Energy and Resources Minister Judith Collins has today announced the appointment of two new members to the Electricity Authority.

The Electricity Authority is an independent Crown entity established in November 2010. 

It is responsible for governance and regulation of the electricity market and its objective is to promote competition, reliable supply, and the efficient operation of the electricity sector for the long term benefit of consumers.

Allan Dawson and Sandra Gamble have been appointed for terms of five years each commencing 18 April.

“Both Allan and Sandra have held director, chair and executive positions and will be excellent additions to the Electricity Authority.

“Allan brings extensive knowledge of the New Zealand electricity market as well as understanding of the global energy environment and its impact here. Sandra brings significant experience of working within the energy and water sectors and has insight into the critical issues facing the New Zealand industry.”

Ms Collins says the Authority will benefit from having its vacant board position filled, with its substantial work programme progressing steadily. 

There will now be six members of the Authority, with the others being Dr Brent Layton (Chair), David Bull, Susan Paterson and Hon Roger Sowry.

Background information on appointees:

Allan Dawson

Allan Dawson is the current Customer Manager for New Zealand Trade and Enterprise. He was formerly the Chief Executive for the Independent Market Operator in Western Australia, and the Energy Market Company in Singapore, and worked on the development of New Zealand electricity industry rules and arrangements in the 1990s. He has chaired the Association of Power Exchanges, and two bodies in Western Australia: the Market Advisory Committee for the Wholesale Electricity Market and the Gas Advisory Board. He brings strong governance, leadership, communication and relationship management skills, and experience in roles that directly interface with energy regulators.

Sandra Gamble

Sandra Gamble is currently a non-executive director, with roles as an Independent Advisor to the Audit and Risk Committee at Sydney Metro, and Director of the Woodville Alliance, as well as Chair of its Audit and Risk Committee. She was formerly the General Manager for Business Strategy and Resilience for the Sydney Water Corporation, where she held various committee Chair and Executive Convenor positions, and a director of Save the Children Australia. She is an electrical engineer with significant experience working in the energy and water sectors, and brings strong leadership, communication and relationship management skills.

A new tax bill introduced into Parliament today will help modernise our tax administration while ensuring that the current system works as it should, says Revenue Minister Judith Collins.

“The Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill contains proposals relating to collecting employment and investment income information.  The proposals will help Inland Revenue to ensure that people are on the right tax code and receiving any entitlements correctly.”

The Bill also contains proposals to modernise the taxation of employee share schemes.

Employee share schemes are arrangements where companies provide shares or share options to their employees as part of an employee’s remuneration.

Changes proposed in the Bill include new rules to ensure the tax treatment of employee share schemes is consistent with other forms of employment income. This includes providing a deduction for the employer for the cost of shares in line with other forms of remuneration.

“The employee share scheme measures proposed in the Bill are based on feedback from two rounds of public consultation in May and September 2016. The consultation process has been valuable in shaping the reforms contained in this Bill.

“For example, the original proposals raised the possibility of abolishing the tax regime for widely offered schemes, but in response to feedback the rules are being retained, but simplified and improved.

“There will also be another opportunity to provide feedback on the Bill during the Select Committee process.

“Through the consultation process, the Government also became aware of practical issues facing start-up companies offering employee share schemes.

“To address these issues, my officials are currently developing a public consultation document that refines the start-up proposal that was contained in the 2016 issues paper. I hope interested parties will provide feedback on these proposals too,” Ms Collins says.

Ms Collins says a range of measures addressing taxpayers’ concerns such as issues with demergers and decommissioning costs for petroleum miners are addressed by the Bill. There are also a number of GST-related matters included.

“And there is a proposal to add five new charities to the list of donee organisations eligible for tax benefits. These are, Byond Disaster Relief New Zealand, Flying for Life Charitable Trust, Médecins Sans Frontières New Zealand Charitable Trust, Tony McClean Nepal Trust, and Zimbabwe Rural Schools Library Trust,” Ms Collins says.

Revenue Minister Judith Collins and Tertiary Education, Skills and Employment Minister Paul Goldsmith say they are encouraged to see a marked increase in overseas student loan defaulters contacting Inland Revenue and taking steps to pay off their loans.

Since December 2014 there has been a 66% increase in the number of overseas borrowers who are behind on their payments getting in touch with Inland Revenue.

In the same period there has been a 32% increase in the number of defaulters who are now making a dent in their loan. Repayments by those who defaulted increased by $24.5 million for the year ended December 2016.

“Since the overseas-based borrower compliance initiative was established in 2010, borrowers have made an estimated $361 million in additional repayments, as of December 2016, with more than $100 million of that in the last financial year,” says Mr Goldsmith.

