Christchurch-based L&M announced the farm-in agreement yesterday afternoon, one that will see Auckland-headquartered MRP helping to pay the exploration costs of L&M’s second Beaumont Formation well, scheduled to be drilled early next year.
L&M managing director John Bay told PetroleumNews.net this morning that L&M and MRP were to jointly explore in L&M’s Waiau licence PEP 38226, with each holding 50% equity in the onshore Western Southland Basin permit.
He said L&M’s previous exploration work in the 1123 square kilometre permit had identified seven exploration prospects and five leads.
Last June, L&M announced it had recovered small quantities of gas and traces of oil from the target Beaumont Formation reservoir sands at its initial Sharpridge Creek-1 well.
These encouraging results, together with active oil and gas seeps in the permit, confirmed the existence of an active petroleum system in the Waiau Basin.
Bay said L&M and MRP planned to drill the Eastern Bush Prospect in March or April next year, depending on rig availability, as the first well in their joint exploration program.
Sharpridge Creek-1 was drilled only to a depth of 518m, though Eastern Bush-1 would be drilled much deeper into the Beaumont Formation, perhaps to a depth of 2000m or so, he said.
“L&M is pleased to have forged this alliance with Mighty River Power to work together in this effort,” Bay added.
“It validates L&M’s vision of exploring for and developing energy resources in the southern region of the South Island and places us in a strong position leading up to our proposed IPO in late 2006,” he concluded.
MRP chief executive Doug Heffernan said the program with L&M was part of his company’s strategy of investigating a wide range of potential fuel sources to help meet the opportunity created by New Zealand’s growing demand for energy.
MRP was one of the last New Zealand downstream players to move upstream but has acquired a significant diversified portfolio of petroleum exploration assets in less than two years.
The L&M deal is its fifth such venture in 20 months.
Its first involved joining Swift Energy New Zealand in exploring for deep gas (Eocene-aged or older) in the latter’s onshore Taranaki fields.
MRP then moved offshore, taking a 50% chunk of Swift’s offshore Taranaki licence PEP 38495, containing the promising Kaheru prospect, over which 3D seismic data was shot last summer.
It then continued moving offshore, taking over Bridge Petroleum's 40% equity interest in licence PEP 38491 offshore Taranaki. Lastly, in June, it took 50% equity in Houston-headquartered Pogo Producing Company’s offshore Taranaki licences PEP 38488, 38489 and 38490.
Operator Pogo plans to drill two wells in these permits next year, utilising the semi-submersible Ocean Patriot rig that has just arrived in New Zealand waters.
Earlier this week, the rig spudded Cutter-1 in frontier waters off the east coast of the South Island for a consortium of four Australian mid-caps – operator Tap Oil, Australian Worldwide Exploration, Beach Petroleum and Anzon Australia.
MRP’s involvement in gas comes through its ownership of the 122MW Southdown cogeneration plant in south Auckland and its Mercury Energy subsidiary retailing gas and electricity mainly through the upper North Island.
