Apache has agreed to explore and appraise the potential development programme of Tag's East Coast Basin exploration permits PEP 38348, PEP 38349 and PEP 50940.
Two are in the Gisborne region and one in Hawke's Bay.
The work is planned to take place over the next four years.
Seismic operations will start this month with drilling to commence next year.
Tag's website says it plans to fully penetrate the underlying Waipawa Black Shale and Whangai Formation fractured oil-shale source-rocks at an anticipated depth of 1600m in the Boar Hill structure.
Tag uses fracking - hydraulic fracturing - to increase the potential of shale oil deposits.
A cocktail of chemicals and water is injected at high pressure to fracture deposits and improve gas flow.
In the United States there have been reports of chemical contamination of water supplies from fracking.
Some residents have been able to ignite their water.
In Hawke's Bay, water drawn off the aquifer is used for public water supply and irrigation. Crops on the Heretaunga Plains area provide over 40 per cent of the total New Zealand harvest.
Mining firms are reluctant to list the exact ingredients of their drilling fluids, saying they are commercially sensitive.
Another claim is that fracking destabilises the earth - millions of litres of water are used - increasing the likelihood of earth shifting.
Overseas, waste water is buried in disused wells, which further risks the contamination of groundwater.
The Government is actively encouraging the development of oil and gas reserves, last week it announced it was reviewing the Crown Minerals Act.
Acting Minister of Energy and Resources, Hekia Parata, said the Government's goal was to make the most of all energy assets.
"We can't just turn off the tap in our journey to a lower carbon economy.
"We also can't ignore the major economic opportunity that continuing global oil demand could provide New Zealand.
"Petroleum was our fourth biggest export earner in 2010," she said.
Tukituki MP Craig Foss, said Taranaki was a model for Hawke's Bay.
"The Taranaki region has seen substantial growth in both GDP and full time employment figures as a result of the development of the oil and gas industry, which is an indication of what can happen here in the Bay," he said.
Mr Foss said reports countered claims of fracture contamination. Tag Oil in Taranaki did not respond to a request for comment.
