Deep sea oil: Are our coasts at risk?

What is deep sea drilling?

Drilling for oil offshore has become commonplace all over the world since the early part of last century, when the first offshore oil platforms were designed. These earlier structures needed to be secured to the seafloor, so the depth at which they could work was limited to within a few hundred metres. However as technology has evolved – and the price of oil has risen– it has more recently become possible – and profitable – to drill for oil at depths greater than 500m – and up to 2.4km beneath the surface of the sea.

In November last year a deep sea oil exploration ship – a high-tech vessel called Noble Bob Douglas, owned by oil company Anadarko – arrived in New Zealand. The first of several prospectors lured here by the current government’s aim of expanding the oil and mining industries, the Noble Bob Douglas is at the moment prospecting for oil in waters off the coast of Taranaki up to 1.5km deep.

Why are we doing this?

The short answer is ‘for money’. The New Zealand economy has lagged in recent years compared to other developed countries, and we need more cash if we want to keep enjoying the standard of living (good roads, healthcare, education and so on) that we’ve traditionally valued.

Offering oil prospecting rights to overseas companies is a beguilingly easy way to make a lot of money quickly. With very little financial cost to us, New Zealand has been able invite foreign oil companies here with a good possibility they will strike it rich, setting up long-term operations that we can tax year-by-year, with the added bonus of well-paid jobs for locals in the industry.

In fact, drilling for oil in shallow New Zealand waters is nothing new. Since the 1960s we’ve been granting licences to overseas companies to explore for and extract fossil fuels.

To date more than 1000 wells have been drilled and we currently have five significant offshore gas and petroleum fields: Kupe, Maari, Tui, Pohokura and Maui.

However, our current fields are running out. Income from the industry peaked at just under $1 billion in 2010, and since then has dropped by almost 25 per cent. According to David Robinson, spokesperson for PEPANZ (Petroleum Exploration and Production Association of New Zealand), by 2025, we’ll be approaching empty.

If we want the money to keep flowing, we have to entice overseas petroleum explorers here with the possibility of rich new fields.

This renewed search for oil is happening in water up to 10 times deeper than any of our existing wells – and the deeper you drill, the more complex and risky it is.

What are the risks?

Since 2010 the world has been acutely aware of the risks of deep water oil drilling, after the Deepwater Horizon rig exploded in the Gulf of Mexico, killing 11 workers and causing a catastrophic blowout that sent crude oil spewing into the ocean for 87 days. Vast numbers of birds, fish, turtles and marine mammals were killed, huge stretches of coast were coated in oil, and whole ecosystems poisoned. Deformities and illnesses in marine life are still being reported.

The Deepwater Horizon spill happened in water 1.2km deep – which is shallower than some of the exploratory wells currently being drilled off New Zealand’s coast.

Closer to home of course, the grounding of the container ship Rena is still fresh in people’s minds. The 350-tonne oil spill that followed was minor in global terms – and tiny compared to the Deepwater Horizon blowout – yet it still killed thousands of seabirds and fish and coated Bay of Plenty beaches with brown sludge for months.

The Rena spill is widely considered to have been New Zealand’s worst environmental disaster and cost over $46 million – with only $27.6 million of that covered by the shipping company responsible. A report released in December by the University of Waikato said that, two years on, the area has still not recovered its “pre-Rena state”.

What are the benefits?

To weigh the value of a deep sea oil industry in New Zealand, it’s worth looking closely at the benefits oil income can bring.

Last year the industry paid the government around $750 million in taxes and royalties; crude oil was our fourth-largest export after dairy, meat and forestry products. Those tax earnings go into the consolidated fund that pays for schools, hospitals, and infrastructure.

To get a sense of what that can do for the country, $750m covers, for example:

• The $426m the nation spent on the redevelopment of Christchurch and Burwood Hospitals
• The $100m Warm Up New Zealand Healthy Homes project
• The $70m extra allocated to aged care and dementia services
• $27m spent on improving access to science and technology training
• $10m spent on improving support services to released prisoners
• $94m to improve Christchurch’s schools
• Plus with a few million left in change
• The industry also creates high-paid jobs; currently around 7700, with an average full-time salary of $105,000

How bad could a spill be?

According to modelling from Greenpeace and Anadarko, a large spill in the Taranaki prospect (of 12,000 barrels a day) could see oil coating beaches around Auckland’s Manukau Harbour within two weeks – well before a relief rig capable of working in deep water could make it to New Zealand.

After six weeks, every beach from the Kaipara Harbour to Raglan could be affected – with monumental damage to marine life, including the critically endangered Maui’s dolphin, our $1.2 billion fisheries industry, and our $10 billion tourism industry, which employs nine per cent of our population.

In short, it would be about the worst possible kind of man-made environmental accident to happen in New Zealand.

So what are the chances of a spill?

That’s the key question, and everyone, it seems, has a different answer.

Bunny McDiarmid, New Zealand’s executive director at Greenpeace, says well depth is the crucial factor. Citing a 2011 discussion paper commissioned by the US Government, she says the risk of a serious accident (from fire or structural damage to an explosion or spill) over the lifetime of an oil platform rises from less than five per cent on rigs under 150m deep, to over 30 per cent for wells as deep as the proposed Taranaki one. “We’ve been lucky in New Zealand not to have had a major incident,” she says.

On the other side David Robinson, and Minister for Energy and Resources Simon Bridges, describe the risks as extremely low.

Robinson says the risk of a major spill would be “one in tens of thousands” and that you can’t translate risks from the Deepwater Horizon disaster to New Zealand. “The Mississippi Basin is a completely different drilling environment to the one we have in New Zealand. The well was an artesian one that flowed by itself at very high rates. At Maari and Tui, we have to pump the oil out. At 1500m you would hope a well would flow by itself, but extraction is usually a problem here.”

