Time running out to drill NZOG's deep-sea Barque prospect

BUSINESSDESK: New Zealand Oil & Gas has barely a month to find partners to help meet the cost of exploratory drilling in its deep-sea Barque prospect off the Canterbury coast.

While NZOG chief executive Andrew Knight isn't throwing in the towel until all possibilities are exhausted, the company faces a "drill or drop" decision by August 31, with little prospect of being granted an extension, even if it wanted one.

"Barque is harder, but we do still have people in prospect," Mr Knight told BusinessDesk. Part of the issue with Barque was that its geology suggests it may be an extinct undersea volcano, which was a turn-off for some geologists seeking hydrocarbons.

NZOG only picked up operatorship of the Barque licence in January this year, creating hard and tight deadlines if it was to find farm-in partners.

"We've given it as good a push as we are able to give it," he said. The Canterbury Basin is very lightly explored, although an adjacent licence area is held by Origin Energy and deep-sea oil expert Anadarko.

The company was having much better success in seeking farm-in partners for two offshore Taranaki prospects, Kakapo and Kaheru, which NZOG was marketing alongside its involvement in the Block Offer process the New Zealand government is running.

"There's a genuine opportunity to build a country position in a reasonably efficient way. We're getting good interest," Mr Knight says.

Kaheru requires a decision by September 18.

NZOG believes Kakapo, a shallow water prospect in which holds a 90% interest, could be larger than the Tui and Maari fields, and that it will cost around $US25 million to $US30 million to drill to a depth of 3000 metres.

A drilling decision is not due on the Kanuka prospect, which it owns 50/50 with Todd Energy, until December 2013.

NZOG shares rose slightly this morning, up half a cent to 81 cents.

Sales of oil and gas from the Tui and Kupe fields in the three months to June 30 totalled $27.3 million, on sales of just under 50,000 barrels of oil equivalent.