Address by Andrew Knight at the 2013 Petroleum Conference

Posted on 30 April 2013

One of the great Maori traditions is to begin a business meeting with a story about who you are and where you come from. Only when people know each other’s values do we move to specifics. Since our industry places enduring partnerships at the centre of our activity, we can usefully adapt this tradition. Putting relationships and values first is part of what it means to do things in a distinctively New Zealand way. So our story begins in an ancient Maori legend about a great chief from a Polynesian Island, countless generations ago. His name was Kupe. The story begins, as so many perfect days do, with Kupe out on his boat fishing.

But this day was different: He was catching nothing. When he pulled up his lines, all his bait had been taken. Next day, same thing: his lines would go in, no catch. Eventually he discovered a great octopus was taking his bait and eating his catch. So Kupe decided to catch it, and a great pursuit commenced.

He provisioned his boat and set out for the horizon. Eventually the chase led him to New Zealand, where the prized octopus was caught. Kupe spent a long time exploring the new land he had found, then eventually returned home to bring others back. He told them of its rivers and of travelling from harbour to harbour, of greenstone pounamu in the South Island, and richness on the land. He told of planting a tree at the mouth of a river opening to the southwest wind, beneath a snow clad mountain standing near the sea. "Direct your canoe there and you will see the best place to settle," Kupe told them. And so the very first New Zealanders were explorers, who travelled here in pursuit of a prize beneath the sea.

Kupe's legend is a story of New Zealand's strengths and our place in the international context. From Kupe, to Captain Cook, to the sealers and settlers, to the newest arrival - every family in these islands has a story of travel, a story of starting over, a story of exploration. People who aren't from, or haven’t visited New Zealand often don't realise that everything here arrived either by swimming, flying or drifting further than anyone else. That's why New Zealanders bred explorers who were first to the ceiling of the world, who travel the oceans in racing yachts, and pioneer extreme sports.

About a thousand years after Kupe was in Taranaki - maybe a little more, or a little less - a gunsmith called Edward Smith found oil on a New Plymouth beach. His discovery inspired a new generation of explorers. And one day, many years and discoveries later, in Taranaki's southwest, in full view of the mountain standing near the sea, they found a gas and oil field they called Kupe. Today, New Zealand Oil & Gas is proud to earn the substantial share of our income from the Kupe field. We are literally explorers to our core. And just as then, we recognise that Taranaki is a starting place, but there is abundance beyond. New Zealand is geologically complex, and full of promise. Yet for all its prospective resources, New Zealand is also relatively underexplored.

Exciting new discoveries are waiting in new basins. We are excited by what we have seen off the Canterbury coast. We know there are resources in the Great South basin and in deepwater around New Zealand that is almost totally un-searched. Others at this conference will talk about the prospectivity of those basins. What I want to focus on is what it will take in a business sense to unlock them. There is a technical challenge, but it’s more than that. It's also an economic issue in a context where there are other basins in the world. And there is a social and regulatory context capable of valuing success in the oil and gas industry.

I want to discuss both the social, and the economic context. Since it was established in 1981, New Zealand Oil & Gas has had enough economic success over the years to graduate from junior status to become a producer. What we have learned over the years is that exploring in New Zealand brings its own challenges to a global business. New Zealand requires a co-operative industry to share the investment risk, and we have a smaller industry than most countries.

New Zealand has a higher drilling cost structure because of the cost of mobilising, and a less frequent drilling programme. This context, in turn, requires strong partnerships, and long-term perspectives – the need for a long term perspective and strong partnerships applies to us, our partners, the government and the communities in which we operate. New Zealand Oil & Gas diversified overseas to provide balance in our investment portfolio. We’re still proving to ourselves whether we can do it successfully. No other oil and gas company from New Zealand has yet met this challenge.

So, to make it work, we need to bring our New Zealand way of doing things – our values and our culture. Bringing this perspective to what we do is what gets me up in the morning, and makes me passionate about what we do. The opportunity to make a contribution to New Zealand is not an abstract concept; it means a real difference for jobs, and opportunities. I want kids growing up in Taranaki to understand there are opportunities for them beneath the surface in their region, and for those kids to study the science and management skills needed to lead my company in the future.

But we can't take for granted that everyone sees our industry as making a contribution. It's easy for us to say we deserve community support for the opportunities we create. It's harder for us, but crucial, to understand that we need to earn community support. The same features of New Zealand's geographical isolation that created our underground resources also created a stunningly beautiful environment. New Zealanders are incredibly proud of it.

We have a deep emotional commitment to the way of life we associate with our waters, mountains, land and rivers. And so, while New Zealanders recognise our forty years of safe operating in New Zealand, we also know the consequence of failure could be desperately high. Our communities fear that they, not us, will bear the consequences, if we fail.

That’s why they seek to ask us searching questions. It's entirely understandable that they do, and our social licence to operate has to be earned - repeatedly and continuously - by being able to answer their questions satisfactorily. That’s part of forming the long-term community partnerships we need. I started out by talking about an emerging New Zealand habit of talking about our values when we sit down to talk business. New Zealanders expect be ethical, to show concern for our neighbours. We expect fairness in dealing, not selfish advantage. We have a love of our unique physical environment cradled in our understanding that it is remote, and it is our home.

And we have a tradition of having to be resourceful. We have learned or inherited a sense of adventure and the freedom that a small country has to innovate and be creative. As this conference begins we have seen some public questioning of our industry. I have also noticed the consistent theme – we’re being asked to show the benefit to New Zealand.

The reason I do this, and why I'm proud to lead a New Zealand oil and gas company is that we do make a difference. The Tui field, in which New Zealand Oil & Gas has an interest, is a small field by international standards. But over its lifetime it will contribute around $2 billion in royalties and taxes for the government of New Zealand. That pays for a lot of schools and hospitals. Our international partners make a vital contribution too. They bring capital, expertise and technology that we do not have without them. We could not unlock our resources alone without our partners. So New Zealanders have a choice between New Zealanders discovering New Zealand’s resources for the benefit of New Zealanders – or New Zealanders going offshore to unlock someone else’s resources for their benefit.

That’s New Zealand’s international context, and it’s why I warmly welcome our potential partners entering New Zealand. Our community wants to see the highest standards of environmental performance, and health and safety processes. So do I – one of the features of New Zealand that helps to set us apart, and helps me to attract staff to come to New Zealand, is the lifestyle and quality of life. There is a role for government in establishing that it is not seeking a choice between environment and development. There is a role also in championing the opportunities and wealth that those resources can create for New Zealanders.

And there’s a role in making sure the industry can flex our enterprise and initiative. That’s why I stress that it’s important to get the balance right in the allocation of new permits. We need to both encourage new overseas market entrants, and allow participation by smaller players who bring in larger partners. New Zealand has a lot of competition for explorers’ attention, and having more advocates marketing us internationally will help. This is a balance that New Zealand needs to get right in assessing bids in the Block Offer round. What all this amounts to is an international context in which New Zealand provides an unusual set of opportunities. Our isolation has created a unique geological context, and a heritage of values that understand and support exploration. But isolation also means our star shines more faintly in the global search for resources.

We have to be unusually careful to earn – and keep earning - trust in our activity, and we must be creative in attracting partners. For New Zealand Oil & Gas, the New Zealand story is our story: A story of potential that can be unleashed by strong and enduring partnerships. And so I take pleasure in welcoming partners to the New Zealand oil and gas industry.


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