Gas deal gets drilling started

By CHRIS DANIELS energy writer

Plans for the summer oil and gas exploration drilling season are well advanced, with New Zealand Oil and Gas (NZOG) among the explorers finalising preparations.

It has just signed an agreement with a "major international company" which will help pay a big part of the cost of drilling at least two wells off Taranaki this summer.

In return for helping to pay for the drilling, the unnamed company will take a 12.5 per cent stake in NZOG's prospect. 7.5 per cent of this stake is being sold by NZOG, with the remaining 5 per cent coming from Pan Pacific Petroleum, formerly a part-pwned subsidiary of NZOG.

Eric Matthews, NZOG's exploration manager, said the company would not be named for another six weeks at least, and there were some final approvals that needed to be obtained first.

"I think it's important our shareholders know there's a good deal been done," he said.

Two wells will definitely be drilled this summer, near the Tui oil play.

Depending on the results of the first, a third may be drilled.

NZOG is also in the midst of a "re-entry" into a once-plugged onshore well known as Tuihu.

The company has a 20 per cent stake in the well.

Swift Energy has 50 per cent, Origin Energy 20 per cent and Indo-Pacific 10 per cent.

They estimate the well has the potential to hit two reservoirs of up to 1.4 billion cu m of gas each.

Although this is small - the offshore Pohokura field is estimated to have at least 28 billion cu m - the Tuihu field's proximity to existing pipelines and infrastructure means bringing the gas to market will be quick and cheap.

Information gathered when the Tuihu well was first drilled in 2000 led NZOG and others to believe there may be gas nearby.

Although NZOG and others are drilling away, the Government's push to get more oil and gas exploration in the deep waters far off the New Zealand coast has met a disappointing response.

The Government, through the crown minerals division of the Ministry for Economic Development, has been promoting to big oil companies at conferences and seminars around the world the attractiveness of deep-sea drilling.

The Institute of Geological and Nuclear Sciences, in a joint venture with the private company TGS Nopec, conducted a big seismic survey off Taranaki and is providing the data to exploration companies.

But only one bid has been received for a licence to explore the area, despite five blocks being offered.

The next bidding round, for nine blocks on the continental shelf off north Taranaki and eight onshore Taranaki blocks, closes at the end of this month.

New Zealand faces a potential shortfall of natural gas, especially after the Maui field runs down, and the need for new discoveries is becoming more pressing.

Contact Energy and Genesis, both of which burn gas in their power stations to produce electricity, joined forces last week in a deal to investigate importing liquefied natural gas.

Natural gas cooled to liquid form is 1/600th its original volume and thus far easier to transport.

It is shipped in insulated tankers, primarily from Southeast Asia, and "regasified" to go into the natural gas pipeline system and made available to homes and businesses.