Local supplies of gas are in high demand for the firing of new power stations, and with the Maui field’s long-term prospects being unclear, the exploration of expensive but promising offshore blocks in Taranaki and Northland is critical.

Crown Minerals is the government body responsible for developing the exploration investment framework in New Zealand.

Before its announcement on recent blocks offers, Crown Minerals held a forum with major overseas investors to ascertain the concerns of current and potential exploration investors in New Zealand. In summary, investors were concerned with:

• The tightness of global market for seismic vessels, rigs and other equipment making it difficult to complete work programmes on time;

• Clarifying Crown Minerals position on work program compliance (including any leniency and extensions);

• Clarifying status of practice statements (which are issued by Crown Minerals but have no technical legal status); and

• Taxation as a barrier to developing marginal proposals.

But investors generally supported the principles underlying the government's practice statement on unitisation, and supported government acquisition of data and moves to improve Crown Minerals’ provision of geotechnical data and permitting information.

The investors also proposed a grid-based allocation of permit blocks in future, and supported government involvement in ensuring there was an offshore drilling program in 2007.

The growing uncertainty in the exploration industry, exacerbated by the decline of the Maui gas field, increases the need for a review of policy and legislation governing the permitting regime.

In light of the poor uptake of the latest blocks offer, Crown Minerals has indicated it may consider relaxing work program requirements in an effort to encourage investment.

In addition to this, Crown Minerals needs to review its Minerals Program to reflect the fluctuating trends in the global exploration investment environment.

The growing shortage of offshore and deep sea rigs coupled with the shortage of expertise in the exploration industry increases the need for flexibility in complying with work program obligations.

Kensington Swan are experts in matters related to obtaining and dealing with permits under the Crown Minerals Act 1991. For more information and contