NZOG celebrates offshore oil find

By CHRIS DANIELS energy writer

NZOG shareholders are popping the champagne, with news that the company's latest exploration well has struck black gold.

The Amokura-1 well, drilled off the Taranaki coast, looks to be a great success, with discovery of a "12-metre gross oil column" announced to the NZX yesterday morning.

NZOG, which has a 12.5 per cent interest in Amokura-1, says the well, expected to cost between $15 million and $20 million to drill, has the potential for 15 million to 35 million barrels of recoverable oil. At current prices, 25 million barrels would mean gross revenue for the well-owners of about $1.2 billion.

"Initial results indicate that there is a 12-metre gross oil column at the top of the F Sand," the company told shareholders.

"Reservoir quality appears to be excellent, consistent with that encountered at Tui-1 some 4km to the southeast."

This means a 12m layer of oil-saturated sand has been found. How far this layer extends from the well site will be determined by seismic surveys and drilling appraisal wells.

More analysis of the well will take place over the weekend and the results announced on Monday.

The discovery is good news for more than just NZOG shareholders, as the Government is trying to encourage energy exploration companies to come to New Zealand.

It will be hoping for new natural gas fields to be found, thus blunting the pain caused by the depletion of the mighty Maui field.

Big electricity generators are waiting for new gas discoveries before they can proceed with plans to build gas-fired power stations.

Oil is the best thing to find at the bottom of a well, since it can be pumped cheaply and transported to a thirsty world market. If gas is found, expensive infrastructure is needed.

But the more oil discoveries like Amokura there are, the more wells are drilled by exploration companies, thus increasing the chances of finding gas fields.

Petroleum Exploration Association executive director Mike Patrick said the Amokura discovery was great news for the industry.

"It shows we are prospective in terms of oil, not just gas, which is good for our security of supply in New Zealand. Equally as important, it confirms the prospectivity of the offshore Taranaki ...

"Yes we need gas, but you only need to look back to the 1970s to see we also need security of oil supply.

"At the end of the day we come here to find oil. We are an oil business, not a gas business.

"Up until Maui started going down, gas was the second prize and we didn't do much with it - you couldn't sell it. That's changing."

After Amokura-1 has been drilled, the Ocean Bounty rig will move to drill a well in an area called the Pukeko prospect.

This well will target a series of reservoirs each with potential reserves of more than 80 million barrels.

US company Transworld owns 45 per cent of the well and is the operator, while Australian company AWE owns 20 per cent. Pan Pacific, which is listed in Australia and New Zealand, owns 10 per cent and Japan's Mitsui 12.5 per cent.