Oil price fuels NZ energy scramble

Soaring world oil prices and local demand for natural gas are firing interest in New Zealand's energy exploration sector, with news of global interest in the Great South Basin expected this month.

Crown Minerals, which oversees oil and gas permitting and prospecting, is to disclose who has won the right to look for energy under the sea across a huge region southeast of Dunedin. Eight wells were drilled in the basin between 1976 and 1984, with hydrocarbons recorded in four.

At the time, the depth of the water and the isolation made gas reserves in one well "non-commercial" and mechanical problems meant strong oil shows in another could not be properly tested.

Further north, European energy giant OMV has just finalised its production plans for the Maari oil field in Taranaki. About 80km from the coast, Maari, discovered in 1983, is the country's largest undeveloped offshore oil field. It is 69 per cent-owned by OMV, which is also the operator. Todd owns 16 per cent and Australian company Horizon Oil has 10 per cent.

The owners are expecting to spend about US$360 million ($522 million) developing the field, and the first oil is expected around March 2008.

With an estimated 50 million barrels of oil, it has a predicted life of more than 10 years.

OMV, based in Austria, expects about 35,000 barrels of oil a day to come from the Maari field. The company produces 340,000 barrels a day worldwide.

And the owners of the Tui field have decided to spend more than $300 million bringing oil from off the Taranaki coast by June 2007.

But a high price for oil does not make finding the stuff any easier, with Crown Minerals this month reporting the failure of two Taranaki exploration wells.

A well drilled by Todd Energy near New Plymouth airport was plugged and abandoned after failing to find commercially viable fuel.

An exploration well named Richmond-1, drilled by Tap Oil in the onshore Taranaki area, has also been plugged and abandoned. Tap is an Australian company, based in Perth.

High oil prices have made the economic case for drilling wells much greater, as has the shortage of domestic gas supplies.

The big thermal power generators Contact Energy and Genesis are looking for new gas discoveries to fuel their power stations and are poised to announce their favoured location for a terminal to process imported liquefied natural gas (LNG).

Taranaki and Marsden Pt are prime contenders, with Taranaki the more likely site.