Progress in TAG's oil search

The drilling rig has long been gone but production testing of the Ngapaeruru-1 well east of Dannevirke is about to begin. Photo/Thinkstock

TAG Oil is proceeding with its Ngapaeruru-1 well east of Dannevirke after tests have confirmed the presence of petroleum-bearing rock which will respond well to fracking.

TAG made the update on the well's progress as part of its third-quarter financial results.

It said a study made by independent experts provided "a number of encouraging attributes, and important confirmation that TAG's drilling mud log interpretations from the Ngapaeruru-1 well demonstrate that oil is being generated in the Whangai source rocks".

TAG said it will perforate the well in the coming months, hoping to see if oil or gas will flow, which is "a critical step to pursuing the economic viability" of the project.

Because the source rock is naturally fractured, fracking might not be necessary.

The study's report indicated several positive aspects about the Whangai Formation source rock.

At the well it is 293m thick and highly naturally fractured. The rock is porous, permeable and has a very low clay content, "indicating fracture stimulation can be highly effective".

Horizons District Council chief executive Michael McCartney said no resource consent application to frack had been received.

He said fracking, the injection of sand-bearing water into rock in order to crack it and keep the cracks open, was a discharge into the environment, so consent was required.

Fracking is controversial due to environmental concerns over chemicals added to the fracking water.

In Taranaki, TAG has reported increased revenue for the three months ended December 31, up 19 per cent to $12,939,442 when compared to the same period last year. For the nine-month period it was up 35 per cent to $43,522,224.

In December TAG announced a joint venture inland from Gisborne with fellow Canadian company East West, which has interests in Romania, California, Morocco and India.