Risk management and deep water drilling

I had a bit of fun this week in the House, asking questions of the Acting Minister for Energy and Resources about some of the safety issues involved in offshore drilling in the Raukumara Basin off the East Coast.

The fun came in watching the Minister try desperately to avoid giving a straight answer, which was understandable given that the honest and open response would have been along the lines of: “We don’t have a plan to minimise risks; there is no way that a leak caused by an accident could be plugged within any reasonable time; we are so desperate to pursue this chimera of economic growth based on extraction that we will just gamble that nothing is going to go wrong!”

So the ‘fun’ obviously was tempered by the very serious concerns of those who know what is at stake here environmentally, culturally and economically. Even Petrobras accept that there can be no guarantee of safety, as seen in this quote from Marco Toledo, Petrobras head of operations New Zealand: “Guarantee (of safety) is not a word that exists in our industry”.

We have been doing what we can in Parliament to challenge the folly of endangering our beautiful whenua and moana for illusory economic gains. We acknowledge our allies in this, the iwi and hapu of Te Tai Rawhiti and elsewhere who are standing in opposition, and of course Greenpeace and those who are taking direct action out on the water.

There will be a day of action on April 20th, so keep an eye on www.extractionaction.com for an event that you might want to get along and support!

21 Comments Posted

  1. the whole point that you people are missing is that its not only about the money why people dissagree with the events of deep sea oil drilling,its pride and mana over the lands and ocean of Te Whanau a Apanui.
    What you don’t understand is that not only does the land mean alot to the people of the East Cape and Cape Runaway but so does the moana.
    Oil drilling is totally risky. No one wants to see an oil spill disaster happen.
    Local iwi Te Whanau a Apanui believe the drilling would put them in danger. A lot of those poisonous gases as it’s drilling down into the sea, mixes up within the soil, [which] will contaminate all seafoods. For Te Whanau a Apanui, the life source is the sea.

  2. NZ Navy used to arrest East Coast iwi fishing boat:

    The San Pietro, manned by local iwi, was stationed in front of the survey ship Orient Explorer in the Raukumara Basin, off the coast of Gisborne.

    Police, who had been stationed on nearby navy ships, boarded the San Pietro. San Pietro captain, Elvis Teddy, was arrested and taken back to the navy warship HMNZS Taupo

    The navy’s patrol vessel and air force aircraft, including an Orion, have been working with police to monitor the protest.

    Before today’s arrest, tribal leader Rikirangi Gage radioed the captain of the Orient Explorer and told him he was not welcome in the waters.

    “We are defending tribal waters and our rights from reckless Government policies and the threat of deep sea drilling, which our hapu have not consented to and continue to oppose”

    San Pietro, is owned by East Coast iwi, Te Whanau a Apanui and is part of the flotilla including Greenpeace and the Nuclear Free Flotilla, in its third week of opposing deep sea oil drilling.

  3. BJ – the problem is, most of the companies are big enough to insure themselves, so they simply ramp up the price to cover the risks, and as long as they don’t have any major spills they pocket billions of extra dollars.

    It doesn’t matter if ti’s good times or bad – the oil companies have always managed to make money.

    If you really want to cut oil use, you need to concentrate on the people who use it.

  4. SPC says “There is only one way to reconcile your positions, and that is to transfer transport spending away from roads – transfer lanes for bus use (creating congestion to focrce people out of cars) and otherwise invest in public transport and fast paced broadband (to reduce commuting to work 5 days a week). That would reduce demand for oil from existing land based fields.”

    Yes. We need to do all that and more. And where it will be difficult to get many people out of their cars we need to convince them to use more efficient cars, and electric cars.

    spc asks “So I suppose this is something you have been doing?”

    I’m been looking for a more efficient car for town use, though I don’t use buses. Recently I spent a lot on things like better insulation, better curtains, new heat pump. Our business is now almost completely internet based, and our mail and courier use has plummeted, and I don’t commute cause I can base my business at home.

  5. I suppose photonz could also be consistent if he supports a higher petrol tax to deter use of cars (and or investment in alternative transport to the use of the car). That would impact on consumption without adding value to the oil.

    The economist would note though that its rising value of oil that makes other forms of energy (renewable) cost competitive. However that matter can be met in part by ensuring the full cost impact of oil is charged (this also makes renewable energy cost competitive).

  6. Hmmmm… it has to be expensive enough for the CUSTOMER Photonz, right now the petrol price is subsidized by the taxpayer.

