KEY POINTS:
Philippa, my 13-year-old daughter, looks forward to a world without oil. On a visit to the Auckland Museum in the school holidays she found the 1866 gallery, that re-creation of downtown Auckland in the 19th century, a portent of what's to come. She's nervous but at the same time excited by the prospect of a simpler, slower existence. When I tell her New Zealand is the new Texas, on the cusp of an oil exploration bonanza, she calls me a dinosaur.
Any day now, light, sweet crude will start to flow from the Tui field, 40km off the Taranaki coast. The only obvious sign will be a processing and storage ship anchored in 120m of water, hoses like umbilical cords drawing oil from a station on the ocean floor.
At peak, up to 50,000 barrels a day will be pumped from the country's largest oil field, transferred to tankers and whisked to Australia for refining. High international prices for quality light crude put the Tui field off limits to the Marsden Pt refinery.
It's not a huge field, estimated to contain about 27 million barrels, but a very good earner for investors while it lasts - about 10 years.
It's the tip of the iceberg, if you listen to the oil optimists.
In March, traces of crude surfaced on Stewart Island - from oil seeps after an earthquake 160km offshore. This was encouraging for a Government about to let permits to explore the Great South Basin, a huge tract of ocean within our exclusive economic zone.
Since 2004, Government agencies and politicians have been touting the potential for a "black-gold rush" to rescue us (and our children) from the fast-approaching oil shortage and crippling petrol prices. Associate Energy Minister Harry Duynhoven says the Great South Basin is "one of the world's hot-spots for exploration" and New Zealand could make billions in royalties and taxes from a major strike.
"One oil expert recently described it as the most exciting petroleum frontier in the world," he said in awarding exploration permits to two companies this month. This week, local player Greymouth Petroleum joined the race, gaining permits for blocks close to the Southland coast.
But with oil, there is always a price to be paid and the answers to our oil crisis are no longer as easy as finding our own supply. Fifty per cent of our carbon emissions come from oil-based transport, for instance.
The Great South Basin was discovered in the late-1960s and initially explored by US company Hunt Petroleum. Oil was found in four of eight test wells but not in quantities to justify development at the time. The area covers the "furious 50s" and "screaming 60s" - where 150 km/h winds and 15m waves can shut down drilling for weeks on end. Icebergs are routine.
But changes in drilling and imaging technology may help to overcome the climatic obstacles. The fact that there have been previous finds is encouraging.
Paydirt can't come soon enough. New Zealand consumes about 44 million barrels of oil a year and, with oil fetching almost US$70 ($89) a barrel and rising as Third World demand soars, it desperately needs to become more self-sufficient. More efficient vehicles and biofuels will, over time, reduce dependence on imported oil, but only by so much. Far sooner, we could be paying $2.50 a litre at the pumps as known supplies diminish.
Two reports in the past fortnight have dramatically brought forward the global supply and demand crunch. By 2012, says the International Energy Agency, demand could begin to outstrip supply. The IEA report is hugely significant, says Green Party co-leader Jeanette Fitzsimons, because the agency is a respected adviser to western governments and, until now, had been projecting crisis point as 30 years away.
The US National Petroleum Council followed up with a report last week which shattered previous US optimism that technological advances and new discoveries would make oil a source of energy for the foreseeable future.
The two reports have added fuel to peak oil proponents who maintain that the earth's oil resource will start to dry up much sooner than official estimates (if not to those who maintain it is already shrinking).
If you're of the barrel-half-full persuasion, there is good news for New Zealand in this: the more international supply tightens, and the price rises, the more likely it is that major exploration companies will be tempted to look here. Finds previously considered uneconomic will become worth exploiting.
But despite worsening international forecasts, and our Government laying out the welcome mat, exploration has yet to begin on the scale needed.
Our remoteness, wild oceans, distance from markets, lack of infrastructure and soaring exploration costs all play a part. We're seen as the final frontier - or last throw of the dice.
That's not the picture painted by government scientists and politicians. A renewed burst of research and seismic data-gathering in our petroleum basins has prompted big oil talk. The Government stepped-up efforts to entice explorers here in 2004, firstly by reducing royalties and offering tax concessions. Then it awarded Crown Minerals $15 million to gather geological data in our offshore sedimentary basins and another $6 million last year - and offered the seismic data free to explorers. The seismic surveys only heightened scientific enthusiasm.
As the Government offered exploration permits off the North Island's west and east coasts last year, Adam Feeley, then head of Crown Minerals, said the seismic surveys had reaffirmed the enormous potential untapped under New Zealand's vast continental shelf. He drew a comparison with Norway, which transformed its economy with oil discoveries in the 1960s.
In the last two years, more than half a million square kilometres has been offered for exploration - but the uptake has been underwhelming. An offer for blocks in the Deepwater Taranaki Basin attracted no takers. Only two permits were issued in the Northland basin; interest in the East Coast basin was similarly lukewarm.
