Australia's Carnarvon Petroleum has entered into a farm-in agreement on the Tuatara-1 "wildcat" exploration well AWE is drilling off the top of the South Island.
Carnarvon said it will contribute between $A2.4 million ($NZ2.9 million) and $A2.8 million ($NZ3.4 million ) to the cost of the Tuatara-1 well to earn a 10 percent interest in the PEP 38524 exploration permit, industry website Upstream Online reported.
Tuatara-1 is due to be drilled to a depth of 2000 metres later this month 15 kilometres west of Durville Island and is targeting up to 100 million barrels in potential oil reserves not far from the location just approved for a 770 hectare mussel farm.
Carnarvon said seismic expression over the structure was similar to the Maari oil field, the largest oilfield in New Zealand, which is located 80km to the northwest of Tuatara-1.
It added that it believed Tuatara-1 was a relatively low risk exploration prospect with an estimated chance of success of about 25 percent.
Chief executive Ted Jacobson said the company had seen a lot of exploration opportunities within Southeast Asia and Australasia, but many did not fit its strict new venture guidelines.
"However, we believe Tuatara is a quality prospect that is well defined on seismic and ready to drill now," Mr Jacobson said.
As a result of the farm-in, the PEP38524 joint venture will now comprise AWE (65 percent), Carnarvon (10 percent), Australian-headquartered ROC Oil (15 percent) and British-listed KEA Petroleum (10 percent).
The well will be spudded after the big semi-submersible rig Kan Tan IV has finished drilling two wells in the Tui field. Australian company AWE's Tui asset manager, Jason Peacock, said earlier this month that drilling off the Taranaki coast was taking longer than expected.
He said the drilling, expected to take 20 days, would probably begin towards the end of this month.
AWE has five major oil and gas projects in Australia and New Zealand.