“We know that repayment times for overseas borrowers are much longer than for those residing in New Zealand, and that they account for more than 90 per cent of the roughly $1 billion that is in default. It is vital for overseas borrowers to make a plan with Inland Revenue to repay their loan.”

“Moving overseas is not a way to hide from your student loan obligations,” says Ms Collins.

“I’ve been pleased to see the recent data match arrangement with the Australian Tax Office proving successful. Inland Revenue has been provided with the contact details for almost 57,000 borrowers, which has already resulted in some large payments to Inland Revenue.”

Ms Collins says some borrowers have stumped up with significant lump sums after being contacted while many more have made arrangements to get back on track.

“I strongly advise any student loan borrower planning their OE to contact Inland Revenue before they leave. Sorting out a workable repayment plan in advance could save headaches later on.”

“The significant investment made by taxpayers in tertiary education and the student loan scheme means that around 82 per cent of the cost is shouldered by taxpayers, so it is important that borrowers make arrangements to repay their loans,” says Mr Goldsmith.

Energy and Resources Minister Judith Collins is leading a petroleum sector trade delegation to Texas and an electricity sector trade delegation to Silicon Valley next week.

Ms Collins will be accompanied by a petroleum sector delegation, which includes representatives from New Zealand Oil and Gas, Todd Energy and the Petroleum Exploration & Production Association of New Zealand, to Texas.   

In Texas, Ms Collins will be attending the American Association of Petroleum Geologists’ Annual Convention & Exhibition in Houston, as well as meeting with exploration and service companies to discuss investment opportunities in New Zealand.

Ms Collins will then lead an electricity sector delegation, which includes representatives from Mercury, Contact Energy, Vector, Power Systems Consultants and Genesis Energy, to California’s Silicon Valley.

“The electricity sector is going through a lot of change internationally and the trade mission to Silicon Valley will help New Zealand companies learn about the opportunities with emerging technologies, support New Zealand businesses looking to partner with US firms, and encourage electric vehicle manufacturers to enter the New Zealand market.”

The delegation to Silicon Valley is due to make calls on Tesla’s electric vehicle plant, Siemens, Volkswagen, energy technology company Enphase, Plugshare, SolarCity, Pacific Gas & Electric, Wrightspeed and Californian State energy regulators.

Ms Collins will be in the United States from 1 to 7 April.

 

 

Revenue Minister Judith Collins today welcomed Inland Revenue’s new webpage to help trustees of foreign trusts comply with the new disclosure rules.

“Foreign trusts now have to provide significantly more information than in the past. The webpage has all the information on the new rules and includes the forms which trusts need to complete in order to be registered by 30 June 2017.

“This information will help Inland Revenue get a much clearer picture about the beneficiaries of foreign trusts and their activities, as well as enable greater exchange of information with tax treaty partners.”

“Our new comprehensive foreign trust disclosure regime reinforces New Zealand’s international reputation.”

Trustees are encouraged to visit www.ird.govt.nz/international/exchange/foreign-trusts/ to download the forms and find more information.

 

A Bill  to improve and strengthen the tax rules passed its third reading today, Revenue Minister Judith Collins says.

“Building a more competitive and productive economy for New Zealanders is a priority for this Government.

“Making sure that the tax rules keep up with social and economic changes, as well as current business practices, is a vital part of a well-functioning economy.

“Improvements to the tax rules following enactment of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill will give taxpayers more certainty over their tax affairs by dealing with inefficiencies and complexities that have occurred over time. 

“That in turn, should result in lower compliance costs for business,” Ms Collins says.

Changes include:

simplifying the look-through company rules and the dividend rules as they apply to closely held companies, to ensure that the decision to convert a small business to a company is not driven by tax considerations; bolstering the rules around the tax treatment of interest earned in New Zealand by non-residents to ensure greater fairness; taxpayer-friendly changes to the GST rules, such as enabling businesses to deduct GST associated with the costs of raising capital; depreciation rollover relief for businesses in the upper South Island and Greater Wellington areas hit by last year’s earthquakes and aftershocks, and adding 14 new charities to the list of donee organisations in schedule 32 of the Income Tax Act 2007, making donors to those charities eligible for tax benefits on their donations.

The amount of electricity generated from renewables in New Zealand grew to 88 per cent in the three months to December 2016, building on increases seen in previous quarters, Energy and Resources Minister Judith Collins says.

“The result, released today in the latest New Zealand Energy Quarterly, shows the highest level of renewable electricity generation in 20 years. It demonstrates New Zealand is continuing to make the most of its ample renewable resources such as hydro.”

