Stop press: The breaking news from over the weekend was that the Government has had to concede that the wheels are starting to come off its petroleum wagon.
Late on Friday, we received confirmation from the Ministry for Economic Development that two of the key permit blocks that were up for grabs - Northland and Reinga - have failed to sell. In true, cynical fashion they tried to bury this news in some opaque and ambiguous statement on their website (here).
The significance of this is that these blocks were the centre piece of the Government's sales pitch - the supposed crown jewels of the nation’s oil prospects - and the ones that were going to make us all rich. They covered the 150,000 sq km of ocean that are met by some of the most beautiful stretches of beach I've ever had the pleasure to stretch my legs on.
At this stage we cannot say exactly why the blocks were not awarded. The Ministry is trying to release as little detail as possible. But what we can say is that only weeks ago our Energy and Resources Minister was talking up the huge amount of international interest that she said her office had received around the Northland permits, and that an announcement on the successful tender was imminent.
The prospect of deep water drilling in New Zealand has become a very poisonous political issue and it may be that the Government has lost the appetite for another battle this side of the election, in an already politically volatile part of the country. Or it may be that the oil companies are starting to feel the heat of public opposition and have decided that doing business in New Zealand is more hassle than it's worth. We can only speculate.
However, what has been telling is how the investment community has reacted. The Energy New Bulletin is reporting industry insiders as saying “that the Government did not want a repeat of Raukumara, where Greenpeace and Maori protests were held against seismic surveying off the East Cape by Brazilian oil giant Petrobras earlier this year", and that New Zealand Oil & Gas Managing Director David Salisbury talked of a recent "significant downgrading of interest" and a "somewhat pessimistic mood" regarding offshore New Zealand.
The implications of this announcement should not be understated. The economics of doing deepwater drilling here in Aotearoa were always going to be fragile. Without other major oil companies coming to the table, the costs start to become prohibitive and investors get jittery.
Indeed, Anadarko has said as much as they look to delay their plans to drill in the deep water off the Taranaki and Canterbury coasts, because there are no other major players with whom they can split the costs of getting the heavy infrastructure down here.
It is also embarrassing for the Government’s heavily criticised energy strategy. It's clear that Gerry Brownlee and his cohorts are desperate to wed our future to the fossil fuels of yesteryear by putting oil and coal extraction at the heart of Government policy, whilst at the same time overlooking our potential as a competitor in the global clean energy race. And the failure to sell off these permits serves only to underline the foolhardy nature of a strategy that's not only risky business for our climate, but also for our future prosperity.