March 22 (UPI) -- Though small by global standards, New Zealand's oil and gas sector is expected to see strong interest as the market improves, the energy minister said.
New Zealand pounded the gavel for an auction for five offshore and two onshore oil and gas basins. Energy Minister Judith Collins said interest was historically low given the downturn in the energy sector last year, but a rebound was expected as markets improve.
"Activity in New Zealand and globally is expected to pick up as operator margins improve," she said in a statement. "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."
Already this year, Australian energy company Melbana said it was anticipating drilling success closer to home in New Zealand in the Pukatea onshore basin. According to Melbana, Pukatea is a "low-cost [and] commercially robust" drilling opportunity with an estimated 12.4 million barrels of oil equivalents in prospective reserves.
In the four years ending in 2015, the government estimates energy companies invested $5.4 billion in oil and gas exploration in New Zealand. Annually, oil and gas production contributed more than $1.7 billion to the nation's gross domestic product.
Only one company emerged as the sole winner of a bid for onshore assets in the country's 2016 auction for reserves in the so-called Taranaki basin. Canadian energy company TAQ Oil Ltd. also took a strong position in the Taranaki basin last year, but said it expected production there would be relatively low.
Oil is the sixth-largest commodity export for New Zealand, which has touted itself as a leader in the effort to develop a low-carbon economy. Collins said that not all oil winds up burned for energy and the government was still keen on taking a balanced approach.
"Economies around the world have a responsibility to limit the effects of climate change," she said. "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."
An annual review of the New Zealand energy sector from the International Energy Agency described the country as a "success story" for its ability to advance on low-carbon options.