Ms Collins says the increase in renewable generation was party driven by high rainfall over the December 2016 quarter.

“There was a seven per cent growth in hydro generation compared to the previous December quarter, with many hydro catchment areas experiencing higher than average rainfall over the period.”

Continuing decreases in coal- and gas-fired generation also had an impact, Ms Collins says.

“The data shows that coal-fired generation declined by 64 per cent, and gas-fired generation by 21 per cent. This continued a longer-term trend that meant greenhouse gas emissions decreased by 35 per cent compared to the previous December quarter.”

The latest figures also show a fall in electricity consumption across all sectors, down three per cent compared to the same period last year.

“Most of this decrease is due to lower electricity consumption within the agriculture sector, with increased rainfall likely to have resulted in less demand for irrigation,” Ms Collins says.

The New Zealand Energy Quarterly is released by the Ministry of Business, Innovation and Employment (MBIE).

New Zealand Energy Quarterly:

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/publications/new-zealand-energy-quarterly

Read about electricity cost and price monitoring:

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/statistics/prices/electricity-prices

The amount of electricity generated from renewables in New Zealand grew to 88 per cent in the three months to December 2016, building on increases seen in previous quarters, Energy and Resources Minister Judith Collins says.

“The result, released today in the latest New Zealand Energy Quarterly, shows the highest level of renewable electricity generation in 20 years. It demonstrates New Zealand is continuing to make the most of its ample renewable resources such as hydro.”

Ms Collins says the increase in renewable generation was party driven by high rainfall over the December 2016 quarter.

“There was a seven per cent growth in hydro generation compared to the previous December quarter, with many hydro catchment areas experiencing higher than average rainfall over the period.”

Continuing decreases in coal- and gas-fired generation also had an impact, Ms Collins says.

“The data shows that coal-fired generation declined by 64 per cent, and gas-fired generation by 21 per cent. This continued a longer-term trend that meant greenhouse gas emissions decreased by 35 per cent compared to the previous December quarter.”

The latest figures also show a fall in electricity consumption across all sectors, down three per cent compared to the same period last year.

“Most of this decrease is due to lower electricity consumption within the agriculture sector, with increased rainfall likely to have resulted in less demand for irrigation,” Ms Collins says.

The New Zealand Energy Quarterly is released by the Ministry of Business, Innovation and Employment (MBIE).

New Zealand Energy Quarterly:

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/publications/new-zealand-energy-quarterly

Read about electricity cost and price monitoring:

http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/statistics/prices/electricity-prices

New Zealand is well-placed to take advantage of the economic benefits of oil and gas exploration, Energy and Resources Minister Judith Collins announced today at the launch of the 2017 Block Offer petroleum tender.

“The global exploration and production industry is cyclical – the low number of permits granted in last year’s Block Offer reflects a significant downturn in the sector,” Ms Collins says.

“However, activity in New Zealand and globally is expected to pick up as operator margins improve. The Government will continue to ensure we reap the benefits of petroleum and mineral exploration while adhering to strong environmental and health and safety provisions.”

The annual Block Offer was first introduced in 2012 and provides an effective way for the Government to manage how petroleum permits are allocated.

This year’s Block Offer includes five offshore release areas (in Northland - Reinga, Pegasus - East Coast, Hawke Bay, Taranaki and Great South - Canterbury), and two onshore release areas (in Taranaki and Southland). There is also one offshore/onshore release area in Taranaki.

The total acreage included in the tender is 481,735 km², comprising 5,102 km² onshore and 476,632 km² offshore.

“New Zealand’s petroleum sector is small by global standards but is nonetheless a significant contributor to the economy. Between 2011 and 2015, oil companies invested $7.7 billion in oil and gas exploration and production in New Zealand. Other parts of the economy also benefit from the sector’s demand for goods and services.

“In order to encourage exploration activity, we need to maintain our reputation as open for investment and a good place to do business. At the same time, the Government’s regulatory framework will ensure New Zealand’s unique environment continues to be protected and its high standards of workplace health and safety are maintained.”

More information about Block Offer 2017 can be found on the New Zealand Petroleum & Minerals website https://www.nzpam.govt.nz/

It’s a pleasure to welcome you all to New Plymouth in the Taranaki province, the heart of oil and gas production in New Zealand.

Although I’m relatively new as Energy and Resources Minister, I’m very enthusiastic about the future of this dynamic and extremely productive industry.

I’d particularly like to acknowledge PEPANZ for organising the conference, and our international guests for showing their interest this year. I hope you enjoy your time in New Zealand.