    If the price paid to the oil company is high enough, it makes it more profitable as you say, but if the COST to the oil company is high enough in terms of insurance and compensation for destruction of the commons, then it isn’t a matter of them making a profit. It took me a moment to figure out how you were mixing that up though, and it may not be your fault if I didn’t say something dead right. Price is not the same as cost. Bad habit using them as synonymous even if they are MOST times interchangeable in the common speech.

  7. First you argue for focus on the consumers in regards to oil use, then you say the answer is to have a lower value to oil to discourage exploration in areas where there are greater costs (offshore fields).

    There is hole in your bucket/pipeline … the way markets operate …

    There is only one way to reconcile your positions, and that is to transfer transport spending away from roads – transfer lanes for bus use (creating congestion to focrce people out of cars) and otherwise invest in public transport and fast paced broadband (to reduce commuting to work 5 days a week). That would reduce demand for oil from existing land based fields.

    So I suppose this is something you have been doing?

  8. BJ – with all due respect, that is about the most convoluted round about way I’ve heard to campaign for reducing consumption.

    BP certainly wore a large part of the costs for the Deep Horizon spill, so in many places those costs are already factored in.

    And outside factors like the conflict in Libya often have a far greater effect on oil prices than insurance.

    So tell me – under the new environmental standards that are being brought in, who pays for oil spills?

    The irony is, by trying to reduce demand in such a convoluted way – by making oil more expensive – you will acheive the opposite of what you want.

    Expensive oil means high risk drilling is far more viable and worthwile.

  9. Photonz

    I am going to answer you here too.

    Taxpayers currently take on the risk so the oil companies don’t have to pay the sort of insurance premiums a multi-billion dollar spill can generate.

    This makes the oil cheap. This makes the petrol cheap. This keeps demand and the corporate profits up.

    Greens want to make the company wear the risk so the price goes up, forcing their profits and demand back down.

    We don’t want ANYONE to take the risk, but if someone somewhere else remains in thrall to big oil, they can drill off their coastline, not ours.

    We want OUR consumption reduced. The more risky drilling is then simply no longer economic in spite of the subsidies (in terms of risk) provided.

    We want the COMPANY to take and pay for the risk if it must be taken, and the price to reflect that. We want to reduce demand so that the risk does not need to be taken. These things reduce profit to the companies and ultimately take some of their political power away. They are as a result, bitterly resisted, and you Photonz, are (probably unintentionally) a part of that.

    We are taking responsibility here. The government is abdicating responsibility, in favor of the oil (and other resource) companies themselves. The sell everything that ain’t nailed down policies are insane from the perspective of the NZ people.


  10. Ime it is the seismic detection equipment that poses the real risk as far as plate-shifting (earthquakes/tidal waves) goes, by comparison, the drilling itself is almost benign (unless unsafe practices are endorsed).

  11. Most of our oil at present comes from onshore fields with lower environment risk, new fields such as those offshore have greater risk.

    Fully determining the environment risk and adequately assessing (and providing for an insurance cover liability) the cost of this has to be detemined before new exploration is undertaken.

  12. Todd – you just don’t want to take the environmental responsibility for the oil you use.

    You want some unknown people in some unknown country to take the risk for the oil YOU use.

    Then you don’t have to think about it.

  13. I thought you spoke very well on the Nation today David. It would appear that Parata is avoiding the issue now that she has been caught out lying.

    Photonz1, the wealthy want more at poor peoples expense. Thinking that we should capitulate to exploitation, to inhibit drilling elsewhere is probably your worst argument to date. You still believe that there is no resistance in other countries. Enough resistance will force a change. Renewables do not melt down or spill poisonous crap all over the place.

    It is a misconception that the Greens do not want growth, they do in fact want sustainable growth that does not cause adverse environmental effects. As David has succinctly pointed out, the economic benefits are minimal. Comparing what BP makes to what New Zealand might make is irrelevant. The claim by John Pfahlert is now that they’re searching for Gas which gives a return of 1% to New Zealand. I don’t believe him.

    What ever your maths is, 95% or 99% going off shore is not good in anybodies book. We have all the costs if an accident occurs which risks industries that earn far more. We get no taxes from deep sea oil. The gamble is simply not worth it environmentally or economically speaking.

    We do not need to destroy our environment to make money, in fact safeguarding the environment will save us money in the long run. It also safeguards our Kiwi way of life.

