Mon, Oct 15, 2007 - Page 9 News List

Rough sub-Antarctic seas may hold oil and gas reserves -- but are they worth drilling?

By Ray Lilley  /  AP , WELLINGTON

The Southern Hemisphere's "Roaring 40s"" -- a band of howling winds and mountainous seas in sub-Antarctic waters -- still strike fear in the hearts of mariners.

Next year, US oil giant Exxon Mobil Corp and OMV AG, Austria's largest company by sales, will enter this terror-inspiring seascape south of New Zealand to search four exploration blocks for natural gas and oil.

It's one of the latest examples of the lengths to which oil companies will go to hunt for new resources to feed an energy-hungry world rapidly consuming easily accessible supplies.

Elsewhere, US companies have drilled wells 10km into the earth beneath the Gulf of Mexico, this winter Norway will export gas from the seas north of the Arctic Circle, and off Sakahalin island in Far East Russia natural gas will soon be exported from seas that freeze almost six months of the year.

A significant find off New Zealand would hugely benefit the country's economy by bringing in royalties and investment dollars and -- perhaps more importantly -- replenishing the country's natural gas reserves, which could run out in 20 years at current use rates.

The potential is enormous. The government has said unproven estimates for the Great South Basin, which stretches 450km from the South Island's southern coastline toward the Antarctic coast, suggest it contains almost 10 billion barrels of oil equivalent, mostly in natural gas.

That's nearly 10 times the output from New Zealand's biggest gas and oil field, called Maui, over the last 25 years.

"A really big discovery like a Maui field would be worth billions to the economy," said John Pfahlert, executive officer of New Zealand's Petroleum Exploration Production Association.

Should Exxon and OMV decide to drill, the projects could bring in as much as NZ$1.2 billion (US$855 million) in investment from the two companies, New Zealand Associate Energy Minister Harry Duynhoven said.

But commercial production from fields could still be more than 20 years away, some experts say.

That's a potential problem for New Zealand, which is steadily exhausting its reserves of natural gas, used to produce 30 percent of the country's electricity.

Without new discoveries, New Zealand will likely run out of natural gas resources in 20 years. That would probably force New Zealand to import liquefied natural gas from abroad at higher prices and invest in receiving terminals and reconversion plants -- or turn to some other form of energy such as coal or oil to fill the gap.

The country's known reserves stand at just 200 million barrels of oil and 62 billion cubic meters of gas, some of the lowest in the Asia-Pacific region. Australia, for example, has more than 20 times the oil and more than 40 times the gas.

Without offshore gas flows, the government would also stand to lose an income source. Between 1970 and 2005, the government has collected over NZ$2.8 billion in petroleum royalties.

Industries that depend on gas byproducts such as methanol and fertilizer also would be affected.

Still, exploring for potential oil and gas fields underneath the ocean is expensive and time-consuming, especially in the rough seas south of New Zealand. North Sea waters off Scotland "look like a mill pond" by comparison, Pfahlert said.

First, the companies will spend two to three years taking seismic readings, and then another two to three years to test drilling promising target areas.

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