By Gavin Evans
Nov. 2 (BusinessDesk) - New Zealand Oil & Gas says the country needs to advance drilling off the South Island’s east coast to help reduce global emissions.
The company is seeking drilling partners for two large permits it operates off the South Canterbury coast and in the Great South Basin south-east of Stewart Island.
Chief executive Andrew Jefferies told shareholders today that both basins are highly prospective and likely to contain large gas deposits.
“It’s that gas that can be used in the global energy system to displace the coals, and the bitumens and oilsands which is where the other reserves are seen,” he said.
“These prospects should be unlocked, they should get drilled. If we don’t use these resources then the world will continue to use resources – they will just continue to use them from other places and we’re going to have to buy them.
“And that will leave New Zealand poorer and similarly global emissions higher.”
NZOG has spent several years seeking partners to drill the Barque prospect off the Oamaru coast. The 150 square-kilometre structure lies in the Clipper permit the company owns with Beach Energy and could hold the equivalent of 530 million barrels of condensate and gas.
But the venture faces a drilling decision next year, in what could be the first real test of the government’s commitment to allow existing offshore acreage to continue to be worked and developed if a discovery is made. The government is currently rushing legislation through Parliament to block the granting of any new offshore exploration permits.
Jefferies told shareholders the government’s ban had turned the “headwinds” the firm faced finding partners into a “gale.”
But the government had provided a written guarantee of its continuing rights under its existing permits. A well must be drilled at Clipper by late 2020 or the acreage surrendered.
“We’re hoping that they continue to be supportive in helping us keep the permit going and to get that well drilled,” Jefferies said.
“We really want to see Barque drilled. We really want to be part of that discovery of the new North Sea in the south.”
NZOG shares were unchanged at 63 cents.
Jefferies had no new details to offer the roughly 30 shareholders attending the Wellington meeting on the testing of the onshore Kohatukai well in Taranaki.
Drilling was completed by Mitsui-owned AWE last week and produced encouraging gas shows in its two main target formations. Logging is underway and further pressure testing and sampling is planned over the weekend, he said.
NZOG and major shareholder OG Oil & Gas each have 25 percent interests in the well which is targeting a 48 square-kilometre structure that extends almost to the coast.
Chairman Samuel Kellner, a director of OG Oil & Gas, said his firm’s experience as a partner at Kohatukai had reinforced its confidence in the management team at NZOG and the opportunities ahead.
OGOG believes in the Barque prospect and the Ironbark prospect off Western Australia that NZOG has also just taken a 15 percent stake in, he said.
The company is not seeking quick profits and is willing to invest significant capital over “very long” time frames in sectors it gets involved in.
It wants to keep NZOG listed so that it can raise the capital needed to fund future growth, and so that existing investors can continue to share in that growth, he said.
Jefferies said the scale of opportunity and the firm’s credibility with potential counterparties, has risen since OGOG got behind the company.
And he said the firm would likely come to shareholders and the broader market to seek funding for some “large asset purchases” in the future.
He cited Ironbark – potentially five-times the size of Maui – as a potentially “transformative” investment for the company.
It ranks among the world’s top-10 undrilled prospects and has a “great address” among a string of major gas fields.
“It’s a really exciting well.”