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ExxonMobil scuttles Great South Basin drilling plan

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 11 NZPA - ExxonMobil and Todd Energy have bailed out of drilling for oil and gas in the Great South Basin, south of the South Island.

Todd and ExxonMobil's joint venture today surrendered their interest in permit PEP 50117, blaming "high technical risk", the remote location and tough conditions facing deep sea drillers.

ExxonMobil's permit block was 100km from shore and in a water depth of 500m to over 1000m.

"We have spent the last three years evaluating the acreage, including acquiring state-of-the-art seismic data," Todd Energy managing director Richard Tweedie said.

"The data indicates the acreage has a high technical risk, and this is further amplified by the remote location and the harsh operating environment," he said.

The pair's joint venture -- put together in July 2007 -- ought to mitigate the risk by seeking other potential partners but could not attract any players.

"These factors make the opportunity unattractive for the joint venture to pursue," said Mr Tweedie.

ExxonMobil New Zealand (Exploration) Ltd (EMNZEL) and Todd gained Crown Minerals approval 12 months ago to postpone by a year their deadline for making a decision on going ahead with exploration.

At the time, Energy Minister Gerry Brownlee said the postponement was "not unusual" and that "obviously there is more work that needs to be done before a commitment to drilling can be made".

Mr Brownlee may yet lose his other big player, Austrian energy giant OMV NZ, which has three other blocks totalling 48,000sq km, with Thai partner PTTEP Offshore Investment Co (36 percent each), and Japanese company Mitsui Exploration and Production Australia Pty (28 percent).

They picked up the blocks in the central part of the basin with the greatest thicknesses of sediments, some of which have recorded oil shows, but in January also deferred for 12 months their own commitment to drilling.

Exploratory drilling in waters 500m to 1250m deep is expected to cost as much as $US100 million ($NZ132 million).

The potential spending splurge had local interests eyeing an anticipated windfall, with Invercargill mayor Tim Shadbolt planning a trip to Stavanger in Norway -- to find out how that city coped with its oil boom -- when he predicted tens of millions of dollars would be injected into the regional economy.

ExxonMobil/Todd was one of only two big consortiums which said three years ago they were willing to spend $NZ1.2 billion exploring the basin, or at least the 16,390 sq km on their permit.

A total of only nine wells have been drilled in the 500,000 sq km petroleum basin -- six of them in the 1970s by Hunt International Petroleum, working with Phillips Petroleum, with a couple drilled in the early 1980s by Placid Oil.

NZPA WGT kca sl

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