Fitzsimons Jeanette: Questions for Oral Answer — Questions to Ministers 
Fitzsimons Jeanette: Questions for Oral Answer — Questions to Ministers 
[Volume:640;Page:10544] 
4.  
JEANETTE FITZSIMONS (Co-Leader—Green) 
 to the  
Associate Minister of Energy 
: What is the proposed Government take including rentals royalties and taxes expressed as a percentage of revenue taken from production that the Government will demand from Exxon Mobil and the OMV consortium in return for granting rights to pursue their proposed exploration and extraction activities in the Southern Ocean? 
Hon HARRY DUYNHOVEN (Associate Minister of Energy) 
: 
 The permits awarded to Exxon Mobil Corporation and the OMV consortium in the Great South Basin are for exploration only. Accordingly the Government is not anticipating that those permit holders will generate any significant revenue from production alone under those exploration permits. The Government will however receive a total combined rental income through annual fees of $683760 per annum from the permits in that initial exploration period. The Government will also receive significant revenue from the usual company and employee taxation provisions. 
Jeanette Fitzsimons 
: When the Minister said in the  
Otago Daily Times 
 that the rate would be 45 to 50 percent was he aware that even war-ravaged Angola has been able to negotiate a 60 percent Government take from its deep-water drilling contracts with international oil companies which include Exxon Mobil and that Brazil also has a 60 percent Government take from the revenues of production; and why is New Zealand proposing to settle for less than that in a royalty regime described by him in  
the Otago Daily Times 
 as one of the cheapest in the world? 
Hon HARRY DUYNHOVEN 
: First leaving aside the last comment which I think has not been put in context and looking at the actual issue I say that the issue of a royalty regime also has to be balanced against prospectivity the difficulties of production the remoteness from oil exploration infrastructure and so on. New Zealand’s regime will generate from the exploration activity we hope something in the order of 40 percent of net expenditure in New Zealand but that has yet to be seen. But in the production phase obviously a significant amount of revenue will come to New Zealand from the accounting profits royalty regime—20 percent of the accounting profits royalty—and also from the 5 percent ad valorum royalty. That will be substantial. But overall one has to balance not only the fiscal regime but also the prospectivity the costs of production etc. etc. We think and the international oil experts who have advised us believe that we have a very fair regime. 
Maryan Street 
: How does the Government’s take compare with that of other oil-producing countries? 
Hon HARRY DUYNHOVEN 
: When compared in the light of New Zealand’s geographical location the perceived prospectivity and the tight nature of the international market for drilling rigs seismic vessels and indeed skilled personnel the Government’s total take which is at around 50 percent of profits compares very favourably with that of the UK at 30 to 40 percent the USA for deep-water exploration at 35 to 40 percent and Australia at 60 percent where perceived prospectivity is very much higher than it is here. 
Gordon Copeland 
: Would the imposition of any higher levels of rentals royalties or taxes than those he has outlined in his answer to the primary question have carried with it the risk that Exxon Mobil Corporation and OMV would have shied away from exploration in the Southern Ocean thus depriving New Zealand of the chance of receiving any royalties let alone the wealth that could potentially flow to this country from a major oil or gas discovery? 
Hon HARRY DUYNHOVEN 
: That is an exceptionally good question and one that I had not expected but I think I have a pretty good answer too. Four and a half years ago when the regime was being considered I sat with my officials around the table and we debated how we could reinvigorate the oil and gas industries. One of the things we had to consider was the trade-off between exactly the points that the member makes in terms of the royalty regime—the taxation etc.—the prospectivity and the likelihood of having the very big companies that we need to tackle this prospect go to other more favourable places in terms of their likelihood of making a discovery. We think we pitched it exactly right. We were ridiculed by the Opposition for what we put forward and the proof of the pudding is in the eating. We have the largest oil exploration company in the world which has never been in New Zealand before here looking. 
Peter Brown 
: Will the Minister clarify the situation from the general public’s point of view: is he confident there will be an oil and gas find of any significance and of course with the prospect of recovery; if there is will New Zealanders be expected to pay full global prices for their fuel or is there likely to be some sort of favourable discount regime as apparently there is in some other oil-rich nations? 
Hon HARRY DUYNHOVEN 
: In those countries that have major State-owned oil exploration companies that take the risks of the billions of dollars of expenditure required to produce a field like the Great South Basin themselves—such as the Brazils of the world and so on—those countries obviously produce the oil for themselves and therefore are not subject to the international market regime. Because of our prospectivity we in New Zealand choose not to take the risk of the huge expenditure and although there is a very strong likelihood of a very good discovery in the Great South Basin there is also the absolute certainty of enormous costs. We will clip the ticket on the way by but we will pay international market prices for any oil that is discovered. 
Gerry Brownlee 
: Since the Minister has given such an excellent dissertation on many aspects of this particular proposal can he enlighten the House as to how either the exploration or the discovery of significant oil reserves in the Great South Basin may contribute to the Government’s goal of carbon neutrality and sustainability? 