Bridges cites a slightly different risk figure: “about 2.5 loss-of-control incidents per 1000 wells, or 0.025 per cent.”

Since New Zealand has already drilled over 1000 wells, this is perhaps a less reassuring statistic than the Minister intends it to be.

Of course, just because we haven’t had a spill yet, it doesn’t mean we’re overdue for one. But what you can take from the figure of 2.5 incidents per 1000 wells is that, statistically, the prospect of a spill is not a completely outlying risk. And the exploratory stage – which is happening right now – is known to be the riskiest part of the process.

Could we clean up a spill?

In short, no, we couldn’t: New Zealand’s response capability to a major oil spill is very limited.

Maritime New Zealand, which is responsible for initial oil spill clean-ups, has a ‘fleet’ of three 8m-long oil recovery vessels, which are designed to work in sheltered waters like ports, where most minor oil spills occur.

Plus most of the country’s oil spill clean-up equipment (booms, chemical dispersants, skimmers and sponges) is stored in Auckland and would need to be transported to clean-up sites. For a major spill, help would have to come from as far afield as Singapore and Australia.

“We were barely able to cope with the Rena spill,” says McDiarmid. “We have so little capacity for a comprehensive response that is locally based that the chance of being able to prevent it from becoming catastrophic would be very limited.”

There’s also the cost. The Deepwater Horizon clean-up bill stands at over $50 billion.

While Simon Bridges says, “legally, the liabilities all fall on the operator – New Zealand Petroleum and Minerals have very significant checks in place to make sure that companies have the financial means and insurances to deal with anything, including the absolute worst scenarios”, that assurance doesn’t mean that petroleum companies wouldn’t drag their feet post-spill.

Legal disputes from the Deepwater Horizon incident are still in the courts, and Louisiana Governor Bobby Jindal has complained that “three and a half years later, BP is spending more money on television commercials than they have on actually restoring the natural resources they impacted.”

And what about climate change?

Putting spills aside, there’s also the serious question of whether we should be extracting oil at all, given what we now know about the realities of climate change.

“Really conservative institutions like the World Bank and the International Monetary Fund are saying we can’t afford to burn the world’s unextracted resources,” says McDiarmid.

“It sounds Armageddonish and I hate this kind of talk, but it’s reality. We can’t afford to burn them, so why are we trying to get them out of the ground? It’s insane.”

So what’s the alternative?

However much people talk about alternative energy sources, oil is currently still the fuel that powers the world’s economy. And there are few get-rich-quick schemes easier than licensing the hunt for fossil fuels. Yet with some longer-term investment it is possible to get oil – and get rich – without risking deep-sea spills, or releasing CO₂ into the atmosphere that has been locked away for millennia.

In New Zealand, for example, the ‘clean-tech’ company, NXTFuels, has developed a technology that can turn forestry and agricultural waste – even the algae that’s clogging our waterways – into a fuel that can go directly into existing cars, planes and trucks with no need for modification.

“A study from the German government last year sized the clean-tech market at two trillion euros, and forecast it to grow to four trillion euros by 2020,” says chief executive Nick Gerritsen. “That’s 12 per cent growth per year.

“You don’t even have to be a believer. This is one of the highest-growth sectors in the market, and even if you’re only focussed on money, you should be investing in this sector.”

Yet Gerritsen says he’s struggling to drum up enough capital investment to get this safe, locally-made, sustainable fuel source into commercial production. Is New Zealand’s government missing a huge longer-term opportunity while it pursues the short-term cash?

Yes, the government is putting some money into bio-energy – about $50m towards turning forestry waste into biofuels for example – but its policy support (including a rushed and widely criticised law prohibiting protest at sea) seems to go towards fossil fuels and mining.

“We have a lot of small entrepreneurs who don’t have a policy framework to help them get their ideas off the ground,” argues Greenpeace’s McDiarmid.

“We need to radically change the way we do things. I think the opportunity cost and reputational cost of sinking money into an industry that’s passé is very high. It’s not smart.”

The Green Ideas view

Deep sea drilling is an approach to making money that works on the classic investment paradigm of risk vs reward, except it replaces financial risk with risk to the environment. Or in other words, we have the potential to make lots of money by stumping up very little of our own cash – but instead run the risk of total environmental catastrophe.

That equation might seem appealing to someone who doesn’t value the environment for its own sake. Yet it seems clear that in New Zealand the environment has a deeper kind of value.

Our entire brand as a tourist destination is based on the clean, green state of our environment – and the value of our meat, fish, wine and dairy exports are likewise heavily underwritten by our eco credentials.

Perhaps even more importantly the oceans are a source of food and recreation, and a cultural touch-point for huge numbers of New Zealanders.

So regardless of whether the risks are as high as the protestors claim, or as low as the oil industry makes out, it seems crazy to wager the cornerstone of our identity as a nation – our environmental health – on the promise of future riches that could be attained through other, more innovative means.

We believe that

• In the short term we should continue to explore for shallow-water oil reserves for the enrichment of the country as we transition away from being a fossil-fuel economy.
• At the same time we need to take a long-sighted view on our environment and economy by investing heavily in clean alternative energy technologies.
• Riskier deep sea oil exploration should cease in New Zealand waters.

What can I do?

Insist on your right to object to deep-sea drilling through the Greenpeace petition (search for ‘Greenpeace oil act now’).

Vote on the issue – deep sea oil is set to be an issue in this year’s election.

Reduce your reliance on fossil fuels. Get on your bike or public transport, switch to a renewable electricity company and use less plastic.

Be part of the solution and invest in clean-tech. If you’re lucky enough to have money to invest, instead of the standard Kiwi fall-back of rental property, ask your financial advisor about clean-tech companies.

Tell us your view, leave your comments below.