There is a high potential for coal-seam gas development in the block of Southland land newly open for exploration, New Zealand Petroleum and Minerals says.
The area, to the northwest of Gore and including the settlements of Riversdale and Balfour, was one of 23 blocks of land offered last week by NZP&M.
Bids to explore and develop the blocks must be received by October 15, with the successful applicants announced in December.
NZP&M manager of petroleum strategy planning and promotion Brad Ilg said the company believed the Southland onshore block had a high potential for coal-seam gas (CSG) exploitation.
"We know there is substantial coal of the lignite rank," Mr Ilg said.
"That has been tested in places around the world for coal-seam gas."
L&M Energy is investigating CSG opportunities in Ohai and Kaitangata, extracting gas from sub-bituminous (higher-rank) coal.
Mr Ilg said it was possible sub-bituminous deposits were also in the block offer area.
It had previously been explored as part of the National Coal Survey in the 1980s, he said, but no work had been done there since.
Exploration would be along the lines of that done by L&M. NZP&M would expect a company to have developed a pilot CSG project within five years.
Two new areas of the Great South Basin have also been offered for investment. One is to the south of the area being investigated by Shell, while the other lies to the east of present permits.
The permits were similar to previous offers in that area, Mr Ilg said. The potential was high, but extraction would be difficult.
Venture Southland enterprise services manager Alastair Adam said investors in the Southland block were likely to be smaller than industry giants such as Shell, Exxon Mobil and OMV.
Big companies needed to be certain of large potential returns before committing to projects, he said.
However, the fact that it was an onshore permit made it more attractive because it would be cheaper to get at the resources.
Offshore oil and gas exploration had a long history in the Great South Basin, but Southland itself had seen relatively little before this block offer, Mr Adam said.
Prospecting had been done previously in the Te Anau Basin and Takitimu area, as well as in the block offer land.
A shale oil well operated at Orepuki between 1899 and 1903, but it was a rare example of oil or gas production.
Mr Adam said the block offer added to the region's energy potential, joining L&M's coal-seam gas development around Ohai, Solid Energy's work on lignite in Eastern Southland, Greymouth Petroleum's well that was planned on Stewart Island, and the ongoing exploration of the Great South Basin. email@example.com
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