Oil consortium takes fresh steps to strike it rich off Taranaki

The exploration well is near the Tui field which produces thousands of barrels a day. Photo / Supplied

The consortium which has found traces of oil in an exploration well off the Taranaki coast should know more about prospects for commercial development over the next two days.

New Zealand Oil & Gas, a 12.5 per cent partner in the Tui SW-2 offshore exploration well, said monitoring equipment would be lowered into it today.

The company's share price jumped 5c to $1.41 after the announcement, but a company spokesman said it would be months before a decision on commercial development was made.

"It's very early days - obviously we were reasonably hopeful of finding oil at this location because it was so close to producing oil fields."

The exploration well was drilled by the Kan Tan IV and is about 2km away from the main Tui field, which has produced 28 million barrels since 2007.

The spokesman said it was possible Tui SW-2 could be "in communication" with the producing reservoir or it could be a separate structure with the same sands. It is in water about 100m deep.

"At this stage we have oil shows and more work has to be done to try to get a handle on what more needs to be done there."

Other participants are AWE with a 42.5 per cent stake in the permit, Mitsui E&P Australia 35 per cent and Pan Pacific Petroleum with 10 per cent. The Kan Tan IV will be moved several kilometres to the east to drill on the outer edges of the Tui field.

Yesterday's announcement followed the unsuccessful drilling in April of the Hoki wildcat well in deeper water off Taranaki in which NZOG also had a stake.

* Solid Energy plans to build an underground coal gasification pilot plant in Waikato by the beginning of next year.

The taxpayer-owned company says the $22 million plant will open up access to coal seams which would otherwise be nearly impossible to mine using conventional mining technology.

The process gasifies coal very deep underground, producing syngas that can be used in electricity generation, the production of pure hydrogen and to make a range of high-value products such as methanol, synthetic transport fuel, fertilisers or waxes, plastics and detergents.

Solid Energy's general manager of new energy Brett Gamble said the "technology represented a huge opportunity for New Zealand to further ensure our energy security" by using the most plentiful mineral resource - coal.