Oil explorers retreat to small-scale Taranaki plays

Oil and gas explorers have reacted to plunging global oil prices by taking up the smallest and most conservative range of new petroleum exploration licences since the government began its annual 'block offer' bidding process in 2012.

Nine exploration permits were awarded at this morning's event at Parliament, all of them in the Taranaki Basin and none involving new players.

Three of the nine are onshore Taranaki acreage and were awarded to local small-scale player Greymouth Petroleum, through its operating company Petrochem, with the other six awarded for offshore acreage.

Four offshore permits have gone to Austrian explorer and producer OMV, a partner in the producing Taranaki oil and gas fields Maui, Maari and Pohokura, and has existing interests in exploration licences in the Great South Basin.

One offshore Taranaki permit was awarded to locally owned heavyweight Todd Energy, and one such licence was awarded to Mont D'Or Resources, which picked up one onshore permit on the North Island's east coast in the 2013 block offer.

There were no successful bids received for frontier basin acreage on offer in 2015, which included two onshore West Coast basin areas and releases in four offshore basins: Reinga-Northland, Taranaki, Pegasus, and the Great South/Canterbury Basin.

Existing players, including Texas-based Anadarko and Wellington-based New Zealand Oil & Gas did not participate in the offer, and it appears that Shell New Zealand did not bid either.

Shell announced last week it was reviewing its operations in New Zealand as the multi-national company absorbs the impact of low oil prices and a merger with British Gas.

The nine permits were awarded on the basis of initial work programmes valued at $4.4 million and potential contingent expenditure of $364 million, if initial exploration efforts were promising, Energy and Resources Minister Simon Bridges said.

Some 15 permits were awarded last year, with work programmes worth $110 million and up to $1 billion of further activity. The 2013 block offer saw 10 permits issued with committed work programmes worth $62 million. The first block offer, in 2012, saw 10 permits awarded on committed work programmes of $82 million.

"It is clear this has been a challenging year for the sector," Mr Bridges said. "Over the past year we have seen some operators seeking to defer or alter their work programmes, as they rethink their commitments.

"Yet while the industry is changing, it will also recover. Petroleum is, and will remain, an important part of the global energy mix", with the International Energy Agency forecasting that oil and natural gas will still account for around half the world's energy needs until at least 2040.

The Green Party and climate change activists have accused the government of hypocrisy for continuing to pursue oil and gas production just days after signing the new global climate change pact agreed by 188 countries in Paris last weekend, arguing it should build on the country's 80%-plus use of renewable resources to produce electricity.

"I have absolute faith in New Zealand's renewable advantage," Mr Bridges said. "But petroleum products are prevalent in almost every part of our day-to-day lives. I am committed to a mixed and balanced approach to our energy potential."

(BusinessDesk)