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Wednesday, January 19, 2011

NZ oil and gas in steep decline - Taranaki Report

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Venture Taranaki have produced an immaculately presented report entitled "The Wealth Beneath Our Feet". The report is essentially a glossy public relations exercise of trying to talk up the contribution of the oil and gas industry to the local and New Zealand economy.

But even a cursory examination of the data, and the Report’s own graphs, shows that actually, reserves, production, and the contribution of oil and gas to the economy, have all reached a peak, and are all in steep decline.

As the graph shows, this decline has been happening at the very time that drilling activity and the number of wells being drilled has risen sharply.  There is no foreseeable increase in production likely, because no new major discoveries have been made in the last few years.

Interestingly, there are no graphs on oil reserves or production. When there is so much other optimistic material in the report, one has to question why the oil production, including future production projections are omitted. Maybe it's because the projections for oil are even more dire than for gas -- as was pointed out in my post last November about the oil production projections from a Ministry of Development official at the Petroleum conference. They showed oil production halving by 2015. The Venture Taranaki report confirms a similar trend for gas production.

Buried beneath all the public relations optimism of the Taranaki report is the disturbing revelation that our domestic oil and gas reserves and production are in steep decline. This must lead to New Zealand's net oil import dependency increasing to much higher levels than the current 63% ( the figure cited in the report).

With global oil production projected by many credible organisations to be headed for an era of permanent decline, and global net exports of oil likely to decline even faster -- the outlook for New Zealand with its increasing dependency on imported oil - is bleak.

The report contains some interesting information regarding the level of current oil production, -- 19.6 million barrels were produced in 2009 of which 17.9 million barrels were exported and just 1.7 million barrels refined locally.

And in what must be one of the most prescient namings of a petrol brand the report reveals that the finding of oil at Motoroa, near New Plymouth spurred the formation of an oil company trading as "Peak Petrol", which operated until the 1950s!

Could it be that the operators of "Peak Petrol" were aware of Hubbert’s 1950’s peak oil projections even before Hubbert himself, and foresaw a decline in global oil production as steep as the slopes of Mt Taranaki itself?


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