Offshore survey boosts gas hopes

Shell New Zealand says there are positive signs emerging from a seismic survey in the Great South Basin, part of a joint venture exploration the oil company is leading.

Computer and other interpretation of the survey material was being done by Shell teams in Kuala Lumpur and Amsterdam, the chairman of the Shell companies in New Zealand, Rob Jager, said.

"The data is fantastic in quality and it certainly gives us some hope that we're not wasting our time, but ultimately before you make a decision to drill there's a number of things you need to be sufficiently comfortable with."

The information from the seismic survey was also hefty, in the order of a container- load of seismic information tapes, Jager said.

"This is seismic data, which then needs to be crunched in a super computer. It's a huge amount of material, it takes a large amount of time to crunch through that.

"We're working towards making a decision early next year whether to proceed with the next phase, which is the drilling phase."

A possible test could be drilled by the summer of 2014-15 at the earliest.

The cost of drilling a single offshore well or possibly two was in the order of $100 million to $200m, given the expense of bringing a specialised rig, probably from the northern hemisphere.

"We [would] expect to find gas, we certainly don't expect to find black oil [if we drill]," he said.

"The Great South Basin has had about six wells already over a very large area."

Hunt Petroleum drilled in the 1970s and 80s and found indications of hydrocarbons.

In April, Shell assumed operatorship of the New Zealand exploration licence PEP 50119 in the Great South Basin from 50-50 joint-venture partner OMV New Zealand.

Up to that point the venture partners had spent about $100m exploring the area, including $50m early on, then another $50m on the seismic survey, now under analysis.

The large 4820-square- kilometre 3-D seismic study was completed in the first quarter of 2012 by survey vessel Polarcus Alima.

The licence covers 33,500 sq km in deep water, in an area stretching south of Dunedin and east of Invercargill and Stewart Island.

Jager said Shell had a couple of exploration team staff based in New Zealand working on the project. The company had also kicked off an environmental and social- impact assessment.

The company did not expect it would need to seek other partners for the venture at this stage, but took an open view to partnerships.

"It's always for each of the partners to decide whether or not they want to continue with the next phase.

"The whole game is about each phase being more expensive than the previous phase."

Previously Jager has said in order to push into full development the explorer would need to find a field of a size similar to Maui off Taranaki, given that it would need to spend $10 billion-plus on a processing facility if gas were found.

This is Shell's first New Zealand exploration outside the Taranaki region.

The Press