Shell drilling decision awaited

16:00, Jan 05 2014

Energy giant Shell has until Friday to decide whether to drill for gas in the Great South Basin, with Southland leaders optimistic the answer will be yes.

However, if drilling does proceed, pundits predict Southland will not see any immediate financial impact.

A government-imposed deadline has given Shell until Friday to decide whether it will begin test drilling or forgo its claim.

SouthPort chief executive Mark O'Connor, who is also chairman of the Southland Energy Consortium, said the region was awaiting some positive news.

"All signals from Shell are reasonably hopeful," he said.

A decision to drill would be a starting point but the critical aspect was how successful it would be in funding a commercial-scale operation, he said.


If Shell chooses to drill, it must also decide whether to base itself out of Dunedin or Bluff.

There would be no immediate benefit for Southland if drilling went ahead, particularly if Shell were based in Dunedin, and it could take more than five years for the full operation to get up and running, Mr O'Connor said.

The estimated time for drilling the first well would be about 60 days. He believed if the drilling were successful, other exploration companies could look at exploring the region.

Southland Chamber of Commerce president Sean Woodward said he believed Shell would drill.

Although it looked likely tests would be closer to Dunedin, the chamber wanted to build upon relationships and engage with Shell to include Southland in its long-term plan, which could be worth hundreds of millions to the regional economy.

Southland had potential to be involved in the long term to build a thriving industry by providing regional engineers and Southern Institute of Technology courses, Mr Woodward said.

The region needed to diversify its economy and, if in 10 years there were no New Zealand Aluminium Smelters operation at Tiwai, then Shell NZ could fill that gap, he said.

Venture Southland enterprise and strategic projects group manager Steve Canny said Shell had put a lot of time and effort into investigating prospective activity, so there was "a good chance it would go ahead".

Venture Southland enterprise services manager Alistair Adam was also optimistic: "Early signs are positive but they [Shell NZ] are keeping their cards close to their chest."

It had hopes a service centre would be based out of Bluff but, even if it were based in Dunedin, the region would look at ways it could benefit, he said.

Even if the exploration did not go ahead, 188 businesses registered with the Southland Energy Consortium had received good exposure to other oil and gas companies, Mr Adam said.

Invercargill Mayor Tim Shadbolt said it looked positive because Shell NZ had done a lot of consultation with stakeholders, but he believed it could ask for an extension on Friday's deadline.

Shell NZ chairman Rob Jager said there were many factors to be considered in reaching its decision by January 10.

"We have committed to communicate with our stakeholders as soon as a decision is reached."

In the meantime, Shell would also undertake a 2-D seismic survey this month as part of its exploration activity in the Great South Basin.

The programme will involve acquiring seismic information from a block awarded to Shell in December 2012.

"The objective of the seismic programme is to profile the substructure of the seafloor and identify potential commercial discoveries of natural gas."

The Southland Times