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Greymouth Petroleum says gas has flowed from its onshore Kowhai field well in North Taranaki.
The privately-owned company says the well, to be drilled by subsidiary Petrochem, could yield significant gas and would be in production within the next few months.
Aside from selling on the gas spot market which the Greymouth firm pioneered two years ago, the gas would be used for fertiliser manufacturing in Tauranga by Ballance Agri-Nutrients.
Gas was from a Matapo sandstone formation which Greymouth chief executive Mark Dunphy said was significant because the sandstone of the reservoir is present across large areas of the Taranaki Basin.
The Kowhai field neighbours other Greymouth permits and is close to common carrier gas pipelines and Greymouth processing facilities.
A company spokeswoman said drilling was part of the most extensive programme by any gas explorer in the country this year.
Greymouth Petroleum group companies hold the Turangi, Kowhai, Moturoa, Kaimiro, Ngatoro, Surrey, Windsor and Radnor oil and gas fields in Taranaki. In addition to these fields, Greymouth holds exploration permit interests in the Taranaki and Great South Basins.
Energy analyst at McDouall Stuart, John Kidd, said it was difficult to draw conclusions on the significance of the flow but the Kowhai well was in a good location rich with high producing fields, Mangahewa, McKee, Turangi and Pohokura.
The fact gas came from the sandstone layer was good news for the sector, he said.
Greymouth also holds gas and oil companies through Petromagallanes in Chile's Straits of Magellan and on Tierra del Fuego. Drilling in the area is due to begin later this year, the spokeswoman said.
