This week’s announcement of the government’s comes as no surprise. All three coalition parties campaigned on reversing the 2018 ban on offshore oil exploration.
Author
Jen Purdie
Senior Research Fellow, Centre for Sustainability, University of Otago
But it flies in the face of projections that demand for oil could peak as early as this decade.
Minister for Resources Shane Jones has confirmed the government plans to reverse the ban later this year and oil investors by paying them a bond in case their drilling rights are cancelled by future governments.
The government is also considering weakening a law that requires oil and gas permit holders of wells. This law was passed in 2021 in response to taxpayers having to pick up a for decommissioning the Tui oil field after the financial collapse of the oil company.
The government’s decisions go against projections by many sources, including the International Energy Agency, that demand for oil will decline soon as we electrify the global transport fleet. Consequently, investment in oil exploration is projected to decline too.
Peak oil demand
The use of fossil fuels is due to decline this decade, according to several major oil companies. A by Shell projects fossil fuel use dropping rapidly in coming decades, while BP oil demand for combustion has already peaked.
Many large think or . This includes the International Energy Agency (), which has demand for oil will peak before 2030.
The Organisation of Petroleum Exporting Countries () and Exxon Mobil are bullishly stating they see , albeit at a slower rate, into the 2040s. But at the same time, Exxon Mobil is investing significantly in renewable energy, lithium mining and carbon capture technology.
Even if oil demand peaks later than forecast, the progression from prospecting to exploration and mining . Projects prospected now may not yield fuel until demand is already in decline.
We have enough oil to make the energy transition
We’ve known for some time that remaining fossil fuels must to meet the goal of keeping the world below 2°C above pre-industrial temperatures.
The last UN climate summit – held late last year – agreed to “transition away from fossil fuels” and signalled the “beginning of the end” of the fossil fuel era.
But further to this, the IEA has stated we , with enough projects already in existence or planned to meet global energy demand forecasts to 2050. New agrees, saying governments around the world should stop issuing new oil, gas and coal licences.
In line with decreasing oil demand, BP also declining investment in new oil and gas infrastructure globally in coming decades. The IEA’s notes an ongoing hesitancy about oil and gas investment comes partly from concerns about downward long-term demand projections.
New Zealand does not import natural gas, but our gas fields have been for some years. Therefore, to remain independent, some more maintenance drilling or limited new expansion may be needed to see us through the energy transition. But using taxpayer dollars to pay international oil companies to come to New Zealand doesn’t make economic or environmental sense.
The momentum for the energy transition is unstoppable
The good news is that the world’s energy sector, which , is now transitioning at an ever increasing rate. Significant amounts of renewable electricity generation (which is now far cheaper than fossil fuel generation) are being built, with global renewable capacity set to this decade.
New Zealand’s electricity system is already 85% renewable. Significant investment in renewable generation is under way () to supply the approximate doubling of electricity needed for the expected mass electrification of transport and industrial heat by 2050.
Renewables are also being built to replace retiring coal plant. in 2013 and has flatlined since. In 2021, the COP26 global climate meeting in Glasgow agreed to phase down coal, and 60 national (and 51 sub-national) governments have joined the , committing them to phasing out all coal-fired power plants and not building new ones.
Other uses of fossil fuels are in industrial heat and transport. Electric vehicle demand is skyrocketing globally, with the growing from 300,000 vehicles in 2013 to 41 million in 2023. With prices falling, electric vehicles are expected to with internal combustion engine cars as early as 2025.
Most large global vehicle manufacturers have pledged to produce by 2030 or 2040. And 30 countries, including New Zealand, have signed the to ban new petrol or diesel vehicle sales entirely by 2040.
New Zealand should be enabling the energy transition
The world is moving very rapidly away from coal and oil, and eventually all fossil fuels. A growing number of countries require adherence to Paris Agreement pledges by their trading partners. The recently signed free trade deal between New Zealand and the EU if Paris pledges are not met.
New Zealand’s current emissions reduction policies take us on a track that is to limit warming.
New Zealand should be moving away from oil drilling and instead invest in the energy transition, including decarbonisation of industrial heat, subsidising low-emitting vehicles and charging high emitters, better public transport and bike lanes, increased EV charging infrastructure, and “urban mining” (recycling) of batteries and other technology currently filling rubbish dumps.
Jen Purdie has received funding from Deep South Science Challenge in the past, and currently has funding from MBIE’s Smart Ideas fund.
