KEY POINTS:
Canadian oil explorer Trans-Orient Petroleum Ltd says it has found rock with the potential to contain billions of barrels of oil on the East Coast but warns it could take years to extract.
The company said in Vancouver today that AJM Petroleum Consultants had made an assessment of
the company's fractured oil-shale in its 100 per cent-owned 890,000 hectare prospect in the East Coast Basin.
It estimated the oil available from just 10 per cent of the area was 12.6 billion barrels.
By comparison, on the other side of the North Island, the Australian Worldwide Exploration (AWE) company's Tui field is estimated to hold the equivalent of 50 million barrels.
Trans-Orient chief executive Garth Johnson said the consultant's advice confirmed its interpretation that the onshore East Coast Basin "is highly prospective for a fractured oil shale play".
"We were originally attracted to the East Coast basin of New Zealand by the hundreds of active oil and gas seeps naturally occurring on our lands," he said.
"We've tested a number of these seeps and geochemically confirmed the sweet, light (500API) crude oil is being generated from these two world class source rocks," he said.
Trans-Orient has two onshore permit areas in the basin covering about 8750 square kilometres.
One is north of Gisborne and the other is mostly south of Napier and Hastings. Chief operating officer Drew Cadenhead said his company's exploration was in its very early stages
"It's not like a gusher's going to be discovered and everyone in the area is going to get rich."
The company had done seismic testing "quietly" for several years and under terms of its permit was obliged to drill two test wells by November next year.
The area was rich in fractured rock which allowed oil to flow through it, but the key was the speed at which it came to the surface, said Cadenhead.
Oil prices have fallen from a peak of US$147 in July but at even around US$70 such projects were viable.
Fractured shale projects in North Dakota were producing oil at the rate of 1000 barrels a day.
Cadenhead said if East Cape wells produced hundreds of barrels a day they would be economic.
According to Wellington oil exploration consultant Mac Beggs fractured source rock has proved quite successful in North America over the last few years, adding quite substantial reserves.
The rock lacked the permeability for oil to flow, and had only become viable because of extraction technology breakthroughs.
Trans-Orient executive chairman Dave Bennett has previously predicted that the company's prospects in the basin could hold as much as 1.7 billion barrels of oil in place.
Trans-Orient has also planned to investigate commercialisation of two shallow producing features in the northern permit area, at Te Puia Springs, south of Ruatoria, where seeping oil has previously been used to heat a hospital.
Today, Johnson said the best estimate after analysis of the field was
for 12.6 billion barrels of hydrocarbons for both the Waipawa and Whangai shales.
"There have been a number of modern wells drilled in the East Coast Basin targeting conventional exploration prospects, but Trans-Orient will be a first mover in the Basin to leverage North American knowledge and technology to test the unconventional potential of these fractured oil shales in New Zealand," he said.
The estimate of "original oil in place" at 12.6 billion barrels was based on less than 10 per cent of its lands.
"We feel there is tremendous upside potential to both the conventional prospects and the unconventional fractured oil shales within our permits."
Grant Bradley, NZPA