Oil exploration plumbs deepest water

A gas field rig off the Taranaki coast.

More than 130km offshore from New Plymouth the latest front in the quest for oil is being opened up.

In some of the deepest water drilled off Taranaki, a joint venture of Australian, Austrian and New Zealand companies hope for results from the Hoki wildcat well within a fortnight.

Statistically, it is more likely to be a $50 million calculated gamble that won't come off, but if it does it could be a 250 million barrel bonanza.

From there drilling starts near the already bountiful Tui field and then up to the Northland Basin where Australian-listed Origin Energy has said it will start drilling in frontier territory around the middle of the year.

In the south, massive United States oil explorer Anadarko Petroleum - a newcomer to New Zealand - and Origin will decide by August whether to spend $100m or more looking for oil and gas 65km off the coast of Dunedin.

Anadarko has extensive deep water drilling experience and it may help send a deep-water oil rig to the area.

By October ExxonMobil and Todd Energy must make a call on whether to drill in what could be a world scale field, the Great South Basin.

Petroleum Exploration and Production Association chief executive John Pfahlert said success has bred interest in the country, along with oil prices that have rebounded and the welcome mat put out by the Government.

"It's a fairly busy period at the moment. It's probably due to the fact we've got three new fields [Tui, Kupe and Maari] producing. There's a financial driver there for the companies to keep looking and get something new to look for to put their plants."

Co-operation was growing among explorers.

'There's drilling rigs here - if you've got to mobilise something yourself that's quite difficult for one company to do."

The removal of the ban on building new baseload gas-fired power stations had also acted as an incentive.

The Government was consulting the industry over a new regime which could do more to encourage explorers by setting up special low tax rates and greater provision for write-offs for exploration.

Explorers made decisions on the likelihood of finding oil or gas which was reasonable in New Zealand, how big it would be (not massive compared to "elephant" fields overseas) and the ability to write off costs, Pfahlert said.

The royalty regime in New Zealand requires companies to pay the Government 5 per cent of the value of the oil or 20 per cent of accounting profits, whichever is higher.

"Once you've found something you don't mind paying a percentage to the Crown, You know you're going to make money on it."

Last year the oil and gas sector paid royalties of $511 million - $504 million more than from the mining industry which Energy and Resources Minister Gerry Brownlee wants to see grow by opening up previously protected land for possible mining.

The minister, who has been under fire for his selling of the mining policy, was not available for an interview but in an email reiterated his intention to ensure New Zealand was an internationally attractive investment option.

The Petroleum Action Plan launched last year had attracted 18 submissions and he said any changes to the regulatory, royalty and taxation regime would be in place by the end of the year.

Offshore oil and gas explorers will have their tax breaks extended for another five years.

Late last year the exemption from tax on the profits of non-resident operators of offshore rigs and seismic vessels was extended for another five years and there was a $20 million injection into Government-funded seismic data acquisition, a programme started under the previous Government in 2005.

Brownlee said the review was looking at how Government agencies are able to support accelerated development in the sector.

"At this point no options have been ruled out."

Crown Minerals' group manager Chris Kilby said during this drilling season - from September to July - more than 40 wells targeting oil, gas and coal seam gas would be drilled.

By one measure that put New Zealand 10th in the world for exploration.

"It's right up there with total activity being the largest for a considerable amount of time. It's something like a four-fold increase from very active 1980s," he said.

Government seismic programmes, which can take up to three years off an exploration programme, had been a big lure for explorers. There was also a growing international market for gas, in the form of LNG, which meant a big discovery no longer meant it was a second rate prize.

New Zealand oil was high quality light crude, compared to the lower value heavy product elsewhere.

"We're incredibly underdrilled. As we get a number of basins with work activities then we can derisk," he said.