An oil company's claim the East Coast has the potential to become "the Texas of the south" is an overstatement, a New Zealand oil exploration expert says.

Canadian exploration company Tag Oil said in a report to investors that the area was "literally leaking oil and gas".

The company plans to develop its oil exploration permits between Gisborne and Dannevirke over the next four years, having signed a $100 million deal with multinational oil independent Apache.

The "Texas of the south" claim comes as the Government looks to make significant changes to the Crown Minerals Act next year to make it easier for companies to find and extract natural resources.


GNS exploration geophysicist Chris Uruski today said Tag Oil's assessment of the East Coast's potential was accurate but it was important not to have unrealistic expectations.

"It is and it isn't (accurate). It is leaking oil and gas, that's for sure. We know that there are around 300 oil and gas seeps up and down the East Coast onshore," he told APNZ.

But unleashing that potential would be the challenge.

"As far as it being the Texas of New Zealand is concerned, that's probably overstating the case really, in my opinion.

"The geological structure of the East Coast is much more complex than in parts of the United States they've actually used as analogies."

Tag Oil had compared the area to North Dakota, where oil could be extracted by drilling "almost anywhere" where hydrocarbon-rich bakken shale occurred.

But the Waipawa black shale on the East Coast was more challenging to extract oil from.

Using conventional methods, explorers would search for some of the area's hundreds of impervious dome-like structures, which trap oil as it migrates up from the shale.


But Uruski said Tag Oil would also be looking to extract oil directly from the shale itself, which was a more difficult proposition.

The challenge was to find shale deep enough for the biological material in it to start breaking down into oil, but not so deep that the oil had seeped away into the environment.

"If it's too shallow, the biological carbon won't have broken down into oil ... If it's too deep, it will have cooked out completely and there'll be no oil left," he said.

"You've got to find it at exactly the right level in the East Coast, and it's hard to do that without thoroughly mapping the area."

Uruski said there would be some oil at the right depth.

"But not all of the East Coast, for sure - so little patches here and there."

Uruski said Texas had hundreds of thousands of pumps spread out over a vast area - a sight that amazed him when he first flew over it.

"I can't imagine that sort of picture is going to happen in the East Coast. There'll be small patches of tens of square kilometres where the oil will be at the right depth, so there'll be maybe one well-head there.

"They'll be able to deviate wells to the whole of the productive area from that single well-head, so it's never going to look like Texas.

"And I don't think we're going to get the same volumes of production, but for New Zealand it could be very significant."

Uruski said there were probably billions of barrels of oil in the East Coast, but the area was unlikely to be the most productive in the country.

Offshore Canterbury and the deep water off Taranaki were looking "very promising".

The East Coast's main advantage was that the oil was onshore, making it relatively cheap to explore.

A find of 100 million barrels of oil would "make" Tag Oil, and the benefits to New Zealand would be just as big, Uruski said.

He said the East Coast had intrigued oil explorers for the last 140 years.

"The first wells were drilled in the 1880s and there was a little bit of production - not a lot, but some."

The wells were abandoned after the oil price crash of the 1890s.