New Zealand The Next Oil Giant? What? Are You Mad?

Ah, New Zealand!  Emerald-green islands set in an azure-blue sea........Beautiful, serene, exotic, home of the "Lord of the Rings"  and ..... isolated!  So why is Norway's biggest oil producer, Statoil ASA mapping seabeds off the coast of New Zealand and sending out a seismic - exploration vessel later this year?  The answer is Simon Bridges, New Zealand's Resource Minister.  He looked at their economy, dominated by sheep, dairy and tourism, and decided to develop the massive ocean seabed surrounding the islands.  In 2009, New Zealand published a white paper "to explicitly position the government both domestically and internationally as highly supportive of the development of our petroleum resources".  Bridges traveled the world to pitch his country to petroleum explorers.  He hired oil experts from Oklahoma and Texas to lure foreign producers to New Zealand's distant shores .......... and he succeeded!

So what is Simon Bridges' secret?  Simple.  The industry changed.  Prior to 2009 -2010, oil companies focused on emerging nations like Angola, Indonesia, Nigeria.  They got great government contracts, weak regulations and low - cost labour.  For awhile it worked but in recent years, violence, government demand for more royalties and competition from state - owned oil companies cut into profits.  Here are a few examples:

-  Shell invested heavily in Nigeria's Niger Delta but in 2006, militants attacked Shell facilities.  They kidnapped executives and workers and blew up pipelines.  That violence still exists;  Shell sold $1.8 billion in assets

- In Libya, Italian oil company, ENISPA has been hit by violence.

- This year, Chevron sold its Chad assets.

-  Exxon has sold projects in Iraq and Indonesia.

The list goes on.  Now Big Oil wants stability.  Now their focus is on the Organization for Economic Cooperation and Development (OECD)  which is made up of the world's richest economies.  In 2013, oil giants - Exxon, Shell and Chevron spent 66% of their exploration and production budgets in OECD countries.  Shell Chief Executive, Ben Van Beurden said, "It would be good if the majority of our cash flow came from OECD countries because they carry little political risk."  First - world governments have been quick to seize this economic opportunity.  In May, 2014, Britain created tax incentives to encourage offshore exploration.  Shell and Exxon now have projects in the seabeds of Eastern Canada, supported by both provincial and federal governments.  Chevron is spending more money in Australia as part of its shift away from Angola and Nigeria.

And as for New Zealand?  the last word goes to Pal Haremo, vice-president of Norway's Statoil ASA:  "We like the very attractive commercial regime that has been established in New Zealand and their very stable political regime".  Simon Bridges should be proud.