Keeping the profits in New Zealand
Exploring and producing oil and gas assets is a major undertaking, requiring large capital investments and deep operational expertise and experience.
- In this section:
The New Zealand government is tasked with protecting and recouping the value of our natural assets on the behalf of all kiwis. To that effect, government has established a comprehensive set of rules and regulations that determine the nature of oil and gas exploration and production in New Zealand - maximising the benefit for the country.
The cost of doing business
1
New Zealand companies alone can't afford to recover our natural assets.
The sheer volumes of investment required, along with the international nature of industry expertise and personnel, means we depend on partnering with foreign companies to recover our natural assets.
Like any commercial operation, attracting these companies to invest in New Zealand is, in large part, based on their sense of achieving significant profits from their activity here.
A good deal for New Zealand
2
Of all profits
42%
are for New Zealanders
NZ has received royalties of over
$3b
in the last decade from Oil & Gas
Right now, approximately 42% of all profit from any producing field is returned the New Zealand government in the form of royalties and levies and corporate tax.
Royalties are the fees companies have to pay the government for the rights to explore and produce oil and gas in New Zealand.
Taxes are the standard corporate taxes that the government collects from all companies and organisations doing business in New Zealand.
Given the nature of exploring and producing oil in New Zealand, this rate of return for kiwis is substantial.
For more information on royalty and tax income, click on the link below.
How does New Zealand benefit from a strong oil and gas industry?
3
Apart from the absolute dollar value of royalties and taxes paid to the New Zealand government by oil and gas companies, kiwis benefit in many ways from oil and gas activity:
- High quality jobs, careers and training in the regions that need them
- Hundreds of millions of dollars of direct foreign investment into our regions
- Improved infrastructure and productivity
- Cash flow for hundreds of supplier companies
- Increased business activity for retailers
- Support and sponsorship for grassroots community organisations
- Billions of dollars in royalty and tax payments for essential services
- A more diverse economy with substantially greater earning power
What are some of the concerns people have about profits from our industry?
4
Concern 1: All the money goes offshore.
It’s true, many foreign companies have earned substantial profits by exploring and producing oil and gas in New Zealand.
However, the current royalty payment and taxation regime ensures that 42% of profit from most producing fields are returned to the New Zealand government. This is a substantial percentage of the profits of a field, especially given a number of limitations that exist for the New Zealand industry:
- Proximity to market. New Zealand remains relatively distant to traditional international market activity
- Size of overall operation. New Zealand is a comparatively tiny oil and gas resource, and companies are less likely to invest when there are easier oil and gas opportunities in other parts of the world
- Lack of basin data. Of New Zealand’s 17 basins, very few have been surveyed to any great extent, meaning relatively little is known about the prospects of finding commercial quantities of oil and gas
It’s also true that New Zealand has not always received as much return on its oil and gas resources as it might. Earlier royalty rates in the 70s and 80s reflected the underdeveloped nature of our oil and gas fields, and the greater attraction of oil and gas recovery in other parts of the world.
There was, and is, relatively little geological data about our 17 basins, making it more difficult for companies to assess commercial viability of any given field, and committing them to more intensive and expensive exploration operations.
Given the abundant availability of oil and gas around the world, foreign oil and gas companies were also less motivated to invest in unlocking New Zealand's relatively insubstantial and unknown resources.
Compounding the issue, our large deposits of natural gas were of little value to international companies seeking to sell oil on the international market. Natural gas was, and is, entirely consumed in New Zealand, leaving little motivation for foreign investors to develop fields that were highly likely to feature a large natural gas component.
Concern 2: The money goes to the national government, not to the local communities where the industry resides.
While royalty and tax payments do accrue to the New Zealand government, local communities do benefit from oil and gas activity in many ways - from more and higher value jobs, busier towns and regions, and active communities.
Busy towns
Our small towns and regions are crying out for investment.
Oil and gas companies invest millions of dollars in exploration and production activity, to date primarily in the Taranaki region.
These construction projects provide cashflow for any number of support and service companies, from engineers to local retailers. This kind of healthy commercial activity creates busy towns.
For more on the benefits of busy towns, click on the link below.
Jobs
Jobs in the oil and gas industry are high value jobs that create more wealth for New Zealand per capita.
Jobs in oil and gas earn on average twice the national salary.
While many jobs are highly skilled, and require international expertise and high qualifications, many jobs are created locally during the construction and decommissioning phases of an oil and gas project.
Jobs are also created through the ongoing support and services sector required to keep the oil and gas project up and running.
For more on the benefits of quality jobs, click on the link below.
Active Communities
Oil and gas companies have a long track record of directly supporting their communities with substantial and long term sponsorships of all sorts of local organisations, events and needs.
For more on the benefits of active communities, click on the link below.
This website was created by PEPANZ - Petroleum Exploration & Production Association New Zealand.
While the information contained within the site is periodically updated, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date.