KEY POINTS:
The Great South Basin oil exploration roulette wheel is spinning again - and this time the punters have sizeable bankrolls.
The 500,000sq km basin is one of the nation's largest - covering an area half as big again as New Zealand's land area - and has only been lightly explored.
But now two big consortiums say they are willing to spend $1.2 billion exploring the basin - effectively doubling the spend on oil and gas exploration over the next couple of years.
Exploratory drilling in waters 500m to 1250m deep will cost as much as US$100 million, with production likely to cost hundreds of millions of dollars.
Only nine wells have been drilled in the basin - six of them in the 1970s by Hunt International Petroleum and a couple drilled in the early 1980s by Placid Oil.
Phillips stirred up a flurry of interest with its claims at the time that the basin potentially holds 10 billion barrels of recoverable oil but the gas and oil shows from exploration wells failed to show enough commercial promise for gas and only traces of oil.
Since then explorers such as Occidental International, Antrim Oil & Gas, Bounty Oil & Gas and Magellan have taken out permits. No wells have been drilled by a Toroa 4 seismic survey was carried out by Bounty and Magellan in 2004.
Bounty and Magellan were following an age-old tradition of generating prospects - without being in a position to do their own drilling - and then scrabbling around to find someone interested in funding them.
Much more is expected from last week's allocation of exploration permits in the heart of the basin.
One licence area went to an American-based consortium, ExxonMobil (with New Zealand's Todd Energy holding a 10 per cent stake) and three other areas to Austrian energy giant OMV and its Thai partner, PTTEP Offshore Investment, and Japanese company Mitsui Exploration.
The Government's mining agency, Crown Minerals, split up the basin into 40 different blocks but the blocks taken up cover only 18 per cent of the basin, including the sites of the earlier exploration wells.
Some observers have suggested the limited take-up of blocks in the basin is disappointing, particulalrlysince the Government and Crown Minerals officials have at times talked up the basin (with the kind of hyperbole last seen from Phillips Petroleum) as likely to attract unprecedented interest from around the world.
A consultant, Mike Patrick, said there was talk in the sector that - despite a brave face by the Government - the results of the offer were a bit disappointing.
"Geologists say the really, really good-looking blocks have been awarded - but there's all these other areas in the offer that have not been taken up," Patrick said.
"They've awarded the blocks which were always going to be the prime blocks because of the data collected by Hunt International."
It could be that companies felt oil prices were not yet high enough to make it worthwhile to take a punt on a wildcat area like the basin.
"Or it could be that NZ is still seen as being gas-prone and the areas that have been awarded have had oil shows as well so companies have opted for blocks more likely to deliver oil rather than just gas," Patrick said.
Energy analyst Chris Stone said the blocks were those in the central part of the basin with the greatest thicknesses of sediments.
"I think the Government may be disappointed they didn't get more permits away but the quality of the joint ventures' awarded blocks was high."
He said it was "unusual" for a company the size of ExxonMobil to be exposed to just one permit in a country.
"I think what will happen is that they will do more technical work on the permit," he said.
"If they see real promise, and they get to the point of drilling a well, it would be logical for them to tie up additional acreage.
"If Exxon was to come to the Government and say they wanted drill a well, but needed protection acreage to protect their position, then I think the Government is going to be pretty receptive to that."
John Pfahlert, executive officer at the Petroleum Exploration and Production Association, predicted that if there were signs of successful exploration in the basin, the Government might later put up the remaining blocks for another round.
"It may be that the incumbent who already has one of the blocks wins it - it may not be," he said.
"Once someone discovers a large deposit down there, you can be sure there will be a lot more interest in the remaining area.
"I thought there might have been at least one more consortium - a total of three would have been ideal, and four or five would have been beyond normal expectations."
Patrick noted the Government was still talking with Greymouth Petroleum but any progress would require the company finding a major partner.
He said the participation of Mitsui - a partner in Taranaki's Tui venture - and PTTEP (the exploration arm of PTT, Thailand's state-run national petroleum enterprise) was in line with a trend for Asian countries to invest closer to home in the Asia-Pacific region, which had high unexplored petroleum potential.
"Big Asian oil users which don't have their own supplies are looking at securing their own supplies outside of the Gulf - outside of Saudi Arabia, outside the conflict zone and outside the American sphere of influence."
The extension of OMV from its interests in Taranaki, was also interesting, in light of its role as one of the largest companies in the EU.
"They're signalling they are seeing New Zealand as a major investment target."
- NZPA
