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Minister of Energy — December 20th, 2002


Dear Mr Atack

Thank you for your letter of 16 November 2002, addressed to the Prime Minister, in which you outline your views about international oil depletion and your concerns about New Zealand’s energy future. As the subject matter you cover falls within my portfolio the Prime Minister asked me to reply to you directly.
I would also like to thank you for the interesting material you enclosed with your letter. The many and varied articles you have collected on the CD shows that this is obviously a subject dear to your heart and one you have followed and researched for some time .
Let me say therefore that I do understand the concerns that you and many others hold about the future of oil resources. It is true that no one seriously disputed the notion that oil is a non-renewable resource that will run out some day, but there is considerable debate about when that “one day” will be. There are counter views to the one that says we have only a few years of oil left. New Zealand is a member of the International Energy Agency (IEA). Then IEA for example, in its latest ‘World Energy Outlook’ published in September this year, foresees enough oil to comfortably meet demand to 2030. After the 1970’s oil shocks the predictions were that the world would run out of oil by the year 2000. I think it is also fair to say that technological improvements mean that the oil industry is steadily increasing the amount of oil it is able to extract and there are many who argue that this technological revolution has only just begun.
However, having said that, I do agree that New Zealand needs to take the depletion of oil reserves seriously and I can assure you that we are.
You also make the point that the extraction of oil from non-conventional sources is so expensive that it will always, no matter what the price of conventional oil, be uneconomic. Again there are counter views to this. The IEA is of the view that non-conventional oil supplies will contribute just over 8% of the total world oil supplies by 2030 and this sharp increase in production will largely be the result of technological improvements that reduce the cost of extracting and upgrading non-conventional resources. In its 2002 World Energy Outlook the IEA states that the greater part of future non-conventional oil will come from Canadian oil sands and Venezuelan extra-heavy bituminous crude, it estimates that these two regions contain 580 billion barrels of recoverable reserves — more than the entire reserves of conventional crude oil in the Middle East — and the proximity of Canada and Venezuela to the US market will help these sources compete against lower-cost producers further a field.
I acknowledge this is one organisation’s forecast, and as I have said to you there are counter views. However, the IEA is considered to be one of the leading authortise on world energy projections and energy supply issues and the ‘World Energy Outlook’ is its flagship publication.
For me, equally important as the question of whether and when we will eventually run out of oil, is the question of the impact we will have on our environment by our ever-increasing use of fossil fuels. As you know, changes in the climate pattern as a result of our fossil fuels is taking place. For this reason we, along with the rest of the world. Must reverse our growth in dependence on fossil fuels.
Renewable energy sources, such as wind and biomass, do not have the same adverse impact on the environment. Energy efficiency is also important. We are ensuring that they will play an appropriate part in our energy future by implementing strategies such as the National Energy Efficiency and Conservation Strategy (NEECS) which will assist us to a more sustainable environmentally friendly future. As you will no doubt be aware New Zealand has recently ratified the Kyoto Protocol, following the passage through Parliament of the Climate Change Response Bill.
There in no easy answer, but I can assure you that this Government is aware of the oil situation, and determined to ensure New Zealand moves over time to a future where we are not overly dependent on oil.
I have kept the interesting material you enclosed with your letter (the CD and tape).
If you would like the material back please write, or ring my office, and let me know and I will ensure it is returned to you Thank you again for sending it.

Yours sincerely
Hon Pete Hodgson
Minister of Energy