Hon HARRY DUYNHOVEN 
: The very simple fact is that New Zealand is a strongly oil-dependent economy in a whole variety of ways. Although the National members have proposed that by the time all of them are dead in 2050 in 43 years’ time New Zealand will be carbon neutral—should National ever be the Government and I doubt very much whether that looks to be very likely—the point that I would make very strongly to the member is that I would much rather have our existing thermal power stations fuelled by natural gas than by coal as they are at present. Our largest power station currently runs on coal largely because the National Government sat on its hands and did virtually no exploration for its entire period in office. National took no initiatives that generated extra oil and gas exploration in New Zealand which has led to the current situation. So we are in a position where we have taken definite action with definite effect. 
Gerry Brownlee 
: I raise a point of order Madam Speaker. The Minister gave a very long answer so he obviously does want to answer. But not once in that answer did he use the words “carbon neutrality” “carbon neutral” or “sustainable”. Given that those are cornerstones of this Government’s current policy mix I wonder whether he might try to work those words into an answer for us. 
Hon HARRY DUYNHOVEN 
: Perhaps for the member’s benefit I can say that if one has an economy that stops because the electricity goes off because one does not have sufficient fuel to run it or if one is burning huge amounts of coal one is much better to have a policy that gets some way towards carbon neutrality in the short term and that gets towards a much more sustainable economy while being better for the environment in the longer term. 
Jeanette Fitzsimons 
: What environmental impact studies were done and what size of bond if any have these oil and gas companies been required to post to cover the possible environmental damage that could result from their activities in a region of highly valuable commercial fisheries and many endangered species such as southern right whales beaked whales Hector’s dolphins four species of endangered albatrosses and many other seabirds and mammals? 
Hon HARRY DUYNHOVEN 
: The exploration activity that has been undertaken by the Government to date includes seismic surveying and we took very strong regard of the advice from the Department of Conservation particularly with regard to marine mammals. We have adopted the policies—which are internationally right up there with the best practice—of a 20-minute starting cycle of low-intensity seismic work and low-intensity explosions in order to ensure that any marine mammals in the area of several kilometres around are if you like gently warned. We have also adopted a policy that where any dolphin whale or other marine mammal comes within 1 kilometre of seismic vessels work stops. However what I want to tell the member is that whales dolphins and other marine mammals are actually curious and are often attracted to seismic vessels as the National Institute of Water and Atmospheric Research found in the small amount of seismic work that it has done. We are taking care to look after the environment and taking the best guidelines we can and of course no project gets approval without meeting environmental requirements set out under the Maritime Transport Act. 
Jeanette Fitzsimons 
: What is the value of the seismic data obtained at taxpayer expense and given free to these companies and why are we subsidising a climate change - denier such as the Exxon Mobil Corporation to contribute to more climate change while putting our environment at risk? 
Hon HARRY DUYNHOVEN 
: First of all I tell the member that if we have a significant gas discovery in the Great South Basin that will actually help in terms of our thermal generation and perhaps we can even supply liquefied natural gas being supplied to other countries for their generation of electricity thus lessening the amount of coal needed to be burnt on this planet which has to be an environmental benefit. 
Jeanette Fitzsimons 
: Have I understood the Minister’s answers correctly: firstly that no environmental bond will be posted against the risk of massive oil spillage in a highly valuable natural and fisheries environment; secondly that the Minister disassociates himself from this Government’s draft New Zealand Energy Strategy which says that fuel for power stations from now on should come from renewable resources—and gas is not a renewable resource—and thirdly that he does not know the value of the taxpayer-derived seismic data that is being given free to these companies— 
Hon Maurice Williamson 
: What was the question? 
Jeanette Fitzsimons 
: Those three questions will probably do. Can the Minister confirm that that is what he has just told the House? 
Madam SPEAKER 
: I just remind members that normally one supplementary question follows. 
Hon HARRY DUYNHOVEN 
: I think I can answer all three questions pretty quickly. First of all in terms of a bond that is not an issue because the Maritime Transport Act controls activities in our oceans. It very clearly sets out the damages requirements and the remedial requirements if there is an oil spill. Secondly in relation to seismic data I think we have spent a total so far of around $16 million on all seismic activity acquired by the Government around the country. For that we have in the Great South Basin alone something in the order of I think $10 million to achieve $1200 million of expenditure in exploration activity. I reckon that is a pretty good return for the taxpayer. Thirdly on the issue of our climate change policy etc. I do not shy away from that at all. The reason why is that currently we have thermal power stations. If we do not have fuel to run them then the power goes off. I think we need to ensure we do have adequate fuel to run them. 
Sue Bradford 
: I seek the leave of the House to table an article from the  
Otago Daily Times 
 of 14 July in which the Associate Minister of Energy makes a statement referred to— 
Madam SPEAKER 
: Leave is sought to table that document. Is there any objection? Yes there is objection.