June 20, 2008

Southland’s Potential As NZ Economic Powerhouse Rated Highly

By THORNE, Dylan

SOUTHLAND is being touted as the potential energy and dairy powerhouse of New Zealand.

A front-page article in the Independent Financial Review outlines why North Island businesses should move to the region. The article focuses on the fact the private sector is gearing up for multi billion-dollar development and exploitation of the region's abundant resources -- oil, coal, gas, silicon, wood and dairy, which has experienced an unprecedented 15 percent year-on-year growth.

Venture Southland group manager Steve Canny agreed with the assessment and said Southland's ability to provide significant, stable and secure energy would be a magnet to businesses with large electricity needs.

"If you need good connectivity for broadband by international standards, good reliable energy supplies and/or primary production then Southland is a very good place to be," he said.

"Moving forward, Southland looks to be quite a strong player in the economic success of New Zealand," he said.

While there has been a slowdown in lending into the household and business sectors, Reserve Bank figures show lending in the rural sector rose 12.8 percent in May last year to 17.1 percent in April.

Mr Canny said Southland had the highest economic growth in New Zealand in the December quarter at 3.4 percent and retail sales were the highest in the country in the June quarter. Rising fuel prices would also hopefully spur on the search for the oil riches resting in Great South Basin, Mr Canny said.

A potentially more lucrative and accessible energy source lies in the Mataura basin, south of Gore, which L&M Mining and Solid Energy plans to exploit. L&M started drilling three wells this month.

Six billion tonnes of low-grade lignite are waiting to be converted to produce primarily sulphur-free diesel, and a substance even more valuable than milksolids, fertiliser.

Local superphosphate prices are now $480 a tonne, up more than 100 percent.

Chamber of Commerce Southland chief executive Richard Hay said he hoped coal to gas would be the one to go ahead because, unlike oil which could be shipped to another port, it would have to be processed on shore.

Mr Hay cautioned that any economic spinoffs from either project were a long way off.

"At this stage they have completed the seismic (work) for the basin but it would be another four or five years before we know if it is an economic proposition or not." The high number of dairy conversions was fuelling growth in the region but there would come a point where that would level off, he said.

Bank of New Zealand chief economist Tony Alexander said the outlook for Southland's economy was positive.

"But it doesn't mean there won't be ups and downs," he said. Why we're rated, Page 2

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