New blocks to spark exploration in New Zealand

New Zealand is poised(43004 bytes) for a major surge in exploration.

The government has received 26 applications for 36 petroleum exploration permit (PEP) blocks this year. They are the first offered in New Zealand since a sweetened petroleum/mineral royalty regime went into effect last February (OGJ, Feb. 20, Newsletter).

In addition, the Ministry of Energy unveiled an offering of 14 blocks in the underexplored East Coast basin.

The energy ministry also disclosed details of the new Acceptable Frontier Offer (AFO) PEPs that allow operators to submit out of round, noncompetitive applications throughout New Zealand's basins. The idea is to encourage frontier exploration in a short time.

Current round overview

The 26 applications in the current round cover about 34,000 sq km in the Taranaki, Canterbury, and Westland basins.

Minister of Energy Doug Kidd said, "These applications, along with the recent decision to grant an exploration permit to U.S.A. explorer Occidental Petroleum over the northern part of New Zealand's Great South basin, signal a resurgence of international interest in exploration in this country."

Oxy recently received a 26,000 sq km exploration permit in the lightly explored basin (OGJ, July 17, p. 30).

"The granting of permits from this round is likely to more than double the number of permit areas being actively explored in New Zealand and will increase exploration expenditures by up to $170 million over the next 5 years," Kidd said.

"This is additional to activity already planned for existing permits and licenses such as a 7,500 sq km seismic survey to be carried out by Conoco in its large offshore Northland basin later this year" (OGJ, Feb. 20, p. 41).

Winning bidders will be disclosed by about mid-October. This schedule allows exploration to begin in the coming summer season.

East Coast offering

The Ministry of Energy is offering seven onshore and seven offshore blocks in the East Coast basin under a tender that will close Feb. 2, 1996.

Blocks will be awarded by staged work program bidding. Such programs are to include a minimum exploration program and a schedule for work. As each stage is completed, the permit holder will be required to commit to the next phase or surrender the permit.

The work program must provide for drilling at least one wildcat within 5 years of commencement. If a permit covers more than 6,000 sq km, at least 50% must be relinquished at the end of the permit's third year. This is in addition to acreage required to be relinquished before award of a second permit term.

The PEP permit holder is to pay a royalty equal to 5% of net sales revenues from a permit's production, excluding volumes lost or returned to the reservoir.

Under a petroleum mining license, the permit holder must pay the higher of 5% of net sales revenues or 20% accounting profits royalty.

AFO permits

AFO PEPs can be made at any time over any part of New Zealand that is available for exploration.

AFO applications can be made over any area other than those:

In a current PEP block offering.
Defined in the rolling 2 year PEP block offering schedule.
Subject to a notification of interest by an intending explorer and not yet determined.
Within reasonable distance of a mining permit or an exploration permit in which a discovery has been made in the preceding 3 months.
Set aside by the Minister of Energy as unavailable for AFOs or otherwise excluded by the government.
For which there is a petroleum permit application not yet determined.

AFOs should be for what the ministry of energy calls a "permit sized area."

While there is no fixed size for permits, typical exploration permits onshore and in prospective offshore basins are 150-1,500 sq km. In less explored offshore areas, the permits are expected to be 3,000-25,000 sq km.

If the proposed permit is for an area greater than 6,000 sq km, a condition of the permit calls for partial relinquishment after a set period.

An AFO applicant is required to commit to an exploration program that calls for identification of a wildcat drillsite within 12-18 month. If the applicant cannot meet this requirement, he must surrender the permit or drill the well within 24 months or, as an alternative, 36 months in areas where there has been little or no recent seismic surveys or drilling.