Southern ocean beckons explorers

Rights to explore for oil and gas across huge swathes of the Southern Ocean have been put up for grabs by the Government in the hope that some of the world's largest oil companies will start searching.

Soaring world energy prices have made probing the farthest reaches of the globe attractive and demand to explore the Great South Basin is expected to be strong.

A total of 40 identical blocks measuring 80km by 113km - about 9000 square kilometres - are being offered.

Eight wells were drilled in the basin between 1976 and 1984, with hydrocarbons recorded in four. At the time, water depth and the isolation made gas reserves in one well "non-commercial" and mechanical problems meant strong oil shows in another were not properly tested.

The Crown Minerals division of the Ministry of Economic Development said yesterday that major international companies had repeatedly expressed interest in the bidding round, which will begin on February 1.

Crown Minerals group manager Adam Feeley said he thought it likely a number of large companies would want to explore the Great South Basin.

Permits are awarded to those companies that show the most "ambitious and achievable" work programmes of drilling and exploration.

"We're trying to get a lot of acreage away but we're also trying to get a lot of entrants there," Feeley said

"It's pretty much, in exploration in New Zealand, a place of myth. I think there'll be a lot of interest."

Chris Stone, an energy specialist and head of research for investment bank McDouall Stuart, said New Zealand had an attractive exploration regime and the Great South Basin had huge potential.

But with the big potential rewards also came large risks.

Much of the area was in deep water unsuitable for semi-submersible drilling rigs, so exploration would need to be done by large drilling ships.

"When you look at this, there's lots of potential but there's no question it's high-risk acreage. I really, really hope we get sizeable companies in to take up that challenge."

Stone said it was important to realise that this country was not the only area of interest for the big exploration companies.

"If you're sitting there in Houston or Calgary, and you've got a billion dollars to invest, where are you going to put it? New Zealand is just one of many options."

Feeley and Crown Minerals say the enormous potential of the Great South Basin is "commonly acknowledged".

"The sooner large-scale exploration starts there, the sooner we will be in a more informed position to know how the basin might contribute to long-term energy needs," he said.

"A distinct possibility" for gas in the Great South Basin was fields so big that, if discovered, could even support production of liquefied natural gas (LNG).

"There is an expectation of gas down there. Gas in a very, very large scale. Gas which is so large, that even at that distance from market and at those depths, would be commercial," he said.

"We know for a fact that companies have carried out a preliminary assessment and it's met their threshold for a new country entry. And those thresholds are around the 5 tcf (trillion cubic feet) of gas."

The Maui gas field, so far New Zealand's biggest, was 3.5 tcf.

The gusher that never was

One of the more persistent stories surrounding the Great South Basin is that Hunt Petroleum, when drilling 50km east of Stewart Island during the 1980s, found a "gusher" but plugged the hole and kept it secret.

Otago man Brian Jackson published New Zealand's Lost Oilfields last year, which said that records of this oil strike were boxed up and flown out of the country.

Jackson claimed Kiwis working on the drilling rig were locked below "so that they could not witness what was floating on the sea". "The well was capped quickly," he said last year. "The anchors were pulled and the rig was put under way.

"When it had moved away from the oil slick, the New Zealand crew members were unlocked."

His explanation of why they simply left was that the Hunt Petroleum executives were "pretty sour with how the NZ Government was treating them".

Crown Minerals has said the story is a myth.