Australian-listed Origin Energy will spend more than $US50 million ($NZ68 million) on a "high risk" one-hole test drilling programme for oil and gas about 65km off the coast of Dunedin.
Origin, one of the country's largest gas and oil explorers, has already completed a hydrographic seismic survey of the Carrack and Caravel prospects, covering about 300sq km in the designated southern point of the Canterbury Basin.
The prospect area is in 1000m of water and about 35km south of the Galleon 1 prospect, drilled by Shell BP Todd Canterbury Services in 1985, which found gas and oil, but was capped as not commercially viable.
The Origin manager of investor relations, Angus Guthrie, said from Australia yesterday the programme was considered high risk, but with potentially high rewards.
The Carrack and Caravel structures were estimated to contain possibly 750 million barrels of recoverable oil, or 2700 petajoules of recoverable gas and 500 million barrels of associated condensate, if it was gas-charged.
"Should hydrocarbons also be trapped in the lower Kawau sandstone reservoirs, recoverable hydrocarbon volumes could more than double," he said.
Origin has a year from August 21 to drill its permitted area, but it has not yet contracted a rig for the job and is looking for partners with permits in the area to share rig costs.
The rig could cost anywhere between $US5 million and $US10 million to get to and from New Zealand, and possibly up to $US50 million for a month-long drilling programme.
Origin's programme follows that of Australian consortium Tap Oil and Australian Worldwide Exploration's efforts in southern waters in late 2006.
The Ocean Patriot capped and abandoned the well 21km off the North Otago coast as commercially unviable.
Mr Guthrie said it was too early to speculate on how any gas or oil find would be managed.
Origin, which owns 51.4% of Contact Energy, holds the largest area of offshore permits in the country, including eight oil and gas fields, two production stations, oil and gas pipelines and extensive Australian oil, gas and electricity generation and retail.
Results are still pending from hydrographic surveys last year over prospects held by separate consortiums Exxon Mobil and OMV New Zealand Ltd (Austria) in the Great South Basin.
In July 2007, the pair took up six of 40 permits between them in what could amount to $1.2 billion being spent on exploration over five years.
