Prospect of big year for gas, oil

By CHRIS DANIELS

After a quiet few years, the business of exploring for energy reserves under New Zealand promises to be big this year.

Chris Uruski, a geophysicist with the Institute of Geological and Nuclear Sciences, has promoted the potential of these reserves to world oil industry players.

He said there was a lot of interest in Taranaki Basin deep-water prospecting. Bidding for allotments was expected to start soon.

Clyde Bennett, of the Ministry of Economic Development's Crown Minerals Unit, is in charge of selling the charms of exploring for gas and oil in bidding rounds - where sections of land or seabed are offered to the big oil companies.

"New Zealand is competing with a lot of other countries that are trying to attract investment into their petroleum industries," he said. "In the last two to three years, New Zealand has done very well at that. The level of activity now is the result of earlier promotional work and shows that New Zealand is right now a place that companies want to invest in."

With oil prospecting, the issue is not the presence of oil, it is whether it is worth the cost of pumping it out.

Lately, high prices have increased oil and gas production and exploration outside the Middle East, which lessens the influence of the Opec cartel.

But it is not only oil exploration that is heating up in New Zealand. Finding more gas is also a priority.

This became clear in November, when New Zealanders were told that the Maui gas field, which has provided the cheapest natural gas in the world, would run out two years earlier than expected.

New technology revealed that production from the huge Taranaki field would start tapering off in 2007, rather than 2009.

Cheap Maui gas, which accounts for more than 70 per cent of the country's gas production, has been pumped into homes since the late 1970s.

Domestic and small commercial gas consumers use such a small percentage of the total gas produced that they will not be affected by the shortfall.

Maui Development (MDL) sells gas to the Crown, which then sells it to users.

"There has been no incentive to go out and find more gas because no price signals have been sent through to the supply side," said MDL chairman Lloyd Taylor.

"We are now in a situation where that environment is coming to an end, the issue being we may have two years less time than we thought to address it."