Sunday, April 8, 2012

New Zealand’s Potential for Oil Independence in an Uncertain World

Ever since United States oil production peaked in the 1970s there has been debate about the ability of North America to become self reliant by producing all its own oil. Fast forward forty years and this conversation is still taking place and the U.S. is still no closer to oil independence. So what about New Zealand? Could we possibly provide for our own oil needs in the coming years?

I would like to state outright that I carryout this exercise purely as a thought exercise. I don’t believe there is much likelihoodof New Zealand becoming oil independent. Even if it was possible in energy terms, the political outfall would make it extremely difficult to implement. We are an exporting nation and part of our trade agreements with other countriesrely on us accepting their imports and oil is a huge part of this. It is also highly unlikely that we could produce and refine all out own oil and produceoil derived products at rates cheaper than that imported.

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 oil according 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 is 600 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 Easterholiday break.

It is time for the National government to get real on providing sustainable transport alternatives for all New Zealanders. The time of low petrol prices is over and all indicators point to the situation only getting worse in the coming years. 

8 comments:

  1. Great Post!

    We dont have long to sort this out either.

    http://oilshockhorrorprobe.blogspot.co.nz/2011/10/when-might-new-zealands-oil-imports-dry.html

    Three years, five years at the most before the big consumers are taking all the global oil supply. 160 small net importers like New Zealand will not get any.

    How many annual vege harvests do we have left to get our food supply sorted? Barely enough, if we start planting now.

    And remember: if Godzone is not getting any oil NO ONE ELSE WILL CARE!

    Regards

    Nigel

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  2. Thanks Nigel. I've come across Dennis Tegg's blog before, there is some great stuff on there. If you have any other New Zealand commentators to looks out for let me know. Also, you are welcome to write a guest post on Southern Limits at any time!

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    1. I agree completely, furthermore the current govt isn't interested in biofuels at all despite a significant capability in NZ, they even went as far as repealing the previous govts mandates. They don't understand that biofuels isn't just about the ecology its about energy security and that is why so many jurisdictions have mandates. Refer here http://www.biofuelsdigest.com/bdigest/2011/07/21/biofuels-mandates-around-the-world/

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  4. I think biofuels are a small part of the solution. They will play a part definitely but it they just don't get the energy returned on energy invested to be viable in any large scale. That, and the huge areas required to grow a relatively small amount of energy.

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    1. I disagree.

      NZ made biofuels could supply up to 30% of NZ's transports needs by 2040 you can read bout this here http://www.bioenergy.org.nz/
      As it stands NZ production capacity for biodiesel could meet 1% of current needs, potentially up to 5% with the right govt policies in place. In regards to "large areas required" that is no true. Only approx 10% of NZ's biodiesel is meet from dedicated landuse e.g. growing Rapeseed and even then it is sustainable and not competing with food crop. You can read that here http://www.biodiesel-nz.co.nz/sustainability/ the rest and bulk is from recycled waste vegetable oil and tallow both products that are available esp Tallow which is currently exported.

      Also note that 2nd generation biofuels will use waste biomass, algae and even waste gas from industry. A couple of NZ companies are already leading this - Lanzatech and Aquaflow. Have a read of what they are doing esp. Lanzatech

      My point is the the bulk of biofuel in NZ will not come from land use.

      I'll do as far as saying the world is on the brink of a bioenergy revolution

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    2. I began writing a reply that got longer and longer so I decided instead to turn it into a full blown post. Look out for it in the next week or so.

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