Oil & Gas Regulation 2013

More documents

Recommendations

Info

Bell Gully New Zealand 1.4 To what extent is New Zealand’s natural gas production exported (pipeline or LNG)? New Zealand does not export natural gas. 2 Overview of Oil Sector 2.1 Please provide a brief outline of New Zealand’s oil sector. Oil is New Zealand’s largest source of energy (as can be seen from the breakdown of total primary energy supply in question 1.2 above). While there are a number of producing fields in New Zealand, for example, Maari, Pohokura, Tui, Kupe and Maui, most of New Zealand’s oil is imported. The Maari oil field is the largest producing oil field in New Zealand. Total oil production in New Zealand decreased by 14.5% in 2011 from the previous year to 99 PJ (17 million barrels). New Zealand’s mean production rate was 45,500 barrels per day in 2011 (compared to a peak production of 58,700 barrels per day in 2008). Crude oil production currently accounts for 52% of total oil production, followed by condensate (46%) and naptha (2%). This is a change from the historical position of condensate dominating total production. Total oil remaining reserves (P50) from producing and nonproducing fields decreased by 11% in 2011 from the previous year. 2.2 To what extent are New Zealand’s energy requirements met using oil? New Zealand’s energy requirements are predominately met by oil, which provided 34% of New Zealand’s total primary energy supply in 2011. 2.3 To what extent are New Zealand’s oil requirements met through domestic oil production? While there are a number of producing oil fields in New Zealand, most of New Zealand’s oil is imported. Over half of all imported oil in New Zealand originates from the Middle East, followed by Russia, Asia, and the United Kingdom. 2.4 To what extent is New Zealand’s oil production exported? In 2011, New Zealand exported 95 PJ (16 million barrels) of oil. Most of New Zealand’s locally produced crude oil is exported because of its high quality and consequently high value on the international market. The majority of New Zealand’s exported oil is sent to Australia. 3 Development of Oil and Natural Gas 3.1 Outline broadly the legal/statutory and organisational framework for the exploration and production (“development”) of oil and natural gas reserves including: principal legislation; in whom the State’s mineral rights to oil and natural gas are vested; Government authority or authorities responsible for the regulation of oil and natural gas development; and current major initiatives or policies of the Government (if any) in relation to oil and natural gas development. The exploration and development of New Zealand’s natural oil and gas resources is governed primarily by the Petroleum Act 1937, the Crown Minerals Act 1991, the Minerals Programme for Petroleum 2005 (issued under the Crown Minerals Act) and associated regulations. Downstream activities are regulated by the Gas Act 1992 and various regulations and rules promulgated under that Act. The Petroleum Act and the Crown Minerals Act state the law relating to the management of Crown-owned minerals, while the Minerals Programme for Petroleum (prepared by the Minister of Energy and Resources) contains the policies and procedures governing the development of all petroleum resources (including oil and gas). Responsibility for giving effect to both these instruments lies with New Zealand Petroleum & Minerals, an office of the Ministry of Business, Innovation and Employment. The Government recently undertook a NZ$25.4 million seismic acquisition programme over the period from 2008–2011, and has so far acquired seismic data over the Reinga Basin, the Pegasus Basin and the Bounty Trough. This follows an earlier seismic data acquisition project between 2004–2008, which involved the Government purchasing seismic data over the Northland Basin, the deepwater Taranaki Basin, the Great South Basin and the East Coast and Raukumara Basins. This data was offered freely to explorers and led to the award of several exploration permits. As part of the Petroleum Action Plan released by the Government in 2009 (see question 1.1 above), the Government is currently undertaking a review of the petroleum and minerals management regime in New Zealand. The Crown Minerals Act sets out the broad legislative framework for the issuing of permits to prospect and explore for, and mine, petroleum within New Zealand’s territorial area. Initially, a discussion document was released by the Government in August 2010 as phase one of a two-part review. This discussion document focussed on proposed amendments to the Crown Minerals Act, with a review of the associated Minerals Programme and regulations to be released at a later point in time as phase two. However, following public consultation on the phase one discussion document, the Minister of Energy and Resources announced that the review of the Crown Minerals Act, the regulations and Minerals Programme would be combined and a new consultation document would be issued. This document was released in March 2012. Public submissions on the discussion document closed in April 2012. In late September 2012, the Crown Minerals (Permitting and Crown Land) Bill was introduced into Parliament. The Bill amends the Crown Minerals Act (and several other Acts) as a result of the proposals in the March 2012 discussion document and the related submissions. Some of the more significant proposals in the Bill include: having a two tier permitting system (with Tier 2 permits available for lower value operations); changes to the permit application process including, proposed work programmes being able to have committed and contingent work components, exploration permits having to include an estimate of expected total work programme expenditure and, in the case of Tier 1 exploration permits, the Minister being satisfied the operator has (or will have) sufficient HSE capability and systems (by way of a “high-level preliminary assessment”); a maximum permit duration for petroleum exploration permits of up to 15 years plus any appraisal extension term (with a distinction likely to be drawn between offshore and onshore blocks); a requirement that mining permit extensions and appraisal extensions are sought 6 months before the expiry of the current permit. Other permit changes must be sought not less than 90 days before the work commitment due date (or, if compelling reasons exist, not less than 30 days before the due date); ICLG TO: OIL & GAS REGULATION 2013 WWW.ICLG.CO.UK 231 © Published and reproduced with kind permission by Global Legal Group Ltd, London New Zealand
