Low Oil Prices A Mixed Blessing?
January 28th, 2009
While most businesses are heaving a sigh of relief after the collapse of global oil process last year, NZ’s oil exploration industry is not likely to be quite so ecstatic. High prices for crude have not only helped the NZ economy in the past 12 months, as “black gold” joined the “white gold” of the dairy industry to keep the country’s exports booming, they’ve created an apparently booming exploration industry.
The implications of a lower oil price are significant. Overseas explorers will certainly cut back on exploration in NZ, projects could be put on hold, or explorers could simply walk away from more difficult prospects such as the Great South Basin. This will have a flow-on effect on infrastructure projects, jobs and the wider economy, as crude which could be boosting the country’s balance of payments by helping off-set oil imports, sits in the ground unexploited.
The deep-pocketed Norwegian State-owned oil explorer Statoil, which operates in waters similar to those found off NZ, has already announced a 13% cut in its exploration budget. It is also pressuring its suppliers, cancelling rig contracts it says are now too costly. The exploration industry is undergoing what could be called a “pregnant pause” but may pick up again if oil, as predicted, heads north to the $US80 a barrel mark later this year or early 2010.
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