‘New Frontier’ Drilling is Playing with Fire

Tracey Barnett ©April 2011


Let’s say five years have passed since Petrobras was awarded the permit to drill New Zealand’s first Ultra Deepwater oil well in 12,000 sq km of rough, remote waters off the East Cape when suddenly, they strike black gold, big time. Back slapping all around.Let’s make up a story. Almost a fairytale, but not quite.

It was worth the extra money spent on naval planes and ships guarding Petrobras against protesters. It was worth Wellington ignoring the local Iwi, because this payday is proof John Key is looking after our future.

Good thing too, because frankly, we needed the cash. Maybe now we can start to pay down our big bailout and earthquake rebuild deficits, the government proudly tells worried voters.

Those generous tax breaks we ended up giving the world’s third largest oil multinational, while handing out one of the cheapest royalty regimes offered in the world—only five percent to us, with 95 percent getting carried offshore to Petrobras in Brazil—are about to pay off.

No worries that other countries with risk contracts like Indonesia, are getting twice our royalties, or that the US is getting over three times what we negotiated and they’re still considered some of the cheapest rates in the world. No worries they’ve had to spend a tidy sum of that profit to recover from huge spills.

We’ll be different. We’ll regulate like crazy with best practices up to our eyeballs, even though we sure didn’t have much in place when we awarded the contract to Petrobras. Jerry Brownlee signed anyway, betting we would figure it all out later.

We’re pioneers, after all. The oil industry calls us the “New Frontier”, like Greenland and the Shetland Islands, because nobody was ever willing to touch our difficult, dangerous and remote deepwater sites with a stick before—that is, until the world supplies got tight enough and the money got good enough.

Then suddenly one day, there is an accident, a huge explosion on our maiden deepwater exploratory well. Several people are killed, but the pain is just beginning.

Here it comes—the millions of barrels of black ink that turn waxy in our cold waters, unlike in the warm waters of the Gulf of Mexico where it can evaporate more easily. The economic and physical ooze is now headed to our shores, financially crippling fishing and tourism, sectors that make us far more revenue than oil has ever done. Luckily, we can always recoup our losses by fining Petrobras our current maximum fine, $200,000.

Our story may be fiction, but storms, earthquakes, bad oversight, even drunk captains, aren’t. Just ask Petrobras. In the last 15 years, their checkered safety record show they’ve had 282 deaths from accidents, explosions and fires, and 27 oil rig blowouts since 1980.

So we go into emergency mode! In the Gulf disaster, they had 6,000 ships, 17,500 National Guard troops mobilized, 7,000 US Coast guard, comprising over 40,000 emergency personnel.

We mobilize our team of trained responders! That’s 400, according to our acting Minister of Energy and Resources.

So we send for help. We have to wait for the nearest available floating rig to be brought to the site to drill a relief well. That might be another one-two months, before we can even begin to drill.

In the Gulf of Mexico they had 3500 oil platforms with trained personnel and experts a helicopter ride away. Even then, it still took three months for experts from all over the world to figure out how to cap the Gulf disaster at 1500 meters deep.

But remember, we are the “New Frontier”. Our well in the Raukumara Basin is likely to be almost twice that depth, 2000-3000 meters under the sea.

Who do we call worldwide for expertise to solve this when technologically it is still being—worked out? We could always ask the Russians. They had a spill that lasted on and off for a year.

The pressure to drill in our deep waters despite the risk will only get greater as the world gets squeezed for oil. We are the country that shunned nuclear power when the whole world embraced it. We have enough natural disasters not to invite man made ones with open arms.

Yes, shallow oil exploration is still necessary, until we give similarly generous government focus on renewables so we can wean ourselves off a dying source.

But sadly, this energy policy reads like circa 1984. Renewables should be shouting off the pages. We could lead the world.

Instead, we are celebrating New Zealand becoming the oil industry’s next poster boy for overcoming big risk contracts.

The best minds in the world still can’t figure out how to stop an ever-riskier deepwater oil business from inevitably poisoning our oceans, our beaches, our brand. Why bet disaster won’t happen to us?

Our Prime Minister is trying to sell us high risk for shortsighted cash. Don’t buy it.

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