Govt to hike mining royalties; Eyes 50% oil and gas exploration increase; 'Won't hurt clean, green image,' Resources Minister Heatley says

Govt to hike mining royalties; Eyes 50% oil and gas exploration increase; 'Won't hurt clean, green image,' Resources Minister Heatley says

The government will hike hard mineral mining royalties, and wants to increase oil, gas and mineral exploration by 50%, in a bid to lift its revenue stream from the resources sector from NZ$4 billion to NZ$12 billion a year.

Minister for Energy and Resources Phil Heatley told TV One's Q&A programme on Sunday that an expansion of activity in the sector did not have to come at the expense of New Zealand's 'clean, green' image.

Heatley took over the Energy and Resources portfolio this Parliamentary term from Hekia Parata, who announced last year the desire to treble the government's resources royalty income.

Oil and gas extraction in Taranaki had operated for decades alongside other sectors such as tourism and dairy, which could be the case in all of the 17 other regions around the country with recognised petroleum basins, Heatley said.

The oil and gas sector was New Zealand's fourth-largest export industry, and tended to operate under the radar.

"Most of it’s out of Taranaki. The safety and the environmental track record over the decades has been pretty good.  They’ve been operating for about 50 years, discovered oil about a hundred years ago, and New Zealanders don’t know a lot about it," Heatley said.

"But the amazing thing is, as I say, it’s all out of Taranaki, it works beautifully [and] neatly beside one of our best dairy industry areas in the country and also tourism in Taranaki," he said.

Oil and gas operations in Taranaki contributed to about 3,500 jobs in the region, while dairying was worth about 2,500 jobs, and tourism about 2,000 jobs.  

"Now, what we’re saying is, look, there are other regions in the country where oil and gas reserves are. We’re very sure of that.  If Taranaki over all these years can environmentally and in a safety-conscious way have a big oil industry sitting neatly beside dairying and sitting neatly beside tourism, there’s no reason why other regions can’t do that," Heatley said.

Asked specifically whether New Zealand would have to sacrifice some of its 'clean, green' image for more activity in the sector, Heatley relied: 

"No, I don’t think we do.  We’ve got a very strict environmental regime.  Health and safety we’re working on pretty hard.  Taranaki’s got a great track record.  Dairy industry, oil and gas, tourism – why can’t it happen elsewhere in the country?"

Hiking mineral royalties, but not for oil and gas

Heatley said the government was looking to increase mining royalties for hard minerals, but not oil and gas. 

"We’re looking at the royalty regime at the moment. We think oil and gas is pitched about right, and the reason is because we’re so isolated and need to attract investment into New Zealand. For example, an oil rig offshore [costs] about a million dollars a day [to run]. We’ve got to be a bit careful that we don’t pitch it so high that they won’t come," Heatley said.

"On the other hand, minerals, for example, coal, gold, silver, all those – we think those royalties are the ones that need to be shifted upward, and we’re looking at that," he said.

The government was consulting on how much to raise those royalties.

"I’m not going to pick a figure, but I do know under minerals, those types of minerals, we’re pitching a bit low," Heatley said.

"The reality is if we are going to do more mining, more oil and gas exploration, and we are saying that we want to put that into schools and hospitals and all these other things New Zealand wants to, you know, keep up, catch up with Australia, then we do need to make sure that we are getting our pound of flesh," he said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Comment Filter

Highlight new comments in the last hr(s).

then we do need to make sure that we are getting our pound of flesh," he said.
Is this just because the industry is foreign controlled and aims to gets round the tax accounting tricks.
Queenstown is doing stuff with a bed tax (tourism royalty).
Problem is the same logic ??? can be applied to the white gold of dairy (Southland would say they need it to clean the place up).
We need a better description of the thinking behind such a measure.

 “We think oil and gas [royalty] is pitched about right”
"We like to give it away so long as the Big Oil guys will take us out to dinner when they come to visit"
Our oil and gas royalty is the forth cheapest in the world… 5%... (cf 15% everywhere else).  So for every $100 barrel of OIL / GAS EQUIVILENT, the people of NZ get = Sweet bugger all… MORONS.   We are one of the only countries in the world that could go 100% renewable electricity as a first step to getting off Oil and Gas dependency…  The last thing we want is to be ruining our green competetive advantage with an oil leak...

