The hunt for oil and gas off the coast of Oamaru and Dunedin will intensify over the next few months as two major exploration companies reach the "drill or drop" stages of their prospecting licences.

If they go ahead it could lead to two offshore wells being drilled by later this year and the discovery of major reserves of oil condensate and gas in what is known as the Canterbury Basin. The area stretches offshore from Timaru to Dunedin.

New Zealand Oil and Gas (NZOG), in partnership with two other companies, is out in the international market at the moment looking for a specialist deep sea drilling company to join it in sinking a well on what is known as the Barque prospect off Oamaru.

And the large international oil exploration company Anadarko has licences to explore the Carrick-Caravel prospects off Dunedin. It will also soon be looking for a deep sea rig to drill off Dunedin and then off Taranaki.

If hydrocarbons are discovered off Dunedin the rig would return to drill an appraisal well.

The Canterbury Basin is considered to be relatively unexplored with only five wells having been drilled between 1970 and 2008. Two of those wells, one south of Oamaru and the other between Timaru and Oamaru, produced gas in one and gas and condensate in the other, but they were not considered to be of commercial significance.

Chris Roberts, corporate affairs manager for NZOG, said yesterday that his company had someone in the United States and recently in London promoting the Barque prospect to companies that had the ability to drill deep water wells.

The depth of the prospect varies from 400 metres to 1000 metres and a well could be drilled to a depth of 3000 metres below that.

NZOG and its partners would need to attract an additional partner because of the cost of drilling a well would be up to $100 million.

The Barque prospect is considered "potentially very large in a New Zealand context", he said.

"Previous wells have proven there is a petroleum system working there; we know that petroleum has been generated. It is a good starting point, so we now need to find where it is trapped in significant quantities to make it commercial."

- © Fairfax NZ News