Irony or hypocrisy?

January 12, 2014

Pro Oil and Gas Otago, commenting on a very small flotilla protesting against Shell’s plans to drill for gas in the Great South Basin:

Not many protesters on the water, but the carpark is full!

Not many protesters on the water, but the carpark is full!

Is that irony or hypocrisy?


The people are speaking

January 11, 2014

Dunedin mayor Dave Cull and some of his councillors are less than enthusiastic about the prospect of Shell drilling for oil and gas in the Great South Basin.

But yesterday’s ODT (print edition) had three letters under the heading ‘silent majority’ needs to stand up for Otago.

Stand up Otago. An empty slogan or a real call for action? The Otago Daily times (8.1.14) headlined with the dreadful news of major cutbacks at Macraes. As with all big business job losses the impact will be felt far beyond those directly affected. These jobs are skilled and well paid, making them even harder to replace in a region where wages have been driven down relentlessly in a crowded marketplace. . .

There is hope for a reversal of our sad fortune, particularly in the field of engineering. Peter McIntyre’s call for support of Dunedin’s push to service the gas industry in its exploration of southern waters should be a rallying call for our future.

Dunedin’s famous silent majority needs to lose its inhibitions and start shouting really loudly to drown out the lunatic fringe whose drums are already beating. Gareth Hughes is up and running with his beak in our business, babbling on with the usual scaremongering that is the trademark of his breed. Dave Cull needs to get off the fence and start thinking about real jobs for real people. Tim Shadbolt will be more than happy to champion Invercargill’s virtues as a base for drilling.

Dunedin still has the skills and equipment to support this enterprise. Should we lose out this time, we will have neither in the future.

Stand up Otago. The revolution starts now!Richard O’Mahony.

Wake Up Dunedin. You should be doing all you can to attract the drilling by Shell off the coast to be based in Dunedin. I visited Aberdeen, Scotland, in 1980 and it was a dull, old grey-stone city. When I visited again in the 1990s it was a bustling, bright city. Why? Because oil had been found in the North Sea and Aberdeen was the onshore base.

Our city could be rejuvenated if something similar was found off our coast. Come on Dunedin mayor and councillors, do everything in tyour powers to encourage use by shell and co of our city and have what could be a bright, vigorous future. Invercargill will take a welcoming attitude. Alexa Craig.

It is great news to hear that Shell has announced, along with its partners OMV and Mitsui E&P, it will go ahead with a $200 million test well for natural gas in the Great South Basin. the well will be located 150 KM offshore from Dunedin in 1350m of water, making Dunedin the ideal base.

Should a discover be made and the gas fields fully developed, then within five years, the potential employment opportunities and benefits for local business would be huge. The Berl report estimates the potential benefits will be: 256 jobs, $179 million spent regionally and $71 million generated per year in GDP for the local community over 45 years. In the first few years of development, there would be an excess of 1000 jobs created and $1 billion spent.

Dunedin and the Otago region need to roll out the red carpet to support the supply hub to be based in Dunedin. We are fortunate that we already have many of the required support businesses based in our city. Now we need the entire community to support this new industry. – Cr Andrew Whiley.

The ODT itself opines:

. . . What we cannot afford as a community is for one sector to stand against the chance of experiencing a possible huge economic boom. To convince Shell to establish here, and possibly keep Macraes operating longer, the whole community and its representatives must be united as one. Let us not allow this opportunity to pass by.

Shell has a choice about where it will base its on-shore support.

No-one doubts that Invercargill will put out the welcome mat.

Mayor Cull must get over his personal antipathy to the development and show the sort of enthusiasm these correspondents are if Dunedin and Otago are to have an even chance of being chosen.


Oil and gas ‘unethical like tobacco’?

January 10, 2014

Yesterday’s ODT quoted a Dunedin City Councillor’s view on the news Shell will be drilling in the Deep South Basin:

Cr Jinty MacTavish agreed, saying the city would not spend money to try to attract the ”unethical” tobacco industry, and should avoid the oil and gas industry for the same reasons.

”It’s an unethical business and I wouldn’t like to see Dunedin setting out to attract it.”

Even for someone with very strong concerns about climate change this is an extreme view.

I am sure she doesn’t smoke but like all of us she uses and benefits from products of the oil and gas industry – and exploration could bring significantly more to the city and province.

Today’s paper reports Dunedin and Otago could reap billions from a game changing gas boom.

The first taste of petroleum money could be just weeks away in Dunedin, as Texas-based oil giant Anadarko prepares to move its state-of-the-art drilling ship into Otago waters, it has been confirmed.

A natural gas boom worth billions of dollars to the regional economy could follow in the ship’s wake, with thousands of jobs potentially created across Otago, it has been suggested.

As arguments for and against the industry’s arrival in Dunedin continue, a report by economic analyst Berl has outlined the possible regional benefits of an oil or gas strike anywhere in the South Island.

It calculated a large offshore gas field could be worth $8.1 billion to the economy of any region hosting the industry, and $3.1 billion in regional GDP, while creating 11,540 jobs.

The report was prepared in March 2012 for the Ministry of Economic Development, but had not previously been seen by Dunedin Mayor Dave Cull.

