The Canadian listed company yesterday said it would continue further completion operations on the SuppleJack South-1A well without its two original partners – ASX-listed Tap Oil and NZX/AMEX-listed company Austral Pacific Energy.

“It’s too early to call it quits,” TAG president Drew Cadenhead said.

“Our two partners believe that the risk of continuing in the other potential zone is too great, but TAG doesn’t agree. Though we recognise there is a risk, we plan on leveraging a few operational techniques now common in North America, but previously untried in New Zealand."

TAG would be financially responsible for all future costs of the well and, if the well started producing, TAG would earn all available revenue available until it had recovered five times its entire sole-risk investment.

After that, Austral and Tap would have the option of buying back into the project, by paying their share of the initial sole-risk costs to TAG.

Cadenhead said TAG planned to perforate a different Miocene-aged Mount Messenger sand at an along-hole measured depth of 1958m and flow-test that zone over the next two weeks.

Austral yesterday said flow testing of the 5m-thick N-0 sand in Supplejack South-1A had produced only formation water and drilling muds, and testing had been terminated.

While the shallower 1.5m-thick sandstone looked of better quality, and was expected to flow gas on test, Austral believed it had limited reserve potential and did not warrant further investigation.

Tap said the well was unlikely to flow commercial hydrocarbons and that it would not participate in any further testing.

Supplejack South-1 was designed to test the hydrocarbon potential of a seismic anomaly at the Mount Messenger level offset to the Supplejack-1 discovery well. Supplejack South had a surface location in PEP38741, but was deviated in adjacent PEP 38765 to test a 3D seismically identified 'sweet spot' roughly 700m from Supplejack-1.

The PEP38765 partners are: permit operator Tap Oil (50%), Austral Pacific Energy (37.67%) and TAG Oil (13.33%), though Austral was operating the Supplejack South-1 well.

The PEP 38741 partners are: operator Austral Pacific Energy (30%), Tap Oil (50%) and TAG Oil (20%).