NZ Minister: Exploration Success Rate is Good

A substantial increase in the number of exploration wells drilled since 2000, and particularly in the past two years, reflects well on New Zealand's oil and gas prospects, states the country's Crown Minerals ministry.

In his keynote presentation to the New Zealand Petroleum Conference, Associate Energy Minister Harry Duynhoven said a total of 149 wells were drilled in the past six years, of which 74 were wildcats. In the past 24 months, 69 wells were drilled. Duynhoven said that of the total 74 wildcats there were 12 discoveries, indicating a success rate of about 16 percent.

"We are shifting up a gear and working in NZ now were companies with deeper pockets and access to a greater number and wider mix of skills," said Duynhoven. Origin Energy, Australian Worldwide Exploration, Pogo Production, OMV, Swift Energy, and Westech Energy have built strong exploration portfolios in New Zealand, states Crown Minerals. In addition, downstream companies such as Genesis, Contact, and Mighty River have taken positions in the upstream sector.

In terms of production, Duynhoven noted that the Pohokura, Tui, Maari, and Kupe projects are "progressing well" and that they are billion-dollar investments. "Tui is a particularly good example of how quickly offshore prospects can be drilled and taken to development,"he said. "The time from initial discovery to first production is only four years."

To encourage exploration, New Zealand's government introduced a series of initiatives in 2004. The measures include adjustments to taxation provisions, reductions in royalty rates for new discoveries, and additional funding to promote investment linked to government-funded seismic data made freely available with the block offers.

Duynhoven admitted that it is "too early to tell" if the measures are paying off. However, he contends that there has been a "high level" of interest in the data sets. "We know that there is particular interest in the Great Southern Basin survey," he added.

The minister said that the Northland block offers produced two highly competitive bids as well as comments asserting that insufficient blocks were awarded. He pointed out that the quality, rather than quantity, of bids is paramount. "It is critical that future blocks are awarded to well-funded and technically capable explorers who are committed to work the acreage," he explained.

Duynhoven also said that he is concerned about the degree to which companies are resorting to litigation to resolve disputes. He said that would prefer to see them explore all other available avenues in settling differences.

"New oil and gas resources are found in basins at the end of drill strings as a result of your intellectual and physical endeavors," he told the audience. "Not in the courtroom through legal maneuverings."