He told the ODT yesterday the report did not allay public concern about fossil fuels and climate change, but the economic benefits – if applied to Dunedin or Otago – would be ”more than significant”.

”It could be a game-changer in terms of the economy.”. . .

The DCC has been lamenting job losses in the city and calling on government to help.

Now there’s an opportunity for significant inwards investment and job creation and the mayor and some of his councillors are still reluctant to grasp it.


Bad and good

January 9, 2014

Yesterday’s ODT led with the bad news of job losses at Macraes mine.

That’s followed up by today’s story of more job losses in firms which service and supply the mine.

Yesterday’s paper also had the good news story of Shell’s decision to drill in the Great South Basin.

This is how life goes. Good things happen during bad times and bad things happen during better times.

But the outlook for those people who have lost jobs or business because of Oceana Gold’s slow-down at Macraes is better now the economy is improving than it would have been even a year ago.

It would be better still if Dunedin was showing a warmer welcome to Shell.

The city is vying with Invercargill to be Shell’s base and mayor Dave Cull is at best lukewarm:

. . . Dunedin Mayor Dave Cull – who remained personally opposed to the increasingly difficult search for fossil fuels – said he was nevertheless ”cautiously optimistic” the city could benefit from Shell’s plans.

He was encouraged the company was prepared to invest up to $200 million in its search for natural gas, and not oil, off the city’s coast.

However, with the test drill not scheduled until 2016, and any full-scale extraction – if it eventuated – a decade away, he cautioned against too much excitment, too soon.

”What comes out of it, in terms of job creation and business and economic development, will depend on the size of what they find.

”If they are going to be drilling, this is pretty good, and clearly Dunedin is very well placed to offer the services and facilities that they might need,” he said. . .

Two councillors are even less enthusiastic:

. . . including Cr Aaron Hawkins, who said the council had a ”moral obligation” to protect the interests of future generations.

”I don’t think it’s fair to clamour over a few jobs now and leave our grandchildren to pick up the tab environmentally and economically.

”Frankly, I think that’s a very selfish way of looking at economic development.”

Cr Jinty MacTavish agreed, saying the city would not spend money to try to attract the ”unethical” tobacco industry, and should avoid the oil and gas industry for the same reasons.

”It’s an unethical business and I wouldn’t like to see Dunedin setting out to attract it.” . . .

Contrast this with the reaction from Invercargill.

Yesterday’s Southland Times devoted its whole front page to telling the story – consortium backs $200m basin well –  and followed up with enthusiastic welcome for drill plan.

Today’s story is headlined drilling holds promise of job bonanza.

Shell will make its decision on where it’s based on a variety of factors, one of which will be the attitude of the city.

In good times and bad, you have to do what you can to help yourself.

Invercargill is doing that, Dunedin must do better.


Shell to drill Great South Basin

January 8, 2014

Shell plans to drill for gas and oil in the Great South Basin off the coast of Dunedin.

Great South Basin joint-venture parties Shell New Zealand, OMV New Zealand and Mitsui E&P Australia will drill an exploration well in the PEP 50119 block (see map).

The western edge of the permit area is about 100km off Dunedin and it stretches down to the south west of Stewart Island and the area borders a marine mammal sanctuary off the the Catlins in Southland. 

The drilling programme will most likely target the early 2016 summer period. . .

The Moeraki runanga is supportive of the plans.

Te Runanga o Moeraki upoko (appointed traditional leader) David Higgins said the permit holder had previously indicated the area was likely to yield ”99% gas”, rather than oil.

The Government had awarded the permits – in this case the Clipper-1 in the Canterbury Basin – and ”there is no way we are going to stop them”.

”But whatever we can achieve for the community, whether it is coastline restoration or whatever, then it is good for the community.”

”We are very proactive about this. You can sit on your laurels and moan and groan about this sort of thing happening.”

”You will find the Ngai Tahu stance is pretty pragmatic. We have always been that way inclined and whatever the tribes do up north, that is fine with us, too.” . . .

Others are less welcoming, including the usual suspects which prompted this tweet:


Foreign ownership fears unfounded, benefits not appreciated

August 14, 2012

Fears of foreign ownership are overstated and the benefits are under appreciated.

In a speech to New Zealand Contemporary China Research Centre Finance Minister Bill English said our investment relationship with China is much smaller than our trade:

Despite our strong trading relationship, China is not a major investor in New Zealand, being New Zealand’s 11th largest investor totalling $1.8 billion in 2011.

Foreign direct investment, or FDI, is less than half this amount.

By comparison, New Zealand has NZ$52 billion of FDI from Australia and NZ$11 billion from the US. China has made investments in New Zealand forestry, manufacturing and agriculture.

China is also investing in New Zealand government bonds, contributing to the record low borrowing rates New Zealand currently enjoys. New Zealand is seen as a relatively safe haven in these difficult times and Chinese authorities want to diversify their international bond holdings.

New Zealand’s investment into China is similarly small, totalling $789 million in 2011, making China our 13th largest investment destination.

These investment figures reflect broader trends.

While New Zealand is a recipient of foreign investment in line with the OECD average, New Zealanders invest overseas at well below OECD average rates. . . .

