Major Downstream Company Enters Offshore Exploration

One of New Zealand's largest energy companies and gas purchasers, Contact Energy Ltd, has entered directly into petroleum exploration with the acquisition of an offshore Taranaki petroleum permit.

Contact's decision to enter upstream exploration follows fellow energy company Genesis Power's involvement in the development of the Kupe gas-condensate field. Both downstream companies are concerned with securing long-term gas supplies for their gas-fired power generation plants and gas customers.

The permit awarded by Crown Minerals is PEP 38493, a 5300 sq km area some 80 km north west of New Plymouth out on the western platform of the Taranaki Basin. Water depths run from under 500 m to more than 1000 m.

Contact Energy's chief executive, Stephen Barrett said "The move to obtain this permit is part of Contact's broad strategy to identify and secure a range of future energy sources for New Zealand."

He said the area lies close to a number of permits held by other parties, which have recently shown encouraging results from test drilling.

Wellington-based Contact Energy in 2003 had a total revenue of $1.2 billion on total assets of $4 billion. It had 619,000 electricity and gas customers. Internal gas use, mainly for its gas-fired power stations, was 51 petajoules and external gas sales were 20 PJ.

The work program which Contact must undertake as a condition of the permit includes analysis of existing data, modelling and review of prospects, acquisition of seismic data within two years and the drilling of a exploration well by 2007.

Mr. Barrett said "There is general consensus in the industry that the level of exploration activity in New Zealand needs to be significantly stepped up if domestic gas is to remain a key energy source for the country".

"We have been working across a range of fronts to stimulate greater upstream gas activity. Earlier this year we announced an initiative with Mighty River Power to establish a gas exploration drilling fund. This fund will target gas prospects that can be brought into production in the next few years. This is a critical period as it coincides with the rundown of the Maui gasfield."

"Looking out beyond the end of this decade, the most likely source of significant domestic gas is the offshore Taranaki basin. We have been in dialogue with a number of parties who have interests in that basin, and we have signaled our interest in purchasing gas from successful explorers".

"While those discussions have been encouraging, Contact is concerned that relying solely on existing explorers may not result in a sufficient level of activity. For this reason, Contact has decided to become more directly engaged in progressing upstream activity".

It was important to get timely information on the real gas supply potential in the Taranaki basin, particularly with the long lead-time needed to develop a sizeable new discovery. This is especially so if it is to help meet the predicted gas demand over the next few years.