New Zealands new bid round the last for a while?

The long delayed Blocks Offer 2020 has opened in New Zealand. New Zealand Petroleum and Minerals (NZP&M) announced 1,566 sq km of onshore acreage, available from 28 March 2023. The round will be open until 26 July 2023.

Though opening in 2023, the offer is retaining its planned name of 'Blocks Offer 2020'. With the "clue in the name" the round was originally pitched in 2020; a nomination period for the round was held between 27 July and 21 August 2020 with a consultation period, with iwi and hapū groups, then following between 25 September and 18 December 2020. Now opened in 2023, it is the first offering of acreage since 2020 (when the - itself delayed - 2019 Blocks Offer was released).

Acreage Offer

A total of 1,565.5 sq km across the onshore Taranaki Basin has been made available, split into a grid across a number of areas (see map). Companies can combine contiguous grid blocks to form their own bid block outline, up to a maximum 250 sq km.

Permits awarded from the round will be valid for a ten year period with two wells required across the permit's validity. Several drill or drop decisions are also included under the conditions.

Prospectivity

In the onshore Taranaki Basin there have been 34 discoveries to date. The largest of these within the Mangahewa Structural play. The key reservoirs are within the Mangahewa, Kaimiro, McKee, Mount Messenger and Tikorangi formations. These will therefore be likely targets in any drilling that would take place within awarded permits.

New Zealand Legislation

The round is the third and final of three permitted block offers after legislation was altered in 2018. The changes were introduced under the 2018 Crown Minerals (Petroleum) Amendment Bill (2018 Bill), by the Labour Party, and saw the ban on the offering or award of any oil and gas exploration licences beyond the onshore Taranaki Basin*. In the 2020 election campaigns the opposition National Party promised to overturn the 2018 Bill introduced by the Labour led coalition government in 2018. However the Labour Party achieved the first outright parliamentary majority win in 27 years, with the Bill therefore remaining in place.

The 2018 Bill's conditions were focused on future offer and award of acreage and therefore didn't impact existing petroleum exploration permits in areas outside the onshore Taranaki Basin. These were still deemed valid and allowed to continue. However, since the 2018 Bill's introduction, New Zealand has seen a dramatic reduction in exploration acreage. In 2021 the last exploration acreage in frontier basins (which are considered to be any outside of the Taranaki: the only producing basin in the country) was surrendered. These areas were also where the majority of IOCs and majors held their acreage, and so the relinquishment of these areas also saw the exit of players such as Chevron, Equinor, Shell and Woodside. It is thought the expensive and challenging nature of exploration in some of these basins, proximity to markets as well as potentially the changes being made to legislation, contributed to the withdrawal of these companies, and though not directly due to the introduction of the 2018 Bill, it has been a further blow to the upstream industry in New Zealand.

A mentioned, under the 2018 Bill three further rounds in the permitted onshore Taranaki region were outlined, with this '2020 Blocks Offer' being the third. In December 2022 it was confirmed that any block offers beyond the "third" release will be deferred until after the next parliamentary term. At this time Energy and Resources Minister Dr Megan Woods reported "Decisions will be made early in the next Parliamentary term when there will be a better evidence base of future demand". This was alongside an announcement that the New Zealand Government would be looking at the potential for offshore renewables as part of New Zealand's forward plan, as part of its efforts to reach net zero in 2050. The future of acreage offers, and subsequent awards, for oil and gas permits is therefore unknown at this stage, with New Zealand opening the floor to expanding options and opportunities for its future energy mix.

[*It should be noted that one exploration permit has been awarded outside of the onshore Taranaki Basin since the introduction of the 2018 Bill; just prior to the announcement of the 2020 Blocks Offer, PEP 60403 was announced as being granted to Greymouth Petroleum. This permit award was the result of a previously rejected application being reassessed].

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.