Shell tentative on Great South Basin drilling

Shell will spend the rest of the year analysing hydrographic data collected by the Polarcus Alima on behalf of Shell and former partner OMV last year around the Great South Basin. Photo / Supplied

Shell says the earliest it will consider drilling in the frontier deep water Great South Basin will be the summer of 2014-15.

The Government, which is putting much store on the potential for increasing trade receipts from the oil and gas sector, said last week it expected 27 oil wells would be drilled around the coast during the next five years.

Shell and Houston-based Anadarko are raising their public profiles, both holding Southern permits for drilling, emphasising their environmental and workplace safety credentials to a public increasingly nervous about dangers associated with deep-water drilling.

In mid-October, tenders close for 23 onshore and offshore oil and gas prospects around the country, including further blocks within the Great South Basin and in Southland.

Shell has taken over from Austrian company OMV as operator of the permit in the Great South Basin, whose permit size has been halved to 16,715sq km, with government permitting agency New Zealand Petroleum and Minerals granting a five-year extension to the permit from July.

"If we decide to drill an exploration well, it is unlikely to happen before 2014-15," Shell said in its inaugural Shell New Zealand Great South Basin newsletter released yesterday.

After analysing drill data from the 1970s and 1980s, Shell was still examining its own hydrographic survey data during the rest of this year, noting that "only gas can be expected to be found in the Shell-operated licence area".

"The Great South Basin venture signals the return of Shell New Zealand as an operator in real greenfield exploration," the newsletter said.

Aside from using four independent marine mammal observers during hydrographic surveying, Shell had environmental, health and social impact assessment studies under way, and was meeting special interest groups, the newsletter said.

This week, executives from Anadarko, which plans up to two test drilling programmes for oil and gas off Oamaru next year, are meeting representatives of Dunedin businesses.

This month, Anadarko committed to test-drilling the first of possibly two deep-water oil and gas exploration holes off Oamaru's coast in 14 months.

The projects, drilling in 1100m of water, could cost $50 million to $100 million.

A new drill ship, the Noble Bob Douglas, is expected to visit New Zealand for its maiden voyage and first work programme of up to three holes within 14 months.

One hole is expected to be drilled in November or December next year off Oamaru, then another off Taranaki.

Then, depending on earlier results, a second appraisal hole might be drilled off Oamaru, at the Caravel prospect.

New Zealand's oil and gas exports totalled $2 billion for the year to June, the fourth largest sector behind dairy, meat and wood products and generated about $700 million in royalties and tax.