Deepwater Taranaki Basin Acreage Receives Only One Bid

Harry Duynhoven, Associate Minister of Energy for New Zealand, announced that three companies have lodged a joint bid for the southernmost block in the Deepwater Taranaki Basin.

The bidding round for the offshore deepwater basin was the culmination of a partnership between the Government's petroleum exploration body Crown Minerals, the Institute of Geological and Nuclear Sciences Ltd and TGS-Nopec Geophysical Company for a program of seismic data acquisition over the previously unexplored area.

The round closed on September 30, 2003. A decision on the award of the permit will be made within the next two months.

The 12,000 square kilometer block applied for is the largest and southernmost of the five blocks in the 42,000 square kilometer area advertised. This block is in water depths of approximately 500 meters.

"While the receipt of only one application for New Zealand's first deepwater basin round is less than hoped for, realistically this has to be seen in the light of the extremely competitive deepwater exploration scene around the world," Mr. Duynhoven said.

Over the last five years, global deepwater and ultra-deepwater exploration and production have been centered on three premier areas – Brazil, the Gulf of Mexico (USA) and West Africa (particularly Angola and Nigeria) where significant oil discoveries have been made.

At the same time many other countries have made new deepwater acreage available, increasing international competition for exploration dollars.

The number of oil companies capable of deepwater exploration has also reduced over recent years. The true number of competing applicants able to afford deepwater exploration has significantly reduced through mergers and acquisitions.

As part of the marketing of the deepwater area, Crown Minerals commissioned international petroleum consultants Wood MacKenzie to undertake a study into the comparative economics of New Zealand's deepwater fiscal terms with those of other deepwater exploration destinations, including Brazil, Gulf of Mexico, Angola and Nigeria.

The results of this study show New Zealand's terms to be more favorable to an explorer than those of Brazil, Angola or Nigeria, and on a par with those of the Gulf of Mexico.

The Wood MacKenzie study said it does not see that New Zealand's fiscal terms are a barrier to development. "In fact the reasonable fiscal regime coupled with low country risk may prove to be desirable to operators who are exposed in regions with high country risk who wish to balance their portfolio," the study said.

Mr. Duynhoven said, "It is important to note that oil companies involved in deepwater exploration are seeking large deposits of oil rather than gas. Deepwater exploration is unlikely to have any immediate impact on New Zealand’s gas reserves."

The next bidding round, for nine blocks on the continental shelf offshore north Taranaki and eight onshore Taranaki blocks, will close on October 31, 2003. These areas are located adjacent to existing oil and gas production and infrastructure and are considered ideally located for sizeable new oil and gas discoveries.