What Natural Resources Matter Most To Kiwi’s?
PS: We have a ‘planet party budget’ of just under a keg left.
Centered in Taranaki, New Zealand’s Oil and Gas sector produces over 40,000 barrels of oil per day. Not a whole lot. In fact, even the idyllic country of Sweden produces eight times as much. Neither country extracts much of the liquid gold and gas in any meaningful quantity and with over 80 million barrels of oil produced daily worldwide, our slice of responsibility to meet the Paris Climate carbon reduction targets is minuscule on a comparative ‘size of problem’ basis.
…but there is another measure where meeting the Paris Climate targets does make real sense so let’s look at New Zealand’s assets, our nation’s economic boundaries and the narrative we tell ourselves.
New Zealand’s Competing Natural Resource Assets
New Zealand has a huge asset in its natural resources. That includes every forest, native bird and expanse of ocean surrounding our sliver of land. It also includes every proven reserve and every unexplored oil and gas region. So, why would we decide to reduce the potential value of one of these assets?
Let’s explore some questions:
What is ‘Clean and Green New Zealand’ and ‘100% Pure’ worth to us?
Billions in tourism. Billions in export markets. Priceless to our way of life.
Brand Finance went further and stuck a number on how much it’s worth. A cool $200 billion dollars, which makes it top five in the world on their list. Now here’s the thing… our brand is a promise. Our promise to export markets is we produce things that have a delicious depth of taste and if you turn up on our shores and have a look around, prepare to be wowed from the moment you glance out your Air New Zealand window and see the rolling green grass carpeting regional New Zealand.
That is an experience and market worth protecting.
It’s the canvas for the our collective way of life and it’s of the highest quality.
How much is oil and gas worth to us?
Well, if you look at it in pure finance terms, there’s some big numbers that end in millions and billions. Here’s three that speak to current and future contributions that we might not see in our bank account, but they collectively contribute to our standard of living.
2.5 billion to our GDP. That’s a tidy slice but it’s a thin slice in comparison to manufacturing and farming, together weighing in 10x oil and gas.
You can also look at what it ‘could’ be worth to us because there’s 5.7 million square kilometres of sovereign seabed that we haven’t even explored yet for its commodity value.
Oil and gas is most valuable where it’s most concentrated and that’s in the coffers of every business that benefits from the 4000+ strong team in Taranaki who extract the oil and gas then pass it on to our neighbourly industries of timber processing, steel production, milk drying and a bunch more. Farming would be a different sector if we didn’t have methanol production to produce urea fertiliser for agriculture.
So we need it.
Not lots of it but enough to keep our industries going and a few billion more to generate some tidy tax receipts to pave the way for a better standard of living.
Now that we’ve established we need it, let’s ask a different question.
What’s the maximium amount of oil and gas we could theoretically produce?
None. OK… practically speaking, there is a lot more that could be found and extracted especially if new reserves were found. But here’s the problem. As a planet, we’ve already found more than enough. We’ve found five times more than we can burn without needing a taxi to Mars asap. The math goes something like this.
We have a ‘planet party budget’ of just under a keg left.
The party has already drunk 2.1 kegs. (The 20th century was a lot of fun.)
A planet party keg = 1,000 million tons of CO2 or 1 Gigaton.
There is real science here (but it’s not as fun as planet party kegs.)
At the current rate, we’ll run out of beer in 18 years. Not alarm bells if you’re 60 plus, but if you’ve got your whole life ahead of you, I’d be wanting an planet party extension.
“We have to slow down our drinking and make it last.”
We also have to get the oil and gas industry to leave existing proven reserves in the ground and they will because it won’t be economical to extract them as renewables continue to plummet in price.
This is good science. It’s also good economics. After meeting with CEO Mark Campanele of the Carbon Tracker in London, I realised for the first time, that shareholders wouldn’t continue to hold shares in a companies that counted assets couldn’t be used. The balance sheets of many global energy companies contain proven reserves that can never be burnt. Here’s a short video on it, which I shot outside Trump Tower for a little drama (and on a PR conference break).
Who loses out if no more permits are issued?
Only one permit was issued in December in the offshore Taranaki area to Westside, which also operates two onshore production assets, Rimu and Kauri, in southern Taranaki. If they want to apply this December then Westside would miss out and any potential work as a result of drilling and the flow on find would lose out. This is the piece I have the issue with, because there should be a dovetail announcement that covers what new growth industries could supplant oil and gas in Taranaki. It’s been done before.
In Hawke’s Bay we had Whakatu Freezing Works employing 2,000 employees on October 9th 1986 and then on October 10th 1986 we didn’t. That was an instant shock. The permit moratorium is not instant. It’s like the shift from mass beer to craft beer and will happen gently with time… however… what will the craft beer alternative to oil and gas be?
I’ve got a few ideas, again based on science and that is the conversation New Zealand should be having and it all hinges on a two question.
What jobs might highly skilled energy workers transfer to?
Transfer they must and they’ve got a whole lot more time than Hawke’s Bays Freezing workers of 40 years ago to retool the skills and their economy. In fact, if I was an energy worker with less than ten years until retirement, I probably wouldn’t change a thing.
Now I don’t have all the answers for what makes a good job transition from the oil and gas sector, but I have a feeling it will continue to be energy related, so have a look at a few of these from The Periodic Table of Profitable Climate Solutions.
The New Zealand Narrative
What made the 20th century will not make the 21st century yet if we move to the future too fast we risk giving away hard fought gains made to date. If we move too slowly, our grandkids might not ever visit us or even be around for any of us to have that option.
If all the decisions our nation made to date were a sunk cost, how should we make the next set of decisions?
Five Strategy Questions for a 30 Year Managed Energy Sector Transfer
- Which of the 24 energy related sectors above are most suitable to New Zealand’s natural strengths?
- What skills competencies are most similar to the 4,000 employed in the oil and gas sector so the transition is simplest? (including my mate Ed who I played rugby with at uni)
- How much of the existing oil and gas sector *must* be maintained for both our energy security and the economic security of parallel industries?
- We banned ‘big bad nuclear’ back in the 80’s but would we still ban the mostly harmless molten salt nuclear reactor tech now used in 2018? (homework: listen to Nuclear 2.0 podcast)
- What big bets need to be made and how are the risks and rewards spread between public and private sector?
The 100% Kiwi Business book
If you would like to read more about New Zealand’s future through the lens of 100 business owners and CEO’s interviewed on why they do what they do, pre-order my book 100% Kiwi Business available at UmPrint Publishing for $99.98.
Jennings is a New Zealand Business Mentor, Adviser, Speaker and Top Writer on Climate Change for the United States Medium Publication.