WELLINGTON, Oct 25 (Reuters) – New Zealand is hoping the first deepwater wells to be drilled in the country in nearly 15 years will reignite interest in its offshore oil and gas basins, mostly ignored since some early discoveries in the 1970s.
New Zealand's remoteness, rough seas, and limited domestic demand for gas given its small population have curbed interest in the region by global exploration companies.
But the development of floating LNG facilities, spearheaded by Royal Dutch Shell PLC, means gas could be processed for shipping without having to build an expensive onshore plant, making any finds more commercially attractive.
Houston-based Anadarko Petroleum Corp, whose exploration success in Mozambique established the African country as a potential gas exporter, plans to drill two deepwater wildcat wells in a joint venture with Australia's Origin Energy Ltd.
The programme snaps a decades-old lull in deep-water drilling since U.S.-based Hunt Petroleum halted exploration in the Great South Basin off the country's southern tip in the early 1980s, due to harsh conditions and political red tape.
"The formations we're looking at are large, they look like they they have the potential to meet our criteria for multiple trillions of cubic feet of gas," said Alan Seay, a spokesman at Anadarko in New Zealand.
"We're seeing similar-sized formations to what we've seen in places like Mozambique," he added, pointing to the results of seismic and other research.
New Zealand has some 18 oil and gas basins, but the Taranaki basin off the west coast of the North Island is the only producing basin. The rest are largely unexplored.
Taranaki, which has more more than a dozen operating fields, produces about 40,000 barrels of oil a day and roughly 450 million cubic feet of gas a day. Output is modest by international standards, although exports of light sweet crude are still the country's No. 4 export product.
Keen to boost exports, the New Zealand government in the past decade has lobbied to attract interest, offering exploration permits and initial geological data for massive swathes of land and water.
A commercial discovery could boost New Zealand's oil and gas exports and open up the region to further exploration, potentially adding a third leg to an economy dependent on dairy products and tourism.
Anadarko is aiming to build on its success in Mozambique, where its initial discovery of gas in 2010 prompted a rush of overseas companies that have found more than 100 trillion cubic feet (TCF) of gas.
It will drill the first well in November in the deepwater Taranaki Basin off the coastal shelf, while a second will start early next year in the Canterbury basin, off the east coast of the South Island.
"Part of New Zealand's attraction is that it's frontier territory. If we do achieve success, we achive first mover advantage," Seay said.
Just seven deepwater wells -- deeper than 500 metres -- have been drilled in New Zealand, six in 1976 to 1984 and one other in 1999.
A handful of overseas companies have been snapping up offshore permits, with a consortium of Shell, Austria's OMV , Thailand's PTTEP and Japan's Mitsui to decide by January whether to drill in the Great South Basin.
Increasingly sophisticated drilling technology has made it easier to explore the Southern Hemisphere seas around 40-50 degrees latitude, where New Zealand is located, known as the "roaring 40s" due to their gale-force winds.
If the partners decide to drill, they would be looking for enough resources to eventually develop a floating LNG operation to export gas overseas, said Shell New Zealand Chairman Rob Jager said.
"If there is success in New Zealand, and the first part of that will be Anadarko drilling in Taranaki deepwater and the Canterbury Basin, that will create excitement -- or otherwise -- amongst both existing operators and new operaters," he said.
Shell has also applied for an initial prospecting permit for the New Caledonia basin, to the northwest of the North Island, in a joint venture with China's CNOOC.
A challenge for New Zealand is its distance from major Asian markets, while factors such as ocean conditions would come into play when assessing the likelihood of developing a commercial field, according to industry analysts. A big discovery would be needed for development to make commercial sense.
"It's deepwater, it's remote, so to get the cost to a reasonable place, you'd have to have something pretty material to make it work for LNG export," said Neil Beveridge, senior analyst at Bernstein Research in Hong Kong.
"You're probably looking at a 10-15 TCF resource base to really get an LNG development off the ground."
The country's largest gas field currently is the Maui field in the Taranaki basin, which contains about 4 TCF and was discovered in the 1970s.
"Four TCFs of gas on its own would be a moderate discovery by international standards," said John Kidd, head of research for Asia Pacific at Edison Investment Research. "(But) it would definitely be enough to attract the interest of international companies, especially if it was away from the Taranaki basin."
Copyright 2016 Thomson Reuters. Click for Restrictions.
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