The New Zealand government is on a collision course with environmentalists over the sale of an offshore oilfield, which is likely to have its life extended through the deal.
Austrian oil and gas company OMV is offloading the Maari field to “reduce the carbon intensity” of its portfolio, while the buyer, London-listed Jadestone Energy (JSE), operates on a model of buying mature assets and squeezing as much profitable production out of them as possible. At the end of June, the deal deadline was extended again to 31 August, as the companies wait for a decision from the New Zealand government on a transaction. This was initially expected to be complete within 12 months of its announcement in late 2019.
Smaller or private buyers have stepped up as major oil and gas companies look to offload older or less efficient operations as they shift to greener strategies. This push has been led by investors but governments around the world are also bringing in tougher rules around emissions. In the Asia-Pacific region alone, consultancy Wood Mackenzie forecasts there are $14bn in assets up for sale.
New Zealand was an early adopter of an emissions trading scheme and banned new oil and gas exploration in 2018. It also brought in legally-binding net-zero carbon emissions targets in 2019.
Greenpeace Aotearoa campaigner Amanda Larsson said OMV should be “safely decommissioning the field” rather than handing over responsibility to Jadestone to “eke out yet more oil”. A petition from local activists including Climate Justice Taranaki has called for limits to exploration even in fields with existing licences, such as Maari.
New Zealand is taking its time to consider the transfer of OMV’s 69 per cent share of Maari to Jadestone, with the $50m deal first announced in November 2019.
A similar acquisition by Jadestone in Australia, which has weaker climate goals, received regulatory approval in three months in 2018.
The country’s emissions are dominated by its agricultural sector, but its small fossil fuel industry has an outsized impact on the climate goals because the methane output of the dairy industry is not part of the net-zero plans.
Jadestone chief executive Paul Blakeley said “maximising every last drop or molecule of hydrocarbon [extraction]” should be the aim of existing projects to avoid the need for more exploration.
Its current reserves indicate Maari should produce around 4,000 barrels of oil per day (bopd) for the next decade. When it announced the acquisition, Jadestone said there was “substantial potential” to add to the project’s reserves, or estimated volume of recoverable oil, extending its life.
Jadestone is set to complete another purchase of a mature asset this month, a collection of licences totalling 6,000 barrels of oil equivalent per day in Malaysia, for $9m. The deal was announced in April, and in a statement to mark the regulatory approval of the deal with the seller SapuraOMV (a joint venture with Maari vendor OMV), Blakeley thanked Malaysian state oil company Petronas for its "clear and practical regulatory processes".
The International Energy Agency said in May exploration bans such as New Zealand’s were the right approach, calling for no “new oil, gas and coal development”.
New Zealand energy minister Megan Woods said the country had “made the right decision” to phase out domestic fossil fuel production through the exploration ban, and this had been backed up by the IEA’s new stance. She declined to comment on the Maari regulatory process.
As well as the government’s net-zero goals, the collapse of another oil company with offshore assets in the Taranaki area has loomed over the deal, and the October 2020 election also made any decision within a few months either side of that point unlikely.
A Malaysian company, Tamarind Taranaki, went bust at the end of 2019 just two years after buying the rights to the Tui project, and left the government with almost NZ$400m (£203m) in decommissioning costs. Rules around decommissioning are being tightened, but Blakeley said Jadestone had already offered to do everything the new laws would require.
OMV and Jadestone have set the new deal expiration date at 31 August, well ahead of when the government has said the decommissioning laws will be passed by parliament. A Jadestone spokesperson said the short extension to 31 August indicated the company’s confidence that the Maari sale will be signed off soon.
Jefferies analyst Mark Wilson said the long approval process showed the “deal completion risk” for smaller players. Recent Asia-Pacific deals have seen Royal Dutch Shell (RDSB) and Repsol (SP:REP) offload older assets to regional players.
Wood Mackenzie said last month $1.6bn in deals in the region had been disclosed in 2021, triple the amount seen at the midpoint of 2020.
