in the petroleum section above. 2. Applicants then apply for exploration or mining permits. Unlike the petroleum sector, this will generally not be done through a tender process (e.g. Block Offer). Instead, individual applications will be received and assessed. 3. Environmental consent the process is similar to above. Seabed minerals prospecting and exploration are permitted activities in the EEZ, so these activities do not require consent from the EPA. However, seabed mining does require notified consent. 4. Health and safety same as above 5. Discharge and dumping same as above 6. Decommissioning same as above. Seabed mining activities do not generally involve seismic surveying, so the Seismic Code of Conduct does not generally apply. Like with petroleum, there will be also ongoing monitoring and compliance requirements for all of the regulatory approvals outlined above. 6

7 What are the affected business population behaviours in relation to relevant services? Petroleum industry s business model The petroleum industry is a high risk-high reward industry. It is also a slow-moving industry: it can take up to five years to complete prospecting, 15 years for exploration and 40+ years for the production and decommissioning phases. More often than not, exploration activities are unsuccessful in discovering oil and gas reserves. In New Zealand s case, the low odds of finding oil reserves are exacerbated by the fact that we know relatively little about New Zealand s sedimentary basins. For example, so far only one of New Zealand s 16 basins has been found to contain oil and gas reserves despite the potential for reserves in other basins. There are also different types of companies operating in the petroleum sector. These can be summarised as follows: - Speculative seismic and multiclient companies, who undertake seismic surveying then promote and sell data to petroleum exploration and production companies - Majors and supermajors, who are exploration and production companies with a wide span of global petroleum interests - Rig operators, who may operate a drilling rig under contract from a major or supermajor. Because petroleum operators have low success rates and high costs, they seek as much certainty as they can from the regulatory environment. Their preference is to have certainty as to whether they can or cannot operate within a certain jurisdiction as early as possible. This means that having a yes or no as soon as possible from government is better than uncertainty. Seabed mining industry s business model Seabed mining follows the same stages as the petroleum industry and can take similar timeframes, although generally less. However, the capital and operating costs are generally less. Because seabed resources are on the ocean floor rather than below the ground, prospecting is easier and the likelihood of finding commercial resources in greater. However, New Zealand s seabed contains a limited range of resources, specifically ironsands, seabed massive sulphides and phosphate nodules. Seabed miners follow broadly the same regulatory process as those in the petroleum sector. 7