NZ's offshore oil and gas operators could be slapped with big insurance rate hikes

Oil companies could be forced to fork out more for insurance if new rules proposed by the Government are passed.

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They could be forced to fork out more for insurance if new rules proposed by the Government are passed. Source: 1 NEWS

Currently, operators need a minimum of $27 million in insurance cover to be able to drill off New Zealand's coast.

However, new estimates show a worst-case-scenario oil spill could cost a whole lot more.

Now, Associate Transport Minister Julie Anne Genter is looking to introduce legislation that would force some offshore oil and gas operators to be insured up to $1.2 billion in order to help cover the fallout of such a spill.

"Under the current regime, they just required a blunt figure of $27.7 million - that is clearly inadequate to cover the cost of the clean-up," Ms Genter said.

Operators will have to go for a risk assessment to the director of Maritime New Zealand, who'll determine how much insurance cover each company needs.

"We think it is fair the industry should have cover based on the risk they pose," Ms Genter said.

Her proposed legislation comes off the back of new estimates into the impact of an oil disaster at one of New Zealand's main drilling sites.

At Canterbury Basin, that's costed at $12 million, while a disaster at Pegasus, just off the bottom of the North Island, could cost $58 million.

For Deepwater Taranaki, it soars to $926 million due to the type of oil produced there and the size of the nearby coastline.

The Opposition has welcomed the proposal but is questioning the figures.

"The last thing that we want to see happen is the change of that quantum to make it impossible for companies to operate," said Jonathan Young, National's energy and resources spokesperson.

Greenpeace, meanwhile, argues the changes won't go far enough.

"If we saw oil washing on our ocean beaches, coastlines, affecting our sea life, New Zealanders would be paying tens of billions of dollars potentially to clean that up," said the organisation's energy campaigner, Steve Abel.

Petroleum Exploration & Production Association New Zealand's chief executive told 1 NEWS that the top band of insurance cover sounds very high, and he's unsure how realistic it is.

"We have to make sure market standard insurance cover is available for that level, otherwise it just won't be workable," he said.

"Our industry is extremely safe and highly regulated. Everything we do is carefully planned and prepared, and we've operated safely in Taranaki for over 50 years."

People will have the opportunity to have their voice heard on the bill during the Select Committee process.