Bell Gully New Zealand New Zealand significantly narrowing the scope of the Ministerial consent provision for dealings (section 41 of the Crown Minerals Act). It will only apply to certain kinds of agreements that impose on permit holders an obligation relating to the proceeds of production; the introduction of strata permits; a requirement for joint venture permit holders to appoint an operator who is responsible for day-to-day management of activities under the permit. Operator changes are only permitted with the prior consent of the Minister; and an ability for petroleum prospecting permit holders to apply for designation as speculative prospectors (with the result that it is possible for any data filed with the Crown to remain confidential for 15 years). There are several stages for the Bill to progress through before becoming an Act of Parliament and it is unlikely this will occur until mid to late 2013. The Marine and Coastal Area (Takutai Moana) Act 2011 (“MCA”) was enacted in 2011. The MCA repealed the Foreshore and Seabed Act 2004 and amends other legislation, including the Crown Minerals Act and Resource Management Act. Under the MCA, an applicant may seek a Court determination of Maori customary title to the foreshore and seabed (now called the marine and coastal area). The MCA provides for three levels of statutory rights in relation to the marine and coastal area: a right to participate in consultation processes; a protected customary right (a form of use right); and a customary marine title (a form of customary interest). These rights may affect an oil and gas development in the marine and coastal area. A key theme of the Government’s promotion of the New Zealand petroleum industry has been to ensure that the development of New Zealand’s oil and gas resources occurs in a safe and environmentally responsible way. In light of this, the Government enacted the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (the EEZ Act) in September this year. This follows the Government’s report in 2010 on its review of New Zealand’s health, safety and environmental arrangements in relation to offshore petroleum operations to ensure such arrangements are fit for purpose and compare favourably to international best practice. The EEZ Act establishes an environmental management regime for New Zealand’s exclusive economic zone and the continental shelf. Prior to the enactment of the EEZ Act, there was no specific environmental management regime in respect of the EEZ and continental shelf as the Resource Management Act 1991 only regulates environmental affects of activities in New Zealand up to 12 nautical miles offshore. In broad terms, the EEZ Act provides for the classification of activities to be undertaken within the EEZ or continental shelf as permitted, discretionary or prohibited activities. A person seeking to undertake discretionary activities must apply to the Environmental Protection Authority (EPA) for a marine consent. This will require the applicant to prepare and submit to the EPA an application for a marine consent (which will include the provision of a detailed environmental impact assessment) in respect of the discretionary activity. That application will then be assessed by the EPA and a public hearing will be held in respect of it. Exploration drilling is expected to be categorised as a discretionary activity. The EEZ Act includes transitional provisions which apply in respect of lawfully established existing activities and some planned petroleum activities. The Resource Management Act 1991, the Hazardous Substances and New Organisms Act 2004, the Maritime Transport Act 1994 and the Marine Mammals Protection Act 1978 are also likely to be relevant to any oil and gas development. Due to the timeconsuming nature of the resource consent process under the Resource Management Act, the Minister for the Environment may use a call-in process (on a case-by-case basis) to streamline the appeals process and decrease consent timeframes. The Gas Act outlines the responsibilities of gas operators and owners of gas fittings, and provides for a co-regulatory model of gas governance. Under this system, an industry body may recommend regulations and rules to the Minister of Energy and Resources in the areas of wholesaling, processing, transmission, and distribution of gas. The Gas Industry Company (GIC) is the industry body approved pursuant to the Gas Act and has, since its approval in late 2004, made several recommendations. The GIC is required to have regard to the objectives and outcomes set out in the Government Policy Statement on Gas Governance 2008 when making such recommendations. Despite promoting industry-led solutions and light-handed regulation, the Government has maintained oversight of the process and has reserved the right to regulate unilaterally where industry solutions are not considered appropriate. The Government has also indicated its intention to establish a regulatory authority of its own if the GIC does not deliver the required outcomes. 3.2 How are the State’s mineral rights to develop oil and natural gas reserves transferred to investors or companies (“participants”) (e.g. licence, concession, service contract, contractual rights under Production Sharing Agreement?) and what is the legal status of those rights or interests under domestic law? All oil and gas in its natural state is the property of the Crown. Ownership of the oil and gas will pass to a permit holder who has obtained the oil and gas lawfully and in the course of activities authorised by a permit issued by the Minister of Energy and Resources. As described below (at question 3.3), three types of permits are available under the Crown Minerals Act: prospecting; exploration; and mining permits. While prospecting rights are usually exclusive (but can be non-exclusive if the permit conditions reflect this), exploration and mining rights are always exclusive. Further, an exploration permit generally gives a subsequent right to apply for, and be granted (subject to satisfying certain specified criteria), a mining permit. In addition, some petroleum mining licences continue to exist under the Petroleum Act. New Zealand historically operated a petroleum exploration permit allocation system based on cash bonus bidding, staged work programme bidding, and priority in time applications. The priority in time application allocation method allowed companies to apply to explore for petroleum over any land in New Zealand which was available for permitting, and the applications were then processed by New Zealand Petroleum & Minerals. However, as part of another significant piece of recent regulatory reform in New Zealand, this allocation method was removed in 2012 and was replaced with annual competitive block offers. This was driven by the objective of providing for a more proactive and strategic approach to the management of the Crown’s petroleum estate by New Zealand Petroleum & Minerals, especially in relation to New Zealand’s offshore basins. The first annual exploration blocks under the new system were recently put up for tender by the Government on 11 June 2012. The 23 petroleum exploration blocks cover over 40,000 square kilometres of offshore seabed and 3,000 square kilometres of land in the 232 WWW.ICLG.CO.UK ICLG TO: OIL & GAS REGULATION 2013 © Published and reproduced with kind permission by Global Legal Group Ltd, London
Page 1 and 2: The International Comparative Legal
Page 3: Chapter 24 New Zealand David Coull
Page 7 and 8: Bell Gully New Zealand New Zealand

Oil & Gas Regulation 2013

Create successful ePaper yourself

Delete template?

Save as template?