Industry downturn

There’s no doubt the last few years have been particularly challenging for the industry. Global markets have experienced an oversupply of oil leading to lows in prices not seen in very many years.

This has created an extremely tough operating environment for all in the sector, and New Zealand hasn’t been immune.

I recognise the difficulties you’ve all faced through the downturn as many of you have had to make very tough decisions about where your expenditure goes.

And there has been a human toll, too, with many parts of the industry having to downsize.

But this is a resilient industry, and we can take comfort in the fact that market downturns are symptomatic of the cyclic nature of the industry.

It’s promising to see signs that global oil prices may have reached their lowest point in this commodity cycle, indicating a sustained recovery.

Additionally, the current high level of merger and acquisition activity globally, and particularly in New Zealand, indicates a continued willingness to invest in the sector. 

Economic benefits

As we look back on where the industry has come from, now is a good time to take stock of just how much of a vital role oil and gas plays in the world economy. It’s a role that will continue for some time yet.

The contribution the sector makes to economies around the globe is particularly significant. While it’s widely appreciated just how integral petroleum is to the transportation and energy generation sectors, it’s not as well-known just how much it contributes to quality of life more generally.

It’s commonly used in chemicals, plastics and synthetic materials. This includes everything from clothing to asphalt for roads, fertilisers for agriculture, to smartphones that have become so prevalent around the world.

And there are no signs the contribution the sector makes in keeping economies going will abate any time soon.

This will be particularly evident as a world population that’s expected to increase from around 7.5 billion currently to around 9.7 billion by 2050 puts increasing demands on global resources.

The International Energy Agency projects that oil and gas will make up about half of the world’s energy consumption in 2040. Most of the projected growth in oil demand to 2040 will come not from fuel for passenger vehicles but from freight, aviation and petrochemicals, where alternatives are scarce.

Climate change

Of course, economies around the world have a responsibility to limit the effects of climate change. There’s much we can do and a great deal of work is underway globally, including in New Zealand, in encouraging greater use of renewable forms of energy and greater uptake of electric vehicles.

But looking at the broader picture, we also need to take a balanced approach.

If nations abide by the Paris Agreement pledges, the IEA forecasts that 37 per cent of electricity will be generated from renewables globally by 2040, meaning petroleum products will still form a large part of the energy mix for decades to come. That’s why taking a long-term view of global energy supply is in everyone’s interests.

It’s important to emphasise, too, in the debate around the sector’s contribution to carbon emissions, that not all oil is burned and turned into energy sources such as transport fuels and electricity generation.

The petroleum industry has a role in transitioning to low carbon fuels. Natural gas has 40 per cent lower carbon emissions than coal for electricity generation, making it a key transition fuel. It’s believed natural gas could displace coal as an energy source in countries such as China and India, where coal is heavily used.

Local Benefits

I’d like to put the focus on the local industry for just a moment, and pay tribute to the contribution it makes to this region. It’s appropriate that this year’s conference is held in New Plymouth. New Zealand and Taranaki in particular, has had a long and productive history in oil and gas dating back to the 1800’s.

Over time, it’s grown to become a major contributor to the nation’s economy, with fields developed in Taranaki in the 1950s still producing oil and gas today.

Oil is New Zealand’s sixth largest commodity export, and gas is a major contributor to domestic industries, households and electricity generation. Annually, oil and gas production contributes more than $2.5 billion to New Zealand’s GDP.

Jobs in the sector are typically highly skilled and well-paid, and there are flow-on effects too, with other parts of the economy benefitting from the industry’s demand for goods and services.

All of New Zealand’s oil and gas is produced from fields in the Taranaki region at present, and some of these fields are expected to continue producing oil and gas into the 2030’s and 2040’s. Significant potential exists for discovery and development of new fields not just in Taranaki but other parts of the country too, if exploration activities are successful.

Looking at New Zealand more broadly, in addition to our producing oil and gas fields in the Taranaki Basin, we offer 17 known petroleum basins across our Exclusive Economic Zone. These frontier basins are largely underexplored and are considered to have significant potential for commercial petroleum discoveries. But more about that soon.

Regulatory regime

I’d like to take a moment to recognise the petroleum sector’s commitment to workplace health and safety. I know that for you, ensuring your employees are safe and that your work is carried out to international best practice is part of your bottom line.

We all know the likelihood of a major spill is low, and we have never had a major spill in New Zealand. While the government has developed a robust regulatory regime, your focus on upholding excellent health and safety standards- which often go above our requirements- helps ensure New Zealand is protected from a damaging event.