Opponents of foreign investment play on fears, most of which are unfounded.

They take no account of the the benefits which include  supplementing domestic savings, sharing technology, and driving growth in wages, employment and economic output.

As a small country, we naturally rely on FDI to help us achieve economies of scale, and for access to ideas and consumer markets. We do not have the large stock of capital which older and wealthier countries have.

Foreign direct investment has benefits for New Zealand in three broad areas:

• First, as a source of capital to supplement New Zealand’s domestic savings.
• Second, as a driver of growth in wages, employment and output.
• And third, for the transmission of technology, skills and know-how to New Zealand and for improving our connections to valuable international markets.

New Zealand simply does not save enough to cover our investment needs.

Between 2002 and 2011, New Zealand saved just over $4 billion a year, leaving a shortfall of $9 billion a year to fund our investment. Foreign direct investment is a type of international trade in savings and helps bridge this funding gap.

Foreign investment can bring benefits that foreign borrowing does not. These benefits can be of particular value to a small economy, and include:

• FDI provides a stronger buffer against economic shock because investment comes without the fixed interest payments of debt.
• FDI produces transfers of technology and know-how, and provides access to international markets.

Recent research shows that New Zealanders working for firms with foreign investors tend to be paid more, and that firms receiving foreign investment increase employment and output.

In 2008, Treasury concluded that foreign capital flows into New Zealand lifted incomes by around $3800 per worker between 1996 and 2006 in today’s prices, and lifted wealth by $16,000 per person.[5]

Foreign investors in New Zealand do take out some profits, but between 2006 and 2011 they have also reinvested about 25 per cent of their returns on equity back into New Zealand.

New Zealanders interact with foreign-owned businesses every day. Over half of the companies larger than $100 million in New Zealand have majority foreign ownership.[6]

Many of these companies are a familiar part of our national landscape, and provide Kiwis with a huge range of products and services. They are also among our largest employers. A recent study showed about a quarter of Aucklanders work for foreign owned companies.[7]

FDI, inward or outward, does not necessarily mean acquisition of full ownership by foreigners. In many cases it can take the form of a joint venture or partnership between New Zealand and foreign owners.

And FDI is not a one shot deal. Businesses built up under foreign ownership can move or return to New Zealand ownership.

Examples of that are Shell petrol stations which are now owned by Z, Opus which was bought by Malaysians but now has significant local shareholding and several meat companies.

What would happen if New Zealand could not access foreign investment?

One outcome is that the cost of capital would increase. This would constrain businesses’ ability to grow, and would reduce employment opportunities and household incomes.

Treasury has estimated that a permanent one percentage point change in interest rates (say, from 5 per cent to 6 per cent) would lower the level of GDP by about 2 per cent over a period of time.[9] New Zealand’s standard of living would be lower without access to foreign investment.

FDI can have its costs. The quality of foreign investment matters, and New Zealanders care that investment goes to productive capital, and that it supports jobs and higher incomes.

But fears of foreign ownership are frequently overstated. While it is true that the returns from foreign financing contribute to New Zealand’s current account deficit, it’s also important to consider the bigger picture.

The outcome for the economy is positive overall when foreign capital raises worker productivity and national income increases by more than the return on the investment.
FDI is profitable precisely because it introduces ideas and brings new capital to countries.

Foreign investment is a vote of confidence in the quality of New Zealand’s institutions and the quality of its workforce.

New Zealand welcomes foreign investment.

Firms that are successful enough to be international investors tend to have developed the skills and deep specialisation New Zealand needs.

These skills produce higher wages for New Zealanders working in those firms, and skills tend to spill over.

As employees come and go from foreign owned firms, they take what they learn and apply it to new ventures. Foreign investment helps bring these advantages to New Zealand.

FDI has other benefits. It helps link New Zealand into opportunities for export and to tap in to international supply chains.

Foreign investors bring knowledge of international markets and access to established networks that are hard to develop from this far away.

FDI has been instrumental in the global shift towards international production networks in which steps on the production process occur across borders. Economies that have experienced the largest FDI inflows have on average also seen the largest expansion in merchandise exports.[10]

The benefits don’t negate the need for checks and balances.

A recent OECD study has rated New Zealand among the most restrictive overseas investment regimes in the OECD.[11] The study focuses on our regulations rather than how many foreign investments we turn away.

But there can be no serious suggestion that New Zealand lacks appropriate controls.

Our constraint on growth is not the size of the opportunity. It is our ability to access capital, knowledge, and people, and we get to decide this in part through policy.

New Zealand has not moved rapidly to reach out overseas to find new ideas and access new capital. This is something we must learn to do.

We sit on the doorstep of the fastest growing economies in the world.

There will be many more people in the Asia Pacific region with growing incomes who want more of New Zealand’s products.

Our trading partners, led by China, have opened the door for us.

Our challenge is to assemble enough capital, people and market knowledge to take advantage of this opportunity. How we go about that will define our economic success in the next generation.

The xenophobes have unfounded fears about the costs of foreign investment but we would have far more to fear if we didn’t have the benefits of overseas capital and expertise.


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