Even if that were possible, we certainly wouldn't want to be the first country or even among the first countries in the world to radically change the economy.  The first are bound to make many mistakes and cause a lot of heartache for their people.
Better to sit back and see how it works out elsewhere first, we don't want to be guinea pigs for the rest of the worlds failed experiments.

It would hardly be radical... we just need some more wind generation (a very tiny amount compared what is going on elsewhere) and a large pumped hydro storage (also many precedents elsewhere) - so in that regard we would be followers.  But it would give us 100% renewable electricty and make us as world leaders in terms of the emerging "Green Economy".  If we want to do better than “Beef and Milk” we better come up with some ideas that involve tangible improvements - something other than the “Financial Services Hub” vision the National Ilk want.   What do you have mind… to just sit around until the ever increasing Oil price forces us to change things redically anyhow?

That would just raise the price of electricity, but certainly would be possible.  I thought you wanted to get rid of using oil (most of it is used in transportation, not electricity generation).  
There is some natural gas generating going on in NZ now, but not much, and almost no oil at all (about 3%):

True – But I think you should start thinking in terms of the overall energy situation for New Zealand….  The gas we are burning at 30% efficiency to make electricity could be used for transportation instead.  100% renewable electricity would not make your power bill any more expensive than it already is with the profit driven corporatisation mindset...
The electrification of the railways should be completed – what sense is there in having it electric from Wellington to Hamilton only?  The future is electric cars and an electric public transport (or some other electric derivative / hydrogen) with gas as a bridge / transition fuel.  Mark my words, the cheap oil era is over.  If you ever travel to South East Asia and witness the swelling masses of middle class that all want to consume as much oil as you and I, you will probably agree, its scary… We need to get off the Crude Oil crack.  100% electricity is the first step and what I great vision for New Zealand.  We could lead the way just like we did for the Woman’s Vote and our Anti Nuclear stance.   We are also isolated from an Electricty point of view so the last thing we want it to be importing Natural Gas (LNG) because we just sat around watching our happyfunballs on the rugby park.

We already are the guinea pig for a raft of neo-liberal experiements. There is a good reason why NZ is first to sign so many of the WTO agreements that other countries either begrudgingly or never sign later on.

This is a common misunderstanding of the current energy predicament. We have a looming liquid fuels production shortage, not an electricity shortage. Installing a few more windmills won't fuel anyone's car. Neither will hydro, geothermal, tidal or solar. 

I don't understand why people who happen to live in the same geographical area as a mining operation think they should receive their "pound of flesh" even though they have contributed nothing to the mining and have probably opposed it (judging by the anti-mining hysteria that seems to be gripping New Zealand).

If their property is somehow harmed by the mining there is room for the appropriate redress, but otherwise I think it is just a blatant money grab. 

Its called GREED.  Always bet on greed.
Most of the 'protest' against any money making venture is about being the squeaky wheel which gets the oil.
Sad to say, but the those who complain the loudest about hydro projects or mining or any other human endeavour do win in the end, in the form of a cash payout.   

It's called rent seeking ... a kiwi speciality of recent years.

""Now, what we’re saying is, look, there are other regions in the country where oil and gas reserves are. We’re very sure of that."
A polly is very sure of that.....oh dear.....if any onshore or close to it decently sized reserve that has been known for a while was worth developing it would have been by now me thinks...whats left is dubious or non-existant.....I mean would any large or medium sized oil company not want to be here otherwise?  We have a well educated, english speaking workforce that doesnt earn a large amount.....A mild taxation, non-corrupt Govn keen to do business, good airlines and transport, capable manufacturing.....there is no reason not to be here except there is little or no oil...

Exactly right....   So we better get another plan...  like 100% renewable electricty as a Start.. 

 Phil Heatly "there are other regions in the country where oil and gas reserves are. We’re very sure of that."
Well put our money where your mouth's at Phil. Why let Sinopec or Petrobras or BP come and help themselves to these vast reserves for pennies-in-the-dollar royalties?
Partner up with Kiwi outfit NZ Oil & Gas and get stuck in. Has your Government's ideological obsession blinded you to the obvious. Or are you really so sure about the size and certainty of these "reserves"?

