Shell's rejection opens the way for Swift Energy to actively recruit its own preferred partner in the licence to help it further appraise and develop all the prospects in the permit.
Shell New Zealand chairman Lloyd Taylor said from Wellington that Shell had chosen not to exercise its option negotiated when it sold the Tariki, Ahuroa, Waihapa and Ngaere (Tawn) mining licences and production facilities to Swift for about $US54.4 million late last year.
Taylor declined to say why Shell had chosen not to take any equity in the permit. "We have made no statement on this as it's not a material matter in the Shell business arena."
The Houston-based international exploration group of Royal Dutch Shell had evaluated the PEP 38719 block and the Rimu-Kauri oil finds. Obviously this group felt any investment in the permit would not have met Royal Dutch Shell's stringent international operating criteria of achieving a 15-18% return on capital and a 3% year-on-year production growth.
This leaves the $NZ900 million Pohokura gas field development as the only definite new project on Shell NZ's books, as it is looking to sell its 49% stake in the marginal Maari oil discovery in PEP 38413, south of the Maui field.
The deadline for Swift Energy's Rimu-Kauri option was Wednesday in the United States. No senior Swift Energy executives were available to comment today, but industry commentators say the Houston-headquartered company would be relieved at no longer having the prospect of Shell as a Rimu-Kauri partner.
One commentator said Shell International had for years been interested more in gas than oil and its refusal to join Swift would leave the Texans unfettered in their search for a more compatible partner to optimise development of the Rimu, Kauri and any other oil finds in PEP 38719.
"Shell would have wanted an option to participate in Rimu and Kauri, but now they've done their due diligence and found nothing worthwhile, from their perspective, they're on to bigger things."
Swift has already said that if Shell did not exercise its right under this option, the Houston company intends seeking a strategic partner by the end of this year to participate in anything up to a 25% interest in the Rimu-Kauri permit.
Last year Shell and Swift negotiated several strategic agreements regarding Shell possibly participating in future exploration and development activity in the Rimu-Kauri and Tawn licences.
Though Shell's due diligence regarding the Rimu options failed to impress it, the oil giant still has almost a year to decide whether to acquire up to 50% of certain deep oil and gas horizons located within the Tawn licence areas.
Swift Energy New Zealand owns the Tawn deep rights and will remain operator for any future exploratory or development drilling within the licences, whether or not Shell joins it in those horizons.