Undeterred, the Government carved the 360,000sq km Great South Basin into 40 blocks. But the offer attracted only five bids and the Government this month awarded two permits covering just 18 per cent of the basin.
There is frustration that explorers aren't beating a path to our basins. National's associate energy spokesman Phil Heatley says the uptake of block offers "isn't flash".
"My understanding from talking to the industry is that Crown Minerals is being far too prescriptive in terms of milestone and reporting requirements. The reality is the companies have little control over these. Putting such harsh conditions on them makes them shy away from even applying."
Consultant Mike Patrick, commenting on the limited uptake on the Great South Basin offer, said explorers might still see New Zealand as gas-prone.
Sporadic bursts of exploration since the 1960s have yet to find a big oil field. In the only commercially successful area, Taranaki, over 350 onshore and offshore wells have been drilled since 1955; the Maui oil and gas find in 1969 remains the biggest. When Maui production peaked in 1997, we were meeting a quarter of our oil needs. In the past decade, production has slumped and we now import more than 90 per cent.
Geologists say there is no need for panic. Taranaki remains only moderately explored by world standards and has considerable scope for further discoveries. "The rest of New Zealand is severely under-explored," says a Crown Minerals paper.
Eight sedimentary basins with known or potential hydrocarbons have been identified within our exclusive economic zone. They contain elements that excite geologists - including potential source rocks and thick sediments that can seal oil traps (see graphic) - and previous discoveries, seeps and shows in exploration wells all indicate petroleum is being generated and is migrating.
Seismic profiling in the Deepwater Taranaki Basin shows a delta which may contain large volumes of petroleum source rocks, says Peter King, petroleum research leader at Crown research institute GNS Science.
"There are places on the west coast off Northland where there appear to be some big structures which could easily be prospective.
"The East Coast North Island has some fantastic structures but very little is known about the source rocks."
King says a "serendipitous interplay of elements" is needed to create a petroleum system - a process of generation, migration and accumulation. The elements, including rock types, temperature, migration paths and seals, must all be in place at the same time and in the right quantity.
The same might be said of what's needed to kick-start an exploration rush in New Zealand, with components including research and the provision of seismic data; favourable tax and royalty regimes; availability of drilling rigs and skilled labour; the international price of oil; good weather - and luck.
"You've got a 4 to 6-inch hole trying to penetrate the subsurface - it's hit and miss," says King. "You can put all of the technology and the added value science into it and pick the best places to drill but, even if you make a discovery, it may not be terribly big or there may be problems with it.
"Areas get written off for a decade or so because of the failure of one well."
There's a statistical factor in finding oil, he says.
"The success rate is about 1 in 10. The difficulty is attaining a critical mass - having enough explorers with enough deep pockets to drill the number of wells required that are needed to make the discoveries."
Interest in the Great South Basin may have been limited but the successful consortiums include some big international players - Austrian firm OMV and, biggest of all, ExxonMobil.
The giant American firm will start seismic studies in the summer and it may be two years before any decision about drilling is made. It may take 10 years to bring a significant find on stream.
But Exxon (which leads a consortium including New Zealand's Todd Exploration Ltd) has the deep pockets needed to exploit a find in one of the world's harshest prospecting environments.
"Big companies don't chase small opportunities," says Duynhoven. "This is only a small beginning but a very significant beginning."
For the Green Party, oil exploration is the wrong answer to the supply problem and there is particular unease about the Great South Basin because of the heightened risk of leaks from a platform. The area is more risky than anywhere the industry has been, says Fitzsimons, and an oil spill would be very difficult to clean up.
It's an area rich in biodiversity, a nutrient-rich feeding ground for whales and a home to endangered seabirds and mammals. "It doesn't look as if an environmental impact assessment is being done."
Fitzsimons says the Government is "giving away" reserves in the basin, offering one of the cheapest oil and gas royalty regimes in the world. "It is not even requiring a liability bond to be posted to cover the clean-up costs of any spillage."
She is also the Government's spokeswoman on energy efficiency but recognises we're a long way from ready to do without oil. "As it gets more scarce it will be difficult for any country to sit on major unexplored prospects."
The Greens have done their best to dampen "the gold-rush expectations in the deep south."
"New Zealand will not own any oil that is found - the bulk of the profits will go overseas," Fitzsimons said last week.
She says the Government should be putting its energies into shrinking demand for transport fuel, through vehicle-efficiency gains and improvements in public transport. "The elation about exploration activity should not deflect the Government from the urgent need to prepare for a post-oil economy and create incentives to reduce our climate change emissions.
"The big risk is that a discovery could make us complacent and slow down efforts to prepare for a very different kind of future."
National's Phil Heatley says the Government still isn't being friendly enough. "When you're as isolated as New Zealand and talking about such wild country as the Great South Basin they [the oil exploration companies] are always going to look for easier options. That's why we need to be as accommodating as we can be but still make sure New Zealand gets something out of the deal."