  14. We are having a repetition of this governing philosophy in Southland. In a letter in today’s Southland Times a writer expressed deep concern that the Gore District Council wouldn’t just accept Solid Energy’s lignite proposals. It was suggested that seeking environmental assurances was just a waste of money and time and would delay the financial gains from extracting the resource.


  15. David says “and if exploitation went ahead we would get at best 5% of the economic return ”

    That’s pretty good for doing nothing. Take the example of BP – they made less than 6% profit in 2008, 7% in 2009, and a loss in 2010 because of the spill.

    That makes 5% look pretty good – there’s simply not the margins for a lot more than that

    I agree that we need to wean off oil.

    Which is where the focus of attention should be.

    Instead of merely shifting the enironmental risk for the fuel WE USE to some other country.

  16. It’s true that the Raukumara is only one of the areas under threat, but it is also the site where there is activity on the water and so the better opportunity to raise public awareness. Interesting that Far North iwi Te Rarawa are the latest to come out in support of the East Coast iwi and hapu.

    Photonz1, I am not saying some other country should carry risk on our behalf – what I know is that at the moment the New Zealand public and our environment are carrying 100% of the risk, and if exploitation went ahead we would get at best 5% of the economic return (which woud soon disappear if we had to try and clean up a spill, given that Petrobras’s liability under maritime law is limited to $200,000! The challenge and the opportunity is to drastically reduce our dependency on oil and other non-renewables, and build a stronger and more resilient economy by adding value to primary production and developing clean tech / green tech solutions that are already in high demand internationally.

  17. Nations are not expected to be self-sufficient in energy, most nations are not.

    The Greens are the only party that has proposed a economic growth plan.

    Greens are only asking of the dairy industry sector that they abide by standards on pollution that most other business operations already have.

    Someone who discussed matters as they really are, rather than as they would spin them, would comment in light of that.

  18. David – so you clearly want some OTHER country to take responsibility for the risks for OUR energy needs.

    As for desperation for economic growth. With the Greens endless spending plans, we’ll need significanltly MORE growth than we do with the current govt who are at least trying to cut so spending is sustainable – that last word was sustainable.

    But you don’t like dairy, you don’t want mining, you don’t want oil, and you don’t like growth – but you want to spend more than anyone else.

    Meanwhile back in the real world, if you want to spend more, then you need to earn more.

    And if you don’t want growth, then you need to be advocating for cuts far MORE severe than those being proposed by the govt – not huge spending increases.

  19. But isn’t anyone else concerned that at least one other exploration company may be drilling in deep water within the next 18 months?

    I’m referring to three exploration permits that OMV were awarded in the Great South Basin. In the next 12 weeks OMV has to make a commitment to drilling exploratory wells in all three, or surrender the permits to Crown Minerals.

    First example – Permit 50120 which is an 8,352 sq km offshore block off the SE tip of New Zealand. If OMV don’t surrender the permit by 10 July 2011, they then have until July next year to drill one exploration well to an indicative minimum depth of 3,500 metres below sea level “unless geological or engineering constraints encountered whilst drilling make this unreasonable”

    Then there’s Permit 50121 which is a 16,520 sq km offshore block that extends off the coast of Stewart Island. If that permit isn’t surrendered, OMV will have to drill TWO exploration wells “to an indicative minimum depth of 1,500 metres below sea level in western areas of the permit or 3,500 metres below sea level in eastern areas of the permit…”

    Last example is Permit 50119 – a 23,860 sq km block stretching between Dunedin and Balclutha. The TWO exploration wells in that area are to be drilled “… to an indicative minimum depth of 2,000 metres below sea level…”

    Not wanting to take anything away from what’s happening in the Raukumara Basin, but let’s also focus some attention on companies who may be drilling in deep water far sooner than Petrobras would be.

  20. It was fun to watch too. A woeful performance from an Acting Minister who’s clearly not up with the play. No wonder Steven Joyce opted to take over on Thursday.

    Do you happen to know where things are at with the Northland and Reinga deepwater exploration permits? Brownlee said we could expect an announcement about which companies were being awarded those permits in late 2010/early 2011. Is the Govt sitting on it because they don’t want to add fuel to the fire?

    Also, the work programmes for offshore permit areas off the South Island indicate there’s likely to be exploratory drilling taking place this year and in 2012. It’s not just the East Cape that’s at risk.

Comments are closed.