While the Waikato block covers oil exploration, the most likely target in the area is coal seam gas. A block near Huntly has previously produced trial quantities of the gas.
David Binnie, general manager of NZ Petroleum & Minerals, a branch within the MED, said land listed as unavailable for mining under Schedule 4 of the Crown Minerals Act will be excluded from exploration.
Once an operator is granted an onshore exploration permit or out to 12 nautical miles offshore, they are also required to apply for any necessary resource consents under the Resource Management Act.
The finalised blocks are expected to be released for competitive bidding towards the middle of this year.
New Zealand and international companies will then be invited to tender for petroleum exploration permits.
Applications will be evaluated on a number of criteria including the applicants' corporate standing, technical and financial capability, risk management practices, operating experience and proposed work programme.
Permits are expected to be awarded by the end of this year.
The change to the permit regime implements the Government's strategy announced last August.
The Government will exclusively use a "block offer" annual competitive tender and no longer use first-in, first-served permitting, known as priority-in-time.
"Priority-in-time permitting limited the Government's ability to strategically manage New Zealand's oil and gas resource. It was a reactive approach, where companies could apply to explore any area in New Zealand at any time," said Binnie.
"Using an annual block offer approach enables the Government to take more proactive control over where and when areas are opened for exploration. It will also provide more certainty and opportunity for upfront engagement with iwi, local government and industry."
Binnie said a report into potential royalty income showed that a 50 per cent increase in exploration could increase royalties to $12.7 billion.
