Shell and the Great South Basin
The Southland Times devoted the whole of the front page to celebrate Shell's decision to do some exploratory drilling in the Great South Basin. My response was the only one that expressed concern.
Setting aside the issue of continuing to recover fossil fuel when the reality of climate change is becoming ever more visible, what are the potential risks and benefits of Shell's activities? Will it really create an economic nirvana in the south or are there sinister possibilities that have been ignored?
The best scenario that will come from Shell's exploratory drilling will be that they discover a sizable gas field similar to the one in Taranaki. New Zealand has bent over backwards to welcome them and has already provided existing scientific surveys of the area for free. However the royalties we will get from any oil and gas is only 5% of the value of what is sold, almost 40% less than the OECD average.
While the oil and gas comes from within our economic zone we will have to pay full commercial rates to have any of it ourselves. If the industry is as successful as Taranaki, around 800 new jobs will be created. There is potential for millions in revenue for our Government and the jobs will go a little way to address the 3500 that have already been cut from the state sector and 40,000 lost from manufacturing. If there are no accidents the drilling will provide some steady income but nothing compared to what we earn from other sectors. Taranaki gas accounts for .5% of our GDP. We will obviously not benefit from any oil and gas discoveries like Norway has.
The worst case scenario would be a Gulf of Mexico accident, which was also an exploratory drill (they tend to be the most risky). Shell will be drilling in 1300 metres of water which is around 1200 metres deeper than Taranaki, and the risks grow as the depth of water increases. Using Anadarko's own worst case scenarios (which were worse than anything predicted by Greenpeace) any major spill will take well over a month to fully react to. We do not have the equipment or capacity to manage a major spill in New Zealand immediately, a capping stack would take over a month to arrive and a relief rig could take up to 100 days.
Maritime New Zealand has the majority of the responsibility in dealing with any spill and while the small Rena spill cost us around $50 million, we are looking at billions with any major oil rig disaster. Shell are predicting that they will strike gas, but this is just an educated guess and oil is still possible. While the odds of a major accident may be very low for many, even a minor accident could have serious environmental and economic consequences if we are not able to respond quickly.
While there is a lot of trust in Shell as a responsible company and their PR was slick and reassuring we don't have to look far to have evidence that would give cause for greater caution and their recent record is hardly pure.
While the Government is throwing all their efforts into welcoming oil companies to help themselves to our resources (involving risks that shouldn't be ignored) we do have other resources that have potential. Southland has extremely pure silica that is easily recoverable and we could be smelting it ourselves and producing our own solar panels for the growing alternative energy market.