The lunacy of the oil and gas decision

I’m not sure that anyone in the current government has bothered to read the reports their ministries provide on the oil and gas sector.

If they did read the reports they’d find out that:

  • Petroleum & Minerals is the highest growth in GDP over past 10 years; which makes it the highest contribution to productivity – GDP $330/hour worked.
  • The next biggest sector is Utilities at $210/per hour worked. Utilities also use the output from the oil and gas sector.
  • Petroleum & mInerals is also the sector with the fastest goods export growth

According to another MBIE site: Quote.

The petroleum and minerals industries:

  • create highly skilled and well paid jobs. The average salary in the petroleum and minerals sector is $105,000twice the New Zealand average of $50,000;
  • are among the longest lived industries in the country. They invest in local infrastructure, support local suppliers, offer training opportunities, and many invest in community initiatives;
  • are innovative and technology focussed; and

help to diversify regional economies ? especially areas that rely heavily on agriculture, dairy, forestry or fishing ? making them less vulnerable to external economic factors.?End quote.

Further, they provide a large economic benefit to the country: Quote.

There is considerable revenue to the Government through personal and company taxation and GST from petroleum and mining activity.

The royalty regime comprises a mixture of:

  • set rates for every unit (i.e. tonne) produced ? typically used for lower value minerals such as aggregates and limestone; and
  • a royalty paid on the percentage of sales or company profit, whichever is higher ? typically used for higher value resources such as petroleum, gold, silver and coal (for example, petroleum operators normally have to pay either five per cent of sales or 20 per cent of profits ? whichever is higher).

All opencast coal miners, and some gas producers, are also subject to an Energy Resources Levy based on a specified price per unit of production.

This money goes into the National Consolidation Fund, which benefits all New Zealanders through investment in broader infrastructure resources, such as hospitals, roads, schools and broadband.

For example,?petroleum operators typically provide 42% of any profits to the Government?through royalties and taxes. End quote.

But all that seems to be moot. I’d love to see how collapsing this industry without replacing the huge revenues is going to help anyone long term.

This shows the lunacy of the gas decision. Killing the strongest and best performing sector with the highest wages and replacing it with McJobs in tourism or hospitality seems rather myopic.

Raw Data:

MBIE Sectors Report: Part 1 – Overview of the Economy by Sector -PDF 2.1 MB (saved here in case it is deleted)

MBIE website – Value and benefits to New Zealand – New Zealand Petroleum and Minerals?(saved here in case it is deleted)