Oil drilling plan over next two years on 'unprecedented' scale

BUSINESSDESK: Almost 90 new oil exploration and production wells are planned in New Zealand over the next two years in a programme that independent analysts Edison Investment Research say will cost oil and gas companies as much as $2.3 billion.

The estimates are contained in Edison's inaugural New Zealand Petroleum Yearbook, perhaps the most comprehensive private sector compilation of the prospects for the local energy sector ever attempted.

Some 60 of the 88 potential wells identified in the report are onshore, while some of the 28 offshore wells are planned for deepwater prospects off the Taranaki and Canterbury coasts and in the Great South Basin.

The plans raise the spectre of controversial deepwater exploration activity in election year, after the Texan explorer Anadarko announced recently it had been unable to source a deepwater rig for the coming summer but was aiming to bring equipment to New Zealand waters in 2013-14.

The surge in onshore activity is partly owing to a jump in successful drilling, particularly by mid-sized Canadian company TAG Oil, workovers of the McKee and Mangahewa onshore fields by Todd Energy, and activity by a new entrant explorer, New Zealand Energy Corp.

Edison estimates as many as 28 offshore wells are also planned, including workovers at the Maui A and B platforms, and could see Anadarko, Shell, OMV and Origin Energy – all of whom have deepwater offshore prospects – forming investment "clubs" to share the cost of rig mobilisation, with decisions likely by the end of this year for drilling late next year.

Led by researcher John Kidd, who also authored the 2009 Stepping Up report for then Energy Minister Gerry Brownlee on unlocking New Zealand's petroleum resources, the report says Anadarko has "a strong preference for a specialised harsh-environment deepwater rig to accommodate possible southern ocean conditions".

While none of the wells is a sure bet either to be drilled or to find oil and gas, Edison says "the underlying theme is clearly one of an extremely full and well-funded forward expansion programme of investment".

Also possible is an extended contract for a Chinese national oil company rig, leased at present by Shell-Todd Oil Services to drill three wells in the Kapuni field, which could see activity in the Taranaki Basin alone exceeding $2.5 billion in a "very short time".

The predictions come as Economic Development Minister Steven Joyce steps up the government's rhetorical support for the oil and gas industry, along with intensification of agriculture and increased mining as major elements in the government's drive to lift economic growth rates.

Legislation establishing a new regime for economic activity, including oil drilling, in the Exclusive Economic Zone passed through Parliament earlier this month, paving the way for deep-sea exploration.