Friendly fiscal and regulatory regimes are bonuses for operators.
Operators seeking a welcoming work environment with opportunity for growth might put New Zealand among their choices for expansion into the international marketplace.
Drew Cadenhead, chief executive officer for Tag Oil Ltd. of Calgary, Alberta, Canada, joined the company as it sought international operations, and his experience with New Zealand's Fletcher Challenge led him back to the two-island nation.
The company made its first discovery in 2005 with the Supplejack-1 well completed as a dual-zone, gas/condensate well on PEP 38741, and it hasn't stopped since. Operator Austral Pacific Energy (NZ) Ltd. drilled the Supplejack South-1 from a surface location in PEP38741 and a bottomhole location in PEP 38765 and then moved to the Arakamu-1 well to look at multiple Miocene zones that produce from Cheal field 2.5 miles (4 km) to the north. The rig will come back to drill a sidetrack to evaluate the 3.3-ft (1-m) oil column found at Supplejack South-1.
As well as teaming up with Austral Pacific Energy on the SuppleJack discovery, the Arakamu-1 well marks Tag's first 100% operated seismic and drilling programs in New Zealand.
Cadenhead likes New Zealand for its economic, political and technical advantages. The government is strong and the terms are attractive. And, with the recent sharp decline of the Maui field, which had produced 85% of the nation's gas, the government made terms for operators even better.
For example, it reduced the 15% royalty rate back to 1% for the next 5 years on new gas discoveries. The government also set aside US $15 million for offshore seismic exploration, and it will provide that information at no cost to operators.
The only area where the government tightened up was in enforcement of minimum work commitments. It wants operators that will work the land, and it will make sure they have permit areas to work.
Technically, there has been very little drilling. "It's like Texas 75 years ago or Alberta 50 years ago. You still have a shot at the big ones," he said.
Rigs and service companies are available, but supplies are tight, as they are elsewhere in the world.
The industry also is expanding outside the Taranaki producing area on the North Island. Cadenhead said he planned to bid on acreage in the Great South Basin off the southern tip of the South Island, and the company already is one of the largest acreage holders in the Canterbury Basin onshore and offshore on the eastern coast of the South Island near Christchurch.
In that area, the offshore Galleon-1 flowed 10 MMcf/d of gas and 2,300 b/d of condensate, but it wasn't economic at that time, with Maui still meeting most of the nation's gas needs. Of the four offshore wells drilled, two have had significant hydrocarbon shows.
Tag's Corvette prospect toward the southern end of the basin potentially holds an estimated 750 Bcf of gas and 150 million bbl of oil.
Onshore, Tag has several large prospects, starting with the Kate prospect, a 6-sq-mile (15.5-sq-km) surface anticline with oil seeps associated with the perimeter.
Only five wells have been drilled in the Canterbury Basin to depths greater than 1.25 miles (2 km).
At this point, he said, New Zealand probably has a dozen serious players. Realistically, large companies have drilled the onshore elephants and independents are looking for prospects below the radar of the larger companies.
New Zealand has 17 different sedimentary basins, most exhibiting numerous oil and gas seeps. One of the great hopes is the Northland Basin, north of the North Island. It shows a lot of good structures, and ConocoPhillips has drilled at least one dry hole in the area, but anything completed in that area would take 5 to 7 years to return cash. Tag wants something closer to the infrastructure. That's the reason it will drill most of its wells this year in the Taranaki Basin, where 350 wells have discovered 6.3 Tcf of gas and 400 million bbl of oil.
Among recent developments in that area, OMV received approval to develop Maari field in 328 ft (100 m) of water 50 miles (80 km) off the south Taranaki coast. It estimates the development cost at $360 million for approximately 50 million bbl of oil.

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