Oil and gas company OMV is talking up the results of its final exploration well of its campaign, despite testing being curtailed because of Covid-19 restrictions.
The Austrian company, which supplies more than half of New Zealand's natural gas from wells in onshore and offshore Taranaki, has been undertaking an exploration campaign since late 2019, which is expected to have cost several hundred million dollars.
Gabriel Selischi, who head's the company's Australasian business from Wellington, told the Herald that the third well, about 50km off the Taranaki coast in the Toutouwai permit, showed "several hydrocarbon-charged layers" on the way to a total depth of 4,317 metres.
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"We have encountered positive signs that lead to the conclusion of a discovery," Selischi said.
Under normal circumstances the COSL Prospector, the Chinese-owned rig which is undertaking the drilling, would have undertaken further testing, but the process had to be halted because of restrictions due to Covid-19, with many specialist crew needing to be brought in from overseas.
But Selischi said he was optimistic the programme would move forward to further drilling to test the reservoir, then potentially commercial development.
OMV holds the permits to explore the Toutouwai in partnership with Mitsui of Japan and a separate joint venture between OMV and Sapura of Malaysia.
If OMV is correct, Toutouwai would represent the first commercial discovery of oil and gas in New Zealand in more than a decade, when gas supplies look increasingly stretched.
As well as being used by many households, gas is used to generate electricity and for many industrial uses.
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It also follows moves by the coalition to end new oil and gas exploration, although Prime Minister Jacinda Ardern has said the rights of existing permit holders will be maintained.
On Friday, Greenpeace, the environmental lobby group claimed for itself "a win of generational significance" when OMV confirmed that it would not be conducting a fourth well this year. Greenpeace has doggedly targeted OMV, but distanced itself from two people who boarded the COSL Prospector earlier this year and who later needed rescue.
Selischi said he was confident that the need for secure energy supplies would help move the project towards further appraisal wells and ultimately commercial development.
"You want to have the energy source close to you, and you want to know how it's produced," Selischi said.
"With what's going on around us, there will probably be more discussion about producing locally what you consume. So I'm optimistic about this and I think that will help going towards a positive resolution with the [permit] partners, and also the possibility of mobilising the rig in order to drill the second well or wells."
Kirk Hope, chief executive of BusinessNZ welcomed the drilling results.
"It's some pretty welcome economic news for New Zealand at a pretty challenging time," Hope said.
"If it's commercially viable, it's good revenue for the Government and it's good for Taranaki in terms of new jobs and flow on benefits for the wider economy" as well as improving the security of New Zealand's electricity generation and other industrial uses.
In December, energy analyst John Kidd estimated that if OMV made a commercial discovery in Toutouwai it could be worth as much as $1.6 billion to the Crown in the form of royalties and taxes.
Oil industry body Pepanz said while more work was needed to confirm the discovery would be developed, a discovery could have substantial benefits.
"It could also help our long-term energy security given we have less than 11 years of natural gas reserves left. We need affordable and reliable energy to rebuild our economy and power our export industries," Pepanz chief executive John Carnegie said.
"Reports of the demise of our sector have clearly been exaggerated. The energy provided by natural gas and oil still has a very important role to play as we transition to a lower emissions world."