Gas drilling '50:50' call - Shell

Oil and gas explorer Shell says its chances of undertaking a $200 million exploratory drilling programme in the Great South Basin are 50:50, with a decision expected within months.

The company, which has spent more than $80 million in two separate seismic surveys in the basin off Otago in recent years, also confirmed yesterday it had committed a further $US10 million ($NZ11.8 million) to additional exploration of the Great South Basin.

The latter work will include more than 2000km of 2-D seismic surveys within a 8500sq km exploration block acquired last December.

Shell's New Zealand exploration venture manager Roland Spuij was in Dunedin yesterday for a meeting with mainly local business people, which was abandoned because of interruptions by more than 30 anti-exploration protesters.

After the meeting, Mr Spuij told the Otago Daily Times there was a 50% chance of test-drilling going ahead off the southern coast.

Data suggested the test drill had a 70% likelihood of being unsuccessful, with a 30% chance of finding commercially viable gas deposits, he said.

''A one in three chance is pretty good, from our point of view,'' Mr Spuij said.

Beginning a test-drill programme would require 18 months' notice, with Shell still targeting the summer of 2014-15.

''Yes. We'll be making an announcement this year,'' Mr Spuij said. Full production, if the test-drilling was undertaken and proved viable, would not begin for a decade, he said.

Shell had completed processing earlier seismic data at its headquarters in the Netherlands. It was now assessing the key ''volumetrics'' which would indicate the potential size of any gas field.

Mr Spuij declined to give an estimate of a minimum size for commercial viability, as fields and costs around the world differed too much for such a comparison.

If Shell went ahead with test-drilling, one of two prospects south of Dunedin would initially be drilled over 40 days, in depths of 1350m-1400m, at a cost of $200 million.

If that result was positive, Shell would ''quickly have to decide'' to drill a second ''appraisal'' hole, then move 45km to a second prospective site for another test well, Mr Spuij said.

He highlighted that New Zealand's historical success rate was 15%, compared with a global success rate of more than 30%, and said that the Great South Basin as a ''frontier'' area had its pitfalls.

The basin had a historical lack of success and its remoteness also worked against it, he said.

''We have to talk to head office about the metrics to get the go-ahead,'' he said.

He said Shell was the world's largest gas explorer, hinting at an annual exploration budget of more than $US2 billion. The company last year drilled 150 exploratory holes, resulting in gas finds equivalent to 2.5 billion barrels of oil.

Shell is building one of the world's largest ships, the $US13 billion, 500m-long Prelude in Korea. It would be able to process gas to liquid at sea for export.

''This ship will be a game-changer for places like the Great South Basin,'' he said.

He did not rule out any southern gas find being piped ashore for processing for industrial or commercial use, noting set-up costs of hundreds of millions of dollars could be undertaken by companies as big as Shell.

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