Origin Energy wants to expand further into greenfields prospecting in New Zealand, but exploration manager Rob Willink expresses some reservations.

“The government lacks flexibility on prevailing rules on exploration and on securing an appropriate rig in a timely manner,” he says.

Christchurch, New Zealand-headquarered L&M Petroleum agrees on this point. With only two years left to run on its Solander Basin block off the southern South Island, the company is seeking farm-in partners, hoping to spread the risks and costs and secure a rig more speedily for the venture.

Chief executive John Bay says mobilisation and infrastructure costs for the drilling permit have so far proven to be “astronomical”, and the company is in a queue for equipment and trying to find a way to extend its permit timetable.

The recent revocation of Bounty Oil & Gas’ Great South Basin permit, PEP 38215, after the company failed to start drilling that difficult block in the required three-year timeframe, is still fresh in the minds of explorers.

With costs rising and rig availability tight, Willink argues that keeping to the government’s timetable rules on permits is becoming “highly problematic” for many explorers.

“It’s a risky and expensive operation and drilling costs have skyrocketed,” he says.

Australian Worldwide Exploration managing director Bruce Phillips agrees that costs are particularly high in New Zealand.

“New Zealand suffers worse than Australia because of its remoteness,” he says.

But he also acknowledges improved local incentives, including precompetitive seismic and a revised royalties regime with relaxed tax provisions.

“The government has a continuous program in trying to work with the private sector to attract foreign investment in a climate in which exploration wells cost up to $A40 million to drill,” Phillips says.

“Relative to the rest of the world, the NZ Government has done considerable high-risk work and they don’t stop at that. They actively promote NZ around the world – Australia, North America, Europe and Asia.”