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Australia has plenty of natural gas, but it grows increasingly dependent on outside sources for its hydrocarbon liquids. New Zealand's main gas supply, Maui field, is in steep decline, and the country wants more exploration, fast, to prop up supplies.
The problems are similar, if not identical. Without extraordinary moves, Australia's self-sufficiency in oil will drop from the 80% to 90% range over the past 10 years to less than 40% by 2010. Malcolm Garrett, chairman of the Australian Petroleum Production and Exploration Association, encouraged the government to ease its terms to stimulate investment. He added the nation is unlikely to make large discoveries onshore or in shallow water, and deepwater and frontier areas are Australia's best bet for new supplies.
With the decline of Maui, New Zealand may not have enough in-country natural gas to meet its electrical generation needs beyond 2015. All of New Zealand's current production comes from the Taranaki Basin onshore and offshore on the west side of the North Island, and New Zealand, too, will count on deeper water and frontier areas to offer alternative supplies.
In spite of the obstacles, and possibly because of incentives, Tony Mackay of Mackay Consultants in the United Kingdom predicts increasing oil and gas production in Australia and production in slow decline in New Zealand.
Australia's exploration dropped 37% in the first quarter this year from the previous year. It was the lowest level in 4 years at $117.6 million.
Australia has re-released some previously turned-down lease areas near existing fields, and it opened 31 new exploration areas off the Northern Territory, Western Australia, Victoria and Tasmania.
It also said exploration in frontier areas would qualify for a 150% deduction against income subject to the petroleum resources rent tax.
Oil is far from dead in Australia. Western Australia recently approved development of Jingemia field near Perth, the first onshore field approved for development in the province in more than 12 years.
In other activity, Santos has gone back into the onshore Cooper Basin of south-central Australia to try and halve oil production declines. Its Reg Sprigg-3 well tested at nearly 3,000 b/d and 9 MMcf/d and the company is running 3-D seismic in the area. The previous year, it brought in the Pelican-11 for 4,600 b/d and the Merrmelia-43 for 5,680 b/d from the Cooper Basin. At that time, the company said the basin had some 1.5 billion bbl of oil in place and only 264 million bbl had been recovered.
New Zealand also is working on an incentive package. It includes reduced royalties on larger discoveries made between mid-2004 and Dec. 13, 2009, and possibly loosening tax burdens on service companies such as rig contractors that work offshore. It also is pushing exploration into frontier areas.
Recent licensing rounds produced operators that want to look more closely off the southern coast of the South Island and offshore north of the North Island. In addition, drilling is underway on the East Coast of the North Island, where oil has been found but in quantities too small to be commercial.
Bridge Petroleum Ltd. and Westech took on an onshore shallow gas prospect south of Auckland on the East Coast of the North Island. Also in the latest licensing round, it picked up a coalbed methane parcel south of Manukau Harbor to the West Coast of the North Island. And it picked up an offshore tract north of the normal Taranaki fairway.
Both New Zealand and Australia are active. The only question is whether the activity will be great enough to meet their needs.