KEY POINTS:
Getting top oil companies to start exploring the Great South Basin has not been without its difficulties.
Exploration permits for areas of the basin were yesterday awarded to a consortium led by ExxonMobil and to a group led by OMV of Austria.
Apart from the infamous weather of
Foveaux Strait and the depth of the wild Southern Ocean, an exploration boom around the world has meant a shortage of rigs.
Court issues have also delayed the long-awaited tender process.
During that period the Government has been criticised for not offering attractive incentives to entice exploratory drilling rigs here from the companies with serious money to invest.
However, in June 2004 the Government reduced royalties on gas finds from 5 per cent to 1 per cent and it was announced oil explorers would receive carry-over tax deductions to encourage more work.
Also, offshore oil royalties would fall from 20 per cent to 15 per cent for the first $750 million of gross petroleum sales, and the same for the first $250 million of onshore discoveries.
Crown Minerals received a $15 million boost to use for gathering seismic data, of which up to a third was spent on the Great South Basin.
That information goes freely to oil companies considering permit applications.
Petroleum Exploration and Production Association of New Zealand executive officer John Pfahlert said yesterday's announcement was significant for Crown Minerals.
"The presence of several large international exploration companies will, however, add a new dimension to exploration operations in New Zealand," he said.
He believed the key factor was the large size of the geological structures identified to date around the Great South Basin which suggested potential for world class discoveries.
With the exception of the unsuccessful Shell drilling programmes in the 1980s, exploration to date in the Great South Basin was by smaller to medium "second rank" companies.
Many problems will be faced by the prospective drillers. Apart from the notorious weather and potential for icebergs, drilling depths in the Great South Basin extend to more than 1200m.
Pfahlert said although many of the Taranaki fields were in depths of less than 100m, rig technology could cope with the greater southern depths.
n the question of rig availability, the majors would have long-term leasing arrangements compared to smaller companies which would have to band together to get a rig to New Zealand.
It has been decades since oil rigs were last in the Great South Basin.
Between 1976 and 1984, the area was explored by Hunt, Phillips, Placid, Occidental, Husky and Ultramar.
One of the eight wells, Kawau 1 found gas condensate, and two others, Tara 1 and Toroa 1, had oil and gas shows.
The Toroa well had to be abandoned after an error in the drilling and recovery procedure.
When Hunt Petroleum test drilled it found several wells but capped them because they were not financially viable.
In the same vicinity, Bounty Oil and Gas NL and Magellan Petroleum New Zealand held exploration permits.
These included the prospects Mehrtens and Cullen which begin about 15km offshore from Kaka Point, and the Tara, Toroa and Lomu prospects. Several were credited with the potential to contain a million barrels or more of oil.
But in spite of plans to test drill the areas they did not get past seismic testing stage.
However, late last year the oil rig Ocean Patriot spent about a month 21km off the coast from Oamaru.
The Ocean Patriot drilled a 3000m exploratory well. But the well was capped and abandoned as it was not found to be commercially viable.
It was the first drilling in the South Island since the 1980s and was undertaken by an Australian consortium led by Tap Oil.
- OTAGO DAILY TIMES