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Shell picks up the challenge of the Great South Basin

Shell picks up the challenge of the Great South Basin

By Pattrick Smellie

Aug. 16 (BusinessDesk) – Global oil giant Shell’s New Zealand arm is to take a half-share in two exploration licences in the fabled Great South Basin, in deep water to the south of New Zealand.

The current operator of the two licences, Austrian explorer and producer OMV, chose Shell after spending $50 million on two-dimensional seismic surveys that make it confident that spending roughly the same sum again on more detailed 3-D surveying was justified.

OMV will reduce its current 36% holding in Petroleum Exploration Licences 50119 and 50120, off the south-eastern corner of the South Island, to 18%, as will another existing partner, PTTEP New Zealand Ltd. Mitsui E&P Australia Pty Ltd. will also cut its 24% share to 14%.

While OMV will remain operator for the 3-D seismic work, to be undertaken this summer by the specialist survey ship Polarcus Alima, Shell will become operator of the licences after that, and will pay its share of development costs so far incurred and projected, “with a bonus”, said Shell NZ chairman Rob Jager.

Analysis of the seismic data will take another two years, with no decision to drill in the deep water prospect before then.

“This is not a goldrush,” said OMV’s New Zealand managing director, Peter Zeilinger. “It is a very careful process.”

The two permits run to 2017, and an adjacent OMV-operated permit, PEP 50121, will be returned to the Crown.

The partners have yet to consider where they might base shore operations if they found a commercial gas field off the South Island coast, but they chose to hold a briefing on today’s announcement for journalists and local stakeholders in Invercargill rather than Dunedin.

While OMV could have done the project on its own, it decided to seek an expert in deep-sea drilling as the target waters in the GSB are up to 1200 metres deep, and are all outside the 12 mile nautical limit in New Zealand’s more lightly regulated Exclusive Economic Zone.

Despite Shell dealing with a current oil spill in the North Sea, Jager and Zeilinger stressed both companies’ commitment to employee health and safety, and responsible environmental management.

Shell’s decision is significant as it had all but withdrawn from exploration other than in its existing tenements in the offshore Taranaki Basin, as well as selling its downstream assets to the company now known as Z Energy.

Shell had “continually looked for other opportunities” in recent years, said Jager.

Both Jager and Zeilinger acknowledged the potential for Greenpeace to mount protests of the sort directed at the Brazilian oil company Petrobras, which undertook seismic surveys in the Raukumara Basin, off the North Island’s East Cape, earlier this year.

There had been early discussions about the GSB plan with the South Island’s dominant iwi, Ngai Tahu, said Zeilinger.

(BusinessDesk)

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