US company Apache pulls out of East Coast oil hunt

The government's drive for new investment in oil and gas development in New Zealand has suffered another blow with the departure of Texan mid-sized player Apache Corp from a joint venture with Canadian TAG Oil.

The pair were to explore together for oil and gas on the North Island's East Coast. TAG says it will now go it alone.

The shale gas play is likely to involve the controversial practice of hydraulic fracturing, or "fracking", to which the Commissioner for the Environment Dr Jan Wright last year gave a partial clean bill of health, subject to robust regulation.

A groundswell of local opposition to the exploration has been building in the region.

Unlike the Taranaki region on the west coast of the island, the east has no previous experience of oil and gas exploration.

TAG is already actively producing oil and gas from numerous onshore wells in Taranaki, has engaged in some fracking to do so, and won more permits in the province in a government tender round late last year.

"We are a large company and we have opportunities all over the world," an Apache senior vice-president for global corporate affairs, Bob Dye, told BusinessDesk from from Houston. "We reviewed where we are at and decided to invest our money elsewhere."

Exploration activity has been progressing, including exploration areas around Gisborne and Hawke's Bay sporting signs saying "This is Apache Country".

"We wish TAG all the best," Mr Dye says. "They are a good company to work with but we decided to reallocate."

The Apache website cites no more than a commitment to "evaluate potential well performance for an oil shale project in New Zealand".

The decision, typical of oil companies with global reach and a constantly evolving portfolio of possible investments, follows a decision announced last month by the Brazilian oil and gas giant to relinquish exploration rights in the Raukumara Basin, in deep water off East Cape in the Exclusive Economic Zone.

Painted locally as a victory for opposition organised by Greenpeace and local iwi Te Whanau a Apanui, the Petrobras decision came as the company retrenched across the world to deal with serious commercial problems in its home market.

TAG chief executive Garth Johnson expressed disappointment at Apache's decision.

"Whether we like it or not, this is the nature of the oil and gas exploration business around the world and we will treat it as an opportunity and move on," he says in a statement.

"We will continue with the work programme on the East Coast in the same careful, methodical and safe way that we have carried out our work programme in Taranaki."

A much smaller company than Apache, the Canadian explorer has struggled at times to communicate its plans positively, but Mr Dye says TAG was "a good company to work with".

Most of TAG's producing assets are in New Zealand, although its shares are listed on the Toronto Stock Exchange, which was not trading at the time of the TAG statement in New Zealand.

(BusinessDesk)

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11 Comments & Questions

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Government needs to think very carefully about this. It needs to award its licences to local players and their iwi partners. Foreign players will always be able to run.

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Greens and Maori separatists will be celebrating. Welcome to the future NZ.

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Yep, it's the flea on the tail wagging the dog. One must question the true motives of the opposition here. To keep NZ clean and green, and close down or prevent the start up of any enterprise that "might" - "just might" - be a problem? Or is it to prevent economic progress that would have created employment in a depressed region, Gisborne, and taken some long-term dependents (their supporters) off wefare?

What will the goverment do? High odds on nothing.

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The US has 'uncovered ' an awful lot of domestic shale gas recently. No surprise, then, that there are better opportunities at the current lower energy prices.
Never mind. At some point in the future exploration here will be worthwhile. We can wait.

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Another victory. Tag Oil's shares have also dropped 30% in 3 days.

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It's all good. Leave the oil/gas in place. In 5-10 years it will be hyper valuable. Then extract it via a national oil company (similar to Norway's Statoil) - much better than letting in multinationals, which pay a pittance in royalties.

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Please don't. The last thing NZ Inc needs in another over-bloated NZ Rail of 40 years ago in the oil and gas sector. Governments the world over are notoriously bad at creating profitable entities.

Partner with iwi, the Crown and private enterprise = PPP or mixed ownership model that will no doubt be ridiculed by the likes of those on the political left.

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So are you telling me that Norway's Statoil has been notoriously bad at creating profits for the Norwegian people?

Must be why there is more than $600 billion in their oil investment fund.

But, hey, you stick with that dogma about government entities all being loss makers. It makes a good bed-time story.

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Yeah, but Norway doesn't have the green Taliban or the unions like we do here.

Just look at the fuss MUNZ inflicted on Auckland, costing Ports of Auckland millions in lost revenue because they still want 1950s work practises at the wharves. So magnify that 100 times and just think how the unions would strangle that industry.

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Perhaps they had been talking to Bathurst Mining about how to get resource consent?

Bathurst said that the silver lining to their coal mine is that by the time they are allowed to operate, it will be a diamond mine and not a coal mine.

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How about giving up trying to figure out new ways to hurt the planet and putting that money and energy into something more constructive. Like the abundance of lovely solar energy just falling out of the sky, literally.

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