A high-powered energy consortium has committed to a $200 million exploration project in the Great South Basin, confident of a gas strike bigger than the Maui field.
Dutch-headquartered Shell, Austrian giant OMV and Japan's Mitsui have combined forces to commit to a "drill or drop" option to drill a well in an exploration permit.
Now the commitment has been made, the project's operating company, Shell New Zealand, will begin planning and preparations for the drilling programme, which is likely to take place over the summer of 2016-2017.
Shell NZ's country chairman Rob Jager said yesterday experts were predicting a 30 per cent chance of a commercial discovery - and that there was a better than 99 per cent chance the find would be natural gas.
"Personally I'm very excited about it," he said.
"The best thing is that after studying all the information about this prospect, the joint venture companies have been sufficiently attracted to invest up to $200m to drill an exploratory well.
"That's great for New Zealand. Shell, for instance, can choose to drill in many places throughout the world - but it has found the Great South Basin sufficiently attractive to rank the area high up in its exploration portfolio, and commit the money."
Yesterday the New Zealand Petroleum, Exploration and Production Association hailed the announcement as big news.
"Unlocking the petroleum potential of the Great South Basin could provide real benefits not only to local communities, but to the country as a whole," chief executive David Robinson said.
"Even though it takes approximately 10 years to fully develop a producing well, a decision to drill is the first step in ensuring benefits will flow locally and nationally and that is good news for Kiwis everywhere."
The joint venture's decision to drill the well came after analysing more than 25,000 square kilometres of seismic survey information gathered over the licence area, Mr Jager said.
Work would now begin on developing the necessary drilling programme and on securing a suitable rig for the job. It would need to be a large one capable of drilling in 1350m water depths in notoriously turbulent conditions off the bottom of the South Island's east coast, he said.
Asked what size of gas strike would need to be made for it to be commercially viable, Mr Jager forecast it would need to be at least the size of the Maui gasfield off Taranaki, which when discovered was rated at containing 3.5 trillion cubic feet of natural gas.
"So we need to be thinking bigger than Maui," he said. "Maui was drilled in 100 metres of water 35 kilometres off the coast - this well will be drilled in 1350m of water 150km off the coast, and it will be a long way from potential markets.
"So to be commercially successful it would have to be of a good size."
The move has been welcomed by Southland leaders although they acknowledge any significant economic benefits to the province will be years away.
The Southland Chamber of Commerce has called on the region's councils and business leaders to be proactive about enticing Shell to establish an operational base at Bluff. The energy giant has yet to decide whether it will base its operations in Dunedin or Bluff.
Environmentalists have repeatedly expressed concerns about the proposal, pointing to the risks associated with drilling at depth in such unpredictable conditions.
- © Fairfax NZ News