New Zealand may have just killed its oil industry

New York City wants oil companies to pay for climate change
New York City wants oil companies to pay for climate change

New Zealand has stunned the energy industry by slapping a new cap on drilling for oil and gas in its waters as part of efforts to combat climate change.

Prime Minister Jacinda Ardern announced Thursday that the government will "no longer be granting any new offshore oil and gas exploration permits."

"This is another step on our transition away from fossil fuels and towards a carbon neutral economy," Ardern said in a speech.

The country's oil industry quickly voiced its anger over the move.

"The decision is a lose-lose for New Zealand's economy and environment, likely to threaten jobs and mean higher prices for consumers," said Cameron Madgwick, CEO of the Petroleum Exploration and Production Association of New Zealand.

"Because petroleum is produced to meet growing global demand, not exploring and producing in New Zealand simply means other countries will produce it instead and we will have to import it at higher cost," he said.

Related: Norway's $1 trillion pension fund wants out of oil stocks

Madgwick said that "huge investments have been made by companies already anticipating offshore block offers, which have now gone to waste and people's jobs will be affected." The association said the oil and gas industry employs more than 11,000 people "at peak times."

The government said that the oil industry should instead use its expertise in more environmentally and economically sustainable areas, such as mining materials for solar panels.

Angus Rodger, a research director at consultancy Wood Mackenzie, said New Zealand's move was "a bold step."

The country was sending a clear message that it was prepared to leave oil and gas production behind, and the tax revenues and jobs that go with it, he added.

"Industry interest in New Zealand oil and gas is actually higher now than it has been for a number of years," Rodger said, pointing to recent investments by companies such as Austria's OMV Group (OMVKY) and Malaysia's Sapura Energy. It's unclear how they and others will interpret the government's announcement, he added.

The prime minister made clear that the government would honor existing offshore exploration permits.

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