Great stuff Iain. I would also reccommend Chris Martenson's book and website 'Crash Course'  if you haven't come across it already. An absolutely devastating dismantling of the current financial system.
I have a feeling in the coming years we could charge much higher royalties and the oil and gas companies would still be scrambling to come here. The reality is that the size and number of oil and gas finds has decreased dramatically over the last 100 years. All the low hanging fruit have been picked hence why the renewed interest in once dubiously economic plays such as the tar sands, shale drilling and and deep sea drilling. 

Time to drill it, mine it, dig it, & bypass the extremists/'green'(so called) fringe from always calling the shots - preventing our economy from growth (again). The PC Correctness / Green fringe has already seized control of every govt dept, university, polytechnic, local council in NZ - now they want to drag the rest of us & business into dirt-poor subsistence living.   How about Stewart Island for all the subsistence dwellers?

So what you are saying now is its morally OK to pillage NZ now and leave our descendants in "dirt-poor subsistence living".  Once its drilled out, what's left for our grandchildren?  In one generation the BBs across the planet have used 50%+ of the resources and virtually all the cheap stuff....NZ is "lucky" we still have some cheapish stuff left....
Those who hold 11% of the vote do not "call the shots"..........
You are a moron if you think we live on an flat (infinite) planet and can grow for ever.....
Sorry but Peak oil etc means you and I have been left with the problem that Pollies etc have kicked down to us.....we can kick it but a few years....not a decade...

Taranaki seems to be surviving alright - not exactly pillaged  -  but is providing jobs for 3000+ and income streams longterm....

Mortgage-belt - you shoot your silly thesis in the foot.
Think about it.
In a nutshell, money is an expectation that it can purchase goods and/or services in the future. Goods and services require work to be expended, no exceptions. Work requires energy, no exceptions. Efficiencies can help, but are self-limiting.
No energy has been found, which comes near to fossil oil in portable punch packed, but it's peaked in effective rate of supply.
Meaning the underwrite for 'money' has peaked, indeed we're in serious overshoot. Income streams long-term? Spare me, the 'buyers' woud have to have access to energy, to do the work, to produce the goods/services, to pay for the energy.......
You should have studied physics.
Re criminality - I suggest that beyond peak energy, the lending of fiat money with interest charged, can be identified collectively as fraud. And - last time I checked - ignorance was no excuse.

OMG are you trolling? or are you that short sighted and amoral?....Oil? its 1/2 or more is used....20 years there wont be any significant amount left....that isnt a long term viable strategy for our children. 3000 jobs, when there are 4 million of us? 

So oil declining, end of energy, etc. So we should now live in wigwams in the bush and scavenge? It's reasonable to prospect and extract natural resources in nz. We live in the real modern world.

So oil declining, end of energy, etc. So we should now live in wigwams in the bush and scavenge? It's reasonable to prospect and extract natural resources in nz. We live in the real modern world.

No offence, but I consider that a foolish statement. Like most of your kind, you introduce emotion to what is a reality question.
If we continue to attempt to run 7-plus billion people on the planet, we will indeed live in wig-wams, or worse. That's not a wish, merely a simple extrapolation.
Finite resources are depleting from the first shovel-ful, and the only way to treat them is to reduce consumption sequentially. Substitution runs into the same problem.
That leaves renewable resources, which can only be used at the rate at which they recover, or can be assisted to using other renewable resources.
Perhaps you might consider my previous comment, in light of your last sentence. Try 'lived'.
The Titanic is a useful analogy on many levels. Your kind denied to themselves that there was a problem, eschewed the cold-looking lifeboats, and ended up riding the stern-rail into the depths. Logic said that they were going to end up in the water (so their strategy was stupid) - the time to leave was early, and if there wasn't room in the lifeboats, an alternative must be found. I suspect I'd have bundled deck-chairs together with their own canvas, launched and gone. Dangerous? Yes, but better odds than zero.
There was an interesting debate to be had re altruism vs survival of the fittest - but at 7 billion we are too late for that. I had a differing of opinion with Clare Curran (Labour) about that last weekend. No point in giving to the resource-scarce, they'd just breed even more. This planet, long term, supports perhaps 2 billion at wig-wam level, perhaps only one billion at our current level.
Wishful thinking won't change that.
Do you have kids?  What kind of world do you think you're handing on to them, and do you think they'll thank you? I've apologised to mine, and spend most of my time teaching/passing on my skills to that generation - they'll need it. (my form of altruism - long-term assistance for the species.....)

