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NZ Explorers Expand Horizons Thursday, 23 November 2006

Neil Ritchie, New Zealand

New Zealand onshore explorers are looking at frontier regions and new ways to exploit the local oil and gas industry's Taranaki heartland as they strive to better the limited successes and modest discoveries of the past 18 months. Last year, New Zealand had just four confirmed discoveries, all of which were small onshore Taranaki finds. So far this year it has had just one onshore discovery, Greymouth Petroleum's deep gas Turangi discovery in north Taranaki, with estimated recoverable reserves of about 154 petajoules (or 142 billion cubic feet) of gas and 5 million barrels of condensate. This year's level of exploration activity is low, with only 18 or so wells expected to be drilled by the end of the year, in comparison to the more than 30 drilled in each of the preceding two years. The Radnor gas field in

Taranaki, New Zealand But activity levels are expected to rebound in 2007 as companies, buoyed by continuing high oil and domestic gas prices, expand their exploration efforts beyond conventional Taranaki targets.

TAG Oil has said it will participate in 17 or more onshore New Zealand wells over the next 18 months. Most of these will be conventional projects in onshore Taranaki, but six to eight of these wells will be in the Taranaki Deep Gas Consortium project. Drilling deep This group, formed on the initiative of TAG Oil president Drew Cadenhead, aims to develop new ways to coordinate onshore drilling programs and facilitate field development of the region's often frustrating tight deep gas (Eocene-aged or older) onshore reservoirs. Cadenhead has said several onshore Taranaki deep gas fields – including Cardiff, Radnor, Kahili, and perhaps even Todd Energy's established Mangahewa field – have yet to perform to their full potential. He argued that about 500 billion cubic feet of gas in onshore Taranaki can be found over the next two years or so, pushing back any need to import liquefied natural gas or compressed natural gas to meet New Zealand's looming gas shortfall. That potential might be unlocked through using innovative drilling techniques – including underbalance drilling, horizontal wells and high-angle laterals, as well as new fracture stimulation techniques and different completion methods. The consortium has already committed itself to pooling downhole data and jointly analysing this information, then rolling out a six-to-eight well continuous drilling program from mid-2007. TAG and several other companies will be venturing into New Zealand's lightly explored onshore frontier regions after concentrating almost exclusively on onshore Taranaki during 2004-06. "Onshore Taranaki exploration is generally good, especially in the proven north-south corridor east of Mount Taranaki," Wellington-based energy consultant Mac Beggs said.

"But now there has been a resurgence of interest in frontier regions." Exploring the frontiers "Once you leave Taranaki, New Zealand is very lightly explored," GNS Science hydrocarbons manager David Darby said. "That's true even of onshore New Zealand." The country's onshore frontier regions include the Wanganui and East Coast basins in the North Island, and the Canterbury and Southland Basins in the South Island. The Wanganui Basin is under permit for the first time in nearly a decade, with new company Hugh Green Energy taking a large onshore licence, PEP 38771, and several companies have shown interest in the East Coast Basin. Late last decade Denver-headquartered Westech drilled 11 East Coast exploration or appraisal wells, all of which encountered significant gas shows, but the company did not develop any of them. Now the explorer has re-entered the region, regaining the northern Hawkes Bay area with the 5582 square kilometre licence PEP 38346. Crown Minerals has also granted or is considering granting several other East Coast permits, including two applications from Canadian independent Trans-Orient Petroleum, which is affiliated with Austral Pacific. TAG's East Coast Basin licences, PEP 38341-342, cover about 400,000 hectares in the Wairarapa region. "We just funded the first modern 2D seismic program in that basin," Cadenhead said. "Look for more seismic activity there in the next year." TAG is also one of the active explorers in onshore Canterbury on the eastern South Island. The company has completed three separate seismic programs in the past 12 months, including onshore programs in PEPs 38260 and 38256. It plans to spud its first onshore Canterbury well, into the onshore Kate prospect in PEP 38260, before the end of this year. Elsewhere in the South Island, onshore Southland already looks promising, with Christchurchheadquartered L&M Group recently announcing it had encountered some hydrocarbon shows while drilling a Waiau Basin, western Southland, well. L&M is also considering other South Island options, including the coal seam methane and lignite. It has nearly completed a pre-feasibility study into the economics of building a $US4 billion ($A5 billion) coal-to-liquids plant using lignite as feedstock. With onshore Taranaki delivering only small discoveries, and a one-well-in-eight success rate, the Petroleum Exploration and Production Association of New Zealand has welcomed moves to not only boost conventional Taranaki drilling, but also to try new drilling techniques in Taranaki and to explore other parts of onshore New Zealand. "The onus is really on the industry to make it happen, to find more oil and gas by drilling more wildcat and other exploration and development wells," outgoing executive officer Mike Patrick said.