I do understand the importance of ensuring that you can continue to develop your practices as the sector evolves and that our wider regulatory regime allows this to happen.

In 2013, the Government amended the Crown Minerals Act – the key legislation setting out how rights to New Zealand’s petroleum and mineral resources are managed. The amendments encouraged development of the Crown’s mineral estate, simplified the legislation where appropriate, and ensured better coordination between government agencies.

A key focus for me this year is making sure our regulation remains world-class; ensures that risks are appropriately managed; and that health and safety and Crown Minerals Act objectives are met.

We have several main areas of work underway at present.

Some offshore oil and gas fields are, for the first time in New Zealand, nearing the end of their lives and we need to think about how best to decommission them. NZ Petroleum and Minerals is working with other government agencies to develop the regulations for decommissioning and I am leading the group of Ministers involved in this.

We need to make sure the environment is protected but I want to make sure that risk and cost are appropriately balanced.

Following concerns raised by the Parliamentary Commissioner for the Environment about liability for the failure of onshore petroleum wells and NZ Petroleum and Mineral’s investigation into historic abandoned wells last year, I’d like to announce that consultation has begun on potential responses to this issue.

Realistically the likelihood of well failure is low and operators are usually responsible for managing any issues. To give perspective, of the almost 1000 wells drilled in New Zealand to date, third parties have only had to pay in four cases. As an industry we need to work out the best way to manage this. The consultation document is available on MBIE’s website, and I’m looking forward to hearing your views. If you’re interested, there is a presentation on this topic tomorrow.

We’re also looking at offshore financial assurance. Last year my officials worked with the Ministry of Transport to develop legislation to ensure that operators of offshore installations have appropriate levels of insurance to cover the costs of potential oil spills.

All of this work is about being clear in our expectations of industry and creating the regulatory certainty you need to get on with the job.

It’s about balancing economic and environmental interests, while ensuring New Zealand remains a predictable and globally competitive investment destination.

I’d now like to move onto the next part of the today’s proceedings, which is to formally launch Block Offer 2017.

Block Offer 2017

When we introduced the annual Block Offer in 2012, our goal was to increase exploration activity in the petroleum sector by building an efficient, stable and transparent process.

That goal is built on year on year, with Block Offers continuing to provide investors with the opportunity to develop portfolios featuring multiple basins of varying levels of maturity.

Since 2012, we’ve awarded 45 exploration permits through the Block Offer process, attracting new operators to our shores including Chevron, Statoil, Woodside and ONGC Videsh.

This indicates to me that we’ve captured international attention in a relatively short period of time, boding well for the future potential of our oil and gas resource.

We all know the impact the drop in oil price has had on exploration across competitive tenders globally. But we also know petroleum development is a long-term game. It’s important we maintain that focus, and continuing our Block Offer puts the spotlight on New Zealand as a compelling place to invest.

We offer a very favourable proposition to potential investors.

Along with our well-developed infrastructure and the potential of our resources, the other point about investing here is that we’re highly regarded as a good place to do business.

You’ll soon be presented with more detail about what’s in this year’s Block Offer, which comprises a total of 481,735 km² across eight release areas. I’d like to just draw your attention to a couple of highlights in this year’s Block Offer.

Hawke Bay 

The East Coast-Pegasus Basin is one of New Zealand’s most prospective basins, with known petroleum systems and natural oil and gas seeps. The Hawke Bay release area is located in that basin. In Block Offer 2016, areas in Hawke Bay more than six nautical miles from shore were included in the tender area. We have included areas of Hawke Bay outside three nautical miles from shore in Block Offer 2017 to allow more shallow-water acreage and more of the known gas prospects in the area to be investigated. The current market conditions favour relatively lower-cost opportunities such as shallow-water exploration.

Southland 

This is the first time parts of the Southland Basin have been included in the Block Offer. The Southland Basin is an onshore basin that is considered to have very similar geological characteristics to the Taranaki Basin and has been lightly explored for oil and gas. The current market conditions favour relatively low-cost onshore opportunities such as the Southland Basin.

Nominations

I’d also like to signal the beginning of the Block Offer 2018 process – which starts with the request for industry nominations.

This year’s nominations process for Block Offer 2018 has been made more robust to ensure consistency in how proposed areas are considered. This is industry’s chance to signal areas that are of interest to them in terms of prospectivity, and I invite you to make a nomination. This will be covered in more detail by New Zealand Petroleum & Minerals during this Conference.

Conclusion

Thank you for the opportunity to address you. Putting the tough few years behind us, I believe we can look forward to a new cycle in which activity in New Zealand and globally increases as operator margins start to improve.

I look forward to your interest in investing in our industry.