The Wealth Beneath Our Feet - full report (6.4 MB ... - Venture Taranaki

Since the development of Maui in 1976, New Zealandhas observed a depleting reserves base. Even recentlydeveloped post-Maui discoveries (Pohokura, Tui, Maari,Kupe) have only temporarily arrested the decline, withyears supply now testing 50 year lows. While this, andstrong oil and gas prices, provides increased incentivesto explore (and develop), outcomes of recent explorationhave been disappointing.Until discoveries exceed production, New Zealand’s O&Gindustry will struggle to maintain the growth observedover the last decade.While many contingent factors willultimately determine the future ofNew Zealand’s Oil and Gas Industry,a number of interventions andconsiderations that could fostergrowth amongst both the industryand the nation are outlined below.8.1 A fresh approach to defining theindustryA change in how the O&G industry is conceptualised andpromoted will enable its full economic contribution to bemore comprehensively and consistently quantified.Redefinition will also create an opportunity for theindustry to reposition and rebrand accommodating thechanging social, economic and political environment.Restrictive statistical definitions and public perceptions,the complexities of the industry and government policypredominantly focused on exploration attraction, meanthat the full value and supply chain that underpins theNew Zealand O&G industry is difficult to understand andrarely appreciated.Whilst exploration and production is important, so is theextensive supply chain, infrastructure, systems, capability,relationships and knowledge (formal and informal), and astrong track record that underpins the industry.As an example, Statistics New Zealand indicate that theO&G industry accounts for 1345 employees 12 , yet researchfor this report conservatively shows that there are at least3730 people directly employed in O&G work within12 Refer to Appendix 9a for further detailsNew Zealand. Further, the addition of indirect andinduced impacts would extend employment flows fromthe O&G industry to approximately 7,700 jobs.Similarly, prime measures of the economic benefit fromO&G have focused on the royalties and export dollars,failing to address the jobs, local content and valueaddopportunities. Furthermore the intangible benefits oftechnological advancement, global partnerships, standardsimprovements, skills, industry diversification, leverage andthe generosity of O&G’s community contribution should berecognised. The O&G industry should not be conceived asbeing insular but a highly skilled, wealth creating industrywith tentacles that catalyse other wealth creating industries,boost industry performance, competitive advantage andis intrinsically linked to the nation’s broader economic andsocial wellbeing.8.2 Fostering local procurementAs demonstrated in this report, New Zealand companiescapture 30 - 80 percent of the construction of major O&Gprojects, however, there is potential to capture more forlocal companies.Local work not only boosts economic growth, butenhances business performance and leverages widerindustries. Increased investigation into the costs andbenefits of incentivising local procurement could form anoutcome of this report.8.3 Growing the entire supply chainGrowth opportunities for O&G supply chain companiesexist domestically, internationally and throughdiversification into other industries. While there isalready high participation in domestic activity, there existsignificant opportunities for exporting our domestic skilland expertise, and taking these skills in new directions.Alliances with overseas companies are often a criticalcomponent in the success of offshore ventures, andleveraging these relationships to include a broadermix of the New Zealand industry could open doors tofuture exporters.Such export and diversification development mustbe encouraged and assisted, and the constraintsNew Zealand’s O&G companies face internationallyinvestigated and addressed.The Wealth Beneath Our Feet75