One of the more irritating traits of National politicians is their bone-headed and short-term obsession about being rentiers selling raw and lightly processed raw materials offshore. Sure it is great in the short-term for the seller of the rights to those raw materials, but it does little to nothing for the other 4+ million people in this country. In the fullness of time, the resource that is being extracted will run out. The extracting companies will be folded up and somehow the bill for the inevitable cleanup winds up on everyone else.
Nowhere in the NZ economy is this more clearly expressed over time than in the oil extraction
Matthew Hooton was peddling some of his should be patented line of bullshit earlier in the week about oil and gas. I got irritated enough to divert from my work to dig out some basic charts to display what has been happening at the output stage. But I noticed something .
Oil is peanuts. All recent fields have been micro fields that get exhausted almost as soon as they are pumped.
There are a number of things that are interesting about this chart if you look closely at it.
You see that red line, that is the export of oil expressed in energy. Essentially we export virtually all of it. There is a reason for that. The type of oil that we get in NZ isn’t easy to use in our sole oil refinery in Whangarei. That is designed to operate on a different type of crude to that commonly found sloshing in the bottom of gas fields (which is where most of our oil comes from). Even the sole major oil only field – Tui, almost certainly started as a gas field that lost its gas.
But the spin you get from the energy industry (and eventually out through the mouth of Mr Hooton) is quite different. Here is a good example from the wikipedia page on oil and gas in NZ.
In 2008, New Zealand’s self-sufficiency in oil (production divided by consumption) was 47%, i.e. the country imports over half its petroleum product needs (though actual imports are higher, as some of the local product is also exported). In the March 2010 quarter, 28.7 petajoules of crude were produced in New Zealand, 78 pj of petroleum products imported (most of it crude), and 61.6 pj consumed. The difference is exported or used for international travel (aviation fuel and similar).
Sounds great eh? 47% self-sufficiency! We only import just over half of our petroleum product. Yeah right! This paragraph appears to be a bit of deliberate spin that you can see repeated amongst almost all of National’s talking heads whenever they start waffling about the benefits of the oil exploration for NZ.
The reality is that we export virtually all of our oil production. As far as I can tell all of it gets exported completely unprocessed.
We import virtually all of our oil needs and some of it gets processed it here. A quick summary from the Marsden Oil Refinery site (my bold).
- all of the country’s jet fuel
- nearly 80% of diesel
- around half of all petrol
- between 75 and 85% of bitumen for roading
- all fuel oil for ships
- sulphur for farm fertiliser
- and we even put the fizz in fizzy drinks!
Why is this interesting? Because NZ crude is mostly a gas condensate, it is very high in light fractions of hydrocarbons. The exact type that is required for making petrol. Which is why it commands a high premium offshore.
It can be used in the Marsden refinery, because that was adapted to be able to use it in the late 1970’s and early 80s.
But rather than adding value to it here using local workers and capital and actually using it here to provide the other half of our own petroleum needs, instead it gets exported. Sure the government gets a minor cut. But most of the value is simply drained from the country.
Quite simply an alternate policy of just leaving the oil in the ground carries better value for NZ. Who apart from a few nutters really expects the long term future prices of the increasingly scarce raw material to go down? The uses for complex hydrocarbons range from plastics to lubricants. Simply exporting it to be burnt defies any kind of economic logic about how to use a natural resource effectively.
Classic rentiers logic exporting unprocessed raw materials rather than providing added value. It is also so characteristic of the National rentier party that this is what happens. Too lazy to put in the capital and work required to provide more value, they prefer to just dump it for cash.
You can see it in the way that our dairy products are increasingly being processed ever lighter and exported by the the cronies of National in a essentially raw form of milk powder. Our wood increasingly exported as raw logs.
Which of course completely explains their reaction to Labour’s policy on increasing the value add on our forestry.