East Coast gas tender still under wraps

David Hunt

As oil and gas companies wait for news of who has won the right to explore for oil and gas off the East Coast, New Zealand's biggest thermal power generators have promised they will not start importing gas until absolutely necessary.

The tender round for exploration rights off the East Coast of the North Island closed last month, but there has yet to be any announcement about who won.

It is significant because the Government stumped up money to help pay for a seismic research ship to survey the area - making the data available to companies that might want to come and look for oil and gas in the under-explored area.

Associate Energy Minister Harry Duynhoven was asked in Parliament last week about the East Coast offer, where applications closed on February 17. The energy sector had been expecting to hear who had won these bidding rounds at an annual petroleum conference held in Auckland this month, but there was no announcement.

National MP Phil Heatley asked Duynhoven to "admit to the House" that he had failed to secure bids for the East Coast blocks. The Minister responded by inviting MPs to "wait for the announcement on successful block offers".

Duynhoven said bidding parties for the East Coast had said "that the timely availability of new data has materially changed perceptions of the potential of the East Coast basin, and stimulated their wider interest in New Zealand".

A successful big gas find would mean the day New Zealand imported natural gas to fire power stations would be put off, potentially for decades.

The hunt for gas has taken on more urgency in recent years with the Maui field near the end of its useful life.

Contact Energy chief executive, David Hunt and Genesis Energy chief executive Murray Jackson, in a joint statement on Friday, said that planning and preparation for LNG importing was needed now, but any final decision on whether to proceed would be left as late as possible.

Importing LNG may have an important role to play in bridging a gas supply gap and it was crucial the option was available if required, the energy chiefs said.

About a quarter of New Zealand's electricity is generated with natural gas.

Contact and Genesis say importing natural gas will not "undesirably expose" New Zealand to high oil prices. Nor would it make the country's current account deficit significantly worse, they said. Importing $400 million worth of gas per year would add about 1.1 per cent to the current account, about the same as cosmetics imports.

Mike Patrick, executive officer of the Petroleum Exploration and Production Association, said there was a feeling in the industry that Crown Minerals might have got a few acceptable bids for the East Coast area.

It was possible Crown Minerals were now negotiating with the exploration companies to try to agree on an exploration work programme.

The most popular of the four blocks on offer was likely to be the southernmost, closest to Napier and Hastings. Patrick said it was great that the Government had paid for the seismic research to be done, but the area was complex geologically, making it a difficult area to explore.

More wells have been drilled in New Zealand over the past few years than in decades, spurred in part by high world oil prices, but also by the increasing attractiveness of natural gas discoveries. But the increase in drilling has not meant great new discoveries, with a low success rate of recent explorations, particularly in the onshore Taranaki region.

In the past 24 months, 69 wells were drilled. Of the total 74 wildcat wells - oil wells drilled in an unexplored area - there were 12 discoveries, a success rate of about 16 per cent.