Wellington, Oct 22 NZPA - A Canadian oil company scheduled to drill exploratory wells next year at two sites north of Gisborne and south of Napier has dampened down speculation over an East Coast Basin oil rush.

Trans-Orient Petroleum released a report in Canada saying its properties on the east coast of the North Island have a potential 12.6 billion barrels of hydrocarbons, with the possibility of recovering 38 million barrels from the Waipawa black shale and 65 million barrels from the Whangai shale.

The company said in Vancouver that AJM Petroleum Consultants had made an assessment of the company's fractured oil-shale in its 890,000 hectare onshore prospects in the East Coast Basin.

The best estimate "hydrocarbon in place" volume of 12.6 billion barrels was the total available for both the shales, it said in a statement.

But the overall extent and thickness of the shale zones needed to be verified.

Trans-Orient geologist Carlos Kazianis said New Zealanders eyeing the "black gold" should wait until after drilling has explored the deep marine shales at the sites.

"All we've conducted is a study that indicates there is source rock that has significant total organic carbon content that is very thick and has potential to expel significant volumes of oil," he said.

It would be wrong to describe it as a discovery, because that would imply oil was already flowing from wells: "A discovery is when you're drilling a well and you have oil coming to the surface in big volumes".

The report's estimates of the recoverable hydrocarbons were "potentials", rather than estimates from recently drilled wells, Mr Kazianis said.

"This study is purely to reconcile the leadership of Trans-Orient and its shareholders that there is thick enough source rock that could potentially expel big volumes of oil -- therefore we should direct our efforts into drilling," he said.

Trans-Orient's permits require exploratory wells to be drilled by November 2009.

There have been 40 wells drilled on the East Coast since the 1960 -- a relatively small number -- and none of them were commercially successful.

Some wells drilled before 2001 recorded "extraordinarily strong" gas shows, but had no porous body of rock to provide a reservoir of gas or oil.

Trans-Orient was looking at the Whangai formation -- a compacted mudstone fractured by earthquakes -- because it was possible that gas could seep through the fractures.

A similar mechanism in fractured limestone in Taranaki's Waihapa field was producing commercial gas flows.

A former executive chairman of Trans-Orient, David Bennett -- who resigned in August and was not involved with the AJM report -- said that usually only between 10 percent and 60 percent of the oil in any field was ever actually recovered.

The East Coast basin has potential for oil and gas, but had not yet had the sustained exploratory drilling needed for a commercially viable discovery.

"In a frontier exploration province such as this, there is a minor probability of any one well being successful," he said.

Petroleum Exploration and Production Association (PEPANZ) executive officer John Pfahlert also said Trans-Orient's assessment of the prospect was an estimate of potential, "not a discovery of oil".

"While there is potential, there is no guarantee that volume of oil is underground," he said.

"The only way of confirming there is oil is to drill a well."

Mr Pfahlert said the seismic surveys underpinning the consultant's report have identified geological conditions which could indicate the presence of oil but this was no "sure thing".

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