Tag Oil's drilling site, Taranaki. Photo by ODT.
Toronto-listed oil and gas explorer Tag Oil (NZ) could be test-drilling an onshore oil and gas prospect near Oamaru within 12 to 24 months, having secured a five-year extension to its existing Canterbury Basin exploration permit. The Jardine-1 test well is about midway between Oamaru and Waimate, about 20km west of State Highway 1, but a land access agreement is yet to be concluded and resource consents are still to be applied for. It is about 60 years since onshore exploratory wells were drilled in the area.
Tag's Canterbury permit covers both onshore and offshore exploration, but Tag is looking at only the onshore prospect, in keeping with the niche onshore operation it has developed and expanded in Taranaki.
Tag operates three production plants onshore in Taranaki, and a wide network of pipelines, anchored by its more than $120 million, at-least-12-well condensate and gas Cheal project, which produces up to 2300 barrels of oil equivalent daily.
From its southern extremity the 4716sq km Canterbury Basin permit begins at the coastal township of Warrington, just north of Dunedin, up to the coastline adjacent to Waimate, in South Canterbury.
Canadian-founded Tag has focused on developing shallow depth, onshore wells in Taranaki and much of its Canterbury permit encompasses onshore territory.
Tag has 11 permits in Taranaki, three on the North Island's east coast, one in Marlborough and one in Canterbury - it holds a 100% interest in Canterbury.
Tag's New Zealand manager, Max Murray, said when contacted the Canterbury extension was necessary because of the lack of availability of a drill rig, which has to be compliant under the new ''petroleum exploration and extraction'' regulations to work in the South Island.
''Due to the lack of rig availability this has delayed progressing land access agreements and resource consent applications,'' Mr Murray said.
He confirmed Tag was focused solely on onshore work.
There is a Jardine Rd, on the south bank of the Waitaki River, a few kilometres before Duntroon.
Mr Murray said while the lack of suitable rigs in the South would impact on the overall drilling cost, the permit extension would allow Tag to progress the most cost-effective way to drill its next well commitment.
''The extension effectively gives us an additional 12 months to drill the well,'' Mr Murray said.
Tag's permit was initially granted on November 2010, with Government permitting agency New Zealand Petroleum & Minerals this week granting the five-year extension, until November 2020.
Initially Tag's work programme includes reprocessing existing seismic data, undertaking a technical study and mapping onshore and ''immediate offshore'' areas, and, up to 24 months away, to then acquire and interpret 100sq km of land-based data.
From the 1970s up to Anadarko's drillship visit in January last year, the offshore Canterbury Basin area has attracted six drilling rigs to the oil and gas prospects: Galleon, Clipper, Caravel, Carrack, Barque and Resolution.
Those prospects have been the most popular of all South Island locations for explorers, although none were labelled commercially viable.
Mr Murray recently told the Taranaki Daily News the company had reviewed its exploration plan and some work had been deferred, given the plunge in global oil prices.
However, he remained optimistic the situation would improve as some of Tag's sites continued to perform well.
''Fortunately for Tag, the highly successful Cheal field in central Taranaki was still producing good revenue streams which would fund the year's work programme,'' Mr Murray said.
Late last year Tag was reported to have accumulated about $NZ65.2 million cash in hand.
• While headquartered in British Columbia, Canada, Tag's subsidiaries are TAG Oil (NZ) Ltd, TAG Oil (Offshore) Ltd, Cheal Petroleum Ltd, Trans-Orient Petroleum Ltd, Orient Petroleum (NZ) Ltd, Eastern Petroleum (NZ) Ltd and Coronado Resources Ltd (49% share).
simon.hartley@odt.co.nz
Drilling history Onshore oil and gas exploration drilling around Oamaru. Adjacent to Oamaru racecourse:
1954 Two test holes drilled by joint venture BP Shell and Todd Petroleum, to depths of 908m and 665m. Both abandoned. Conclusion ''little chance of finding an oil accumulation'', given rock structures found. (Would-be development company lost 23,000 court claim against drilling company, over workmanship).
2016 prospect Jardine-1, northwest of Oamaru, to be drilled in 12 to 24 months.
Sources: New Zealand Petroleum & Minerals/Tag Oil.