Monday, August 11, 2008

The Mystery of New Zealand's Mineral Endowment Solved

My perplexity about Kiwiblog's reporting of Gerry Brownlee's National party convention speech has been somewhat lessened by the Hive.

In a recent opinion piece in the National Business Review Doug Gordon the chief executive of the New Zealand Minerals Industry Association says

We are a rich nation, second only to Saudi Arabia in terms of natural capital per capita.

Now Brownlee apparently said second to Canada, but what's a few thousand kilometres between friends? The essential aspect of the claim is that we are to calculate per capita and then we will come out on top. Fair enough.

Now I couldn't find a version of this claim on the New Zealand Minerals Industry Association web site so I can't speculate as to whether "natural capital" is the same thing as "mineral endowment", but lets suppose that it is.

I am working my way through the useful report "The Natural Resouce Potential of New Zealand" available here. Our main mineral exports are of course coal, oil, gas and gold. Lets see if this per capita comparison stacks up against our nearest neighbour Australia.

Of course you can tell I am pretty sceptical of even the per capita version of the claim. I don't really want to beat up on either Gerry Brownlee or Doug Gordon but this exercise is a useful reminder of why it is that Australia is doing so well economically at the moment.

First up coal. According to BP we have 571 millions tonnes of proved coal reserves (mostly really nasty lignite). Australia has 76 600 million tonnes or more than 100 times as much, nearly half of it high quality. It may sometimes seem like it but there are not 100 times as many Australians as New Zealanders so we loose this one, even on a per capita basis. (I'm using BP's Statistical Review of World Energy so that the figures are comparable between different countries.)

Sadly New Zealand's oil and gas reserves do not rate a separate mention in the BP Statistical Review of World Energy. So I have had to resort to figures from the Oil and Gas Journal volume 104, number 47 page 22. I used my University library access to get on, I am not sure if this available from the main page.

For gas New Zealand has 900 billion cubic feet of reserves while Australia has 30,370. So Australia has roughly thirty times the gas reserves (and roughly 5 times as many people). For oil New Zealand has 0.053 billion barrels of reserves while Australia has 1.592. So again Australia has reserves around 30 times ours.

Moving on to gold, well it's a bit depressing really.

Australia has about 10% of world economic gold resources and is ranked third after South Africa and USA. It is the world's third largest producer, after South Africa and USA and accounts for about 11% of world output.

According to Geoscience Australia the Australian economic gold resource is "just over 5,200 tonnes".

According to GNS New Zealand's gold resource comes to about 12 million ounces. (At least as of 1999, and I have no idea if the definitions of "resource" here are comparable.) Now one tonne is about 35 000 ounces (says Google) so 12 million ounces is about 342 tonnes.
(Arithmetic is not my strong suit so I promise to double check all this in the near future.)

Once again Australia wins, even per capita, with about 15 times as much gold as we have. (Although we seem to be most competitive in gold, I suspect given the way of reporting these things that a gold "resource" is not as useful as an "economic gold resource".)

So at the very least Australia seems likely to win the per capita mineral endowment game against us, given that it has higher per capita reserves of all our main mineral exports coal, oil, gas and gold. I would be willing to bet that Canada (and Saudi Arabia) and probably several other countries do too.


Anonymous said...

I've found someone who has been asking the same questions I have for a while are we really mineral rich? One thing for certain most NZers don't drive BMW's. If we had the resources wouldn't NZers be better off (eg look at the Aussies wealth and that of Norway)
My belief is we are not as well off minerally as others but I also believe very little exploration has been conducted in NZ to confirm our total resource. Much of our resources will come form ocean exploration which is still a very tough ask.
If we had the resources I imagine all the big oil & mining companies would be operation here and they are not.
It would be really nice for the industry/ Gov't here to be honest and say we have minerals how much we are not sure but we are working hard to identify opportunities.

Andrew D said...

We do have a large area underwater, and it's quite possible there are significant mineral resources down there in principal. Commodity prices would like have to go much higher than they are now to make that economic to extract.

Anonymous said...

Gerry Brownlee what an embarrassment. Of course we're not resource endowed and don't compare well to Canada, Australia or the Arabian peninsula. We've got them but they aren't abundant enough to be squandered on dragging up our standard of living.

Andrew D said...

I suspect we may hear more about this from National. I see Wayne Map has been talking up the size of our Exclusive Economic Zone in Singapore.

Here's hoping they find a way to make undersea mineral exploration economic.