New Zealand Oil & Gas is planning its first well in more than two years, although the timing is uncertain and it admits it would prefer to bring in more partners.
Five years after being awarded the right to explore the Kakapo oil prospect off the South Taranaki coast, Wellington-based NZ Oil & Gas had until Friday to decide whether to drill, or return the permit to the Government.
Chief executive Andrew Knight confirmed yesterday it would drill, despite admitting that ideally the company would have sold off a stake in the prospect to reduce the cost should the well - expected to cost at least US$25 million ($30.5m) - turn out dry.
NZOG held 100 per cent of the prospect until recently, when ASX-listed Raisama Energy agreed to buy 10 per cent of the prospect for 20 per cent of the drilling cost. However, to do so Raisama needs to tap shareholders for cash.
Knight said committing to drill may get other possible investors across the line.
"We're probably at a level which is above our preferred level because US$25 million's a lot for us to be putting into one hole," Knight said.
"But by committing to it we're able to give a lot of our prospective partners a degree of certainty that something's going to happen." It also still needs to secure a drilling rig, so the timing of the well is uncertain.
If successful, however, the rewards could be substantial. NZOG said the "most likely" case for a prospect 25 kilometres from its Kupe field was a well of 41 million barrels of recoverable oil, with a remote chance of a find several times bigger.
NZOG has not drilled an exploration well since Kahu-1 was abandoned in July 2010. In recent months it has abandoned two permits in northern Taranaki, while in early August it relinquished the right to drill Barque, a frontier deepwater well off the coast of Oamaru.
Knight said if US oil giant Anadarko was successful in its plans to drill a well near Barque it would prove a "game changer" for the Canterbury Basin. However, NZOG did not have the expertise to drill such a deep well and could not find a suitable partner.
He rejected suggestions the company was drilling Kakapo in a bid give credibility to its claim that it wanted to expand its New Zealand exploration.
"Absolutely not. We believe this is an attractive prospect, it's a large prospect that is within our capability to operate and to drill," he said.
"We wouldn't take things up simply because we had to." Fairfax NZ
- © Fairfax NZ News
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