Hopes high for big new deep sea oil discoveries

Anadarko drilling ship

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BIG STAKES: Anadarko already has a drilling ship in New Zealand waters

United States oil giant Anadarko is about to kick off a $100 million effort to find “world-scale” oil or gas fields, with one exploration well off Taranaki, to be followed by another in the Canterbury Basin early next year.

They are two of the biggest bets in what will be the busiest exploration period for the oil and gas sector in New Zealand for many years, as Anadarko and partners look for elephant-sized fields in deep water with the potential for huge export volumes of oil or gas.

Other big players, including Austrian company OMV, Australian firm AWE, international giant Shell and local oil and gas leader Todd, are also drilling many wells around Taranaki.

The offshore Taranaki Matuku prospect, which is also about to be drilled, could potentially hold about 65 million barrels of oil, which could make it the largest offshore field in New Zealand, ahead of the Maari oil field.

Industry watchers estimate as many as 27 offshore wells could be drilled over the coming 12 months, with dozens more onshore. A recent report from Edison Investment Research said the industry could spend up to $2.2 billion on exploration in the coming year, with about $620m contingent on success.

If big offshore fields are found, it would take some years and potentially billions of dollars to develop them.

But the returns could be massive. The industry is already worth about $2.5 billion a year, with corporate tax and royalties worth about $750m a year, from fields with tens of millions of barrels of oil or less.

By comparison, Anadarko’s Romney targets far off the Taranaki coast could contain hundreds of millions of barrels of oil, while the prospect in the Canterbury Basin could be a huge gas field, which could transform the South Island economy.

In 2008, a GNS survey of Deepwater Taranaki showed three large prospects that could each hold up to 1 billion barrels of oil, though the prospects were well offshore and therefore expensive to explore.

“One the Romney structure could hold 3 billion barrels.

The potential is quite large, but realising that potential is another matter,” then GNS exploration geophysicist Chris Uruski said five years ago.

Anadarko spokesman Alan Seay said yesterday they were after “large formations”, and agreed they were potentially world-scale fields, but it was hard to say what might be there before drilling started.

In Taranaki there was a 50/50 chance they would find oil or gas, but in the Canterbury Basin they were more likely to find natural gas and condensate, light oil.

“We target multiple trillions of cubic feet of gas, and we think that’s the potential,” Seay said, of the Canterbury Basin prospect, Caravel.

The rule of thumb in frontier regions such as Deepwater Taranaki is that perhaps one well in 10 will turn out to be a commercial discovery. In areas already producing, closer to the Taranaki coast, the odds might shorten to one in five.

But Seay said yesterday that the company had a highly successful track record for exploration internationally, with a commercial find in one out of three wells in recent times.

But there have been plenty of disappointments in frontier areas, too.

Last year, Brazilian oil giant Petro bras explored off the East Coast in the Raukumara Basin, but walked away in December after spending millions in a fruitless search for a giant field. Results from seismic testing were not as good as it hoped and the company was slashing its international exploration spending in half.

It denied it had given up because of Greenpeace protests on the water.

Petroleum Exploration and Production Association chief executive David Robinson said the two Anadarko wells could bring in some big new volumes of oil and gas. “It is quite an exciting time for us,” Robinson said.

If some new discoveries were made during the summer, it would be very good for the New Zealand economy.

– Fairfax NZ News

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