New Zealand Oil & Gas has pulled the pin on its plans to search for oil and gas off Patea.

Andrew Knight, NZOG chief executive officer, said that due to the prevailing economic conditions the company had surrendered the permit back to the Government, meaning its original plans to drill a well called Kaheru-1 12km off the Patea River mouth have been been officially shelved.

As the operator, NZOG held 35 per cent of the permit with its partners, TAG Oil and Beach Energy, holding 40 per cent and 25 per cent respectively. The consortium was granted resource consent in 2014 to drill the exploration well.

Mr Knight said they had looked at options to defer or amend work obligations associated with the permit, "but in light of the prevailing economic conditions an application was made to surrender the permit".

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NZOG had announced in February this year that economic conditions made the drilling uneconomic and it wouldn't meet the permit requirement to start drilling by this month at the latest.

Earlier this year the company announced a net loss of more than $27 million for the six months ended December last year. At that stage oil prices had dropped from $100 a barrel down to $67 and with development costs in the order of $30 a barrel the profit margins had dwindled. Hiring a rig would cost around $500,000 a day which also included staff costs, supply boats and other services.

But NZOG's surrender of the permit for that piece of seabed doesn't mean exploration in the area can't be taken up by other operators in future. However, that decision will again rest with the Crown. It also means scientific data gained from seismic surveys and other studies NZOG has done will now be publicly available.

He said the company believes the Kaheru permit has exploration potential, but with the permit surrendered NZOG has no current rights to explore in the area.

"The current resource consent expires in November this year so any proposal to drill a newly acquired permit over the area would require a new resource consent after that date, by a new joint venture," Mr Knight said.

NZOG has interests in eight exploration permits around New Zealand and 10,000sq km of those are in offshore Taranaki, the country's only oil and gas producing basin. It has two producing wells - Kupe and Tui.

Kaheru-1 was to be drilled at the southern end of the Taranaki Fault, which has already thrown up several oil and gas discoveries in eastern Taranaki.