Since you would seem to be in the tiny minority of Libertarian types, (ie about 1000) actually stewart island for you would be more appropriate for your group.
feel free....

This kind of rhetoric would go down poorly at an OPEC meeting.

Just because some of the over the top PC stuff issued from Sue Bradford, it does not mean that all Green Technology is wrong...  Instead try to use your brain instead of burying your head in the sand about Energy issues.  Or you (and the rest of humanity) will indeed be living off the land before you know it.  Well OK, our grandchildren will, but then that’s not our problem right?

I have seen little if anything green from Sue a green party member, good riddance to her and Locke.....
I dont know if its as long away as grandchildren....well assuming you are under about 65 anyway.......I think at absolute most 20 years and 10 is more like it...

This blog post has the the latest basic stats of the current situation for oil production in New Zealand:
"New Zealand imports 50.4 million barrels per year (2009) which accounts for 92% of domestic use. We produce 22 million barrels of oil per year (2010) and export 17.2 million barrels of oil per year (2009).  It is clear that current domestic production would have to increase massively in order to insulate New Zealand from global fluctuations in crude oil prices.


Crude oil is refined at Marsden Point inWhitianga. About 90% of the feedstock comes from overseas and 10% is local crude produced as a by-productof gas production at Kapuni. Roughly 32 million barrels of oil are refined every year. One pipeline carries aviation fuel to Auckland Airportand a 170km pipeline runs to the Wiri depot in South Auckland. The Wiriterminal is the largest storage depot in New Zealand, jointly controlled by the four major oil companies, Mobil, Caltex, Shell and BP. Gull built its own private depot in Mount Maunganui in 1999.


The majority of New Zealand exploration and production has been carried out in the Taranaki Basin. This began in the 1950’sand the two biggest oil fields currently producing are the Tui and Maari fields.  The Taranaki Basin is now in decliningproduction and is expected to produce another 171 million barrels of oilaccording to New Zealand Petroleum and Minerals, a subsidiary of the Ministry For Economic Development. At 2010 consumption rates  of 54.6 millionbarrels of oil per year New Zealand would exhaust this supply within threeyears. This is clearly not a feasible option for long term energy independence. TAG Oil however believes there is600 million barrels of proven reserves left in Taranaki and this has the potential togive us eleven years at 2010 consumption rates.


Elsewhere in New Zealand limited exploration has occurred in the East Coast Basin, Canterbury Basin and the Great South Basin. Currently the most promising area is the East Coast Basin.Two fields, one north of Gisborne and one between Napier and Danneverke arecurrently being explored. TAG Oil believes there is an undiscovered resource potential of 12.65 billion barrels of unconventional original oil in place (OOIP) and 1.74 billion barrels of conventional OOIP. The potential recovery rates of 12% are similar to that ofthe North Dakota Bakken deposit in the United States. This means roughly 1.52 billion barrels of unconventional oil and 182 million barrels of conventionaloil are thought to be recoverable from this area.


Being generous and assuming TAG Oil’sestimates are correct there are currently 2.3 billion barrels of recoverableoil from both the Taranaki and East Coast Basin. This would give us another forty-two years before these fields ran dry at 2010 consumption. If we expectour economy to grow however we would assume that our oil consumption would groweach year and so it is likely we would require far more oil during this time period.


It is clear that with current known discoveries New Zealand has no chance of being oil independent. Our reliance onoil leaves us open to the whim of the market and we can see that affecting us with record high petrol prices seen at the pump recently. An increasing numberof New Zealanders can no longer afford the lifestyles they have come to expectand we see that with reports of people staying at home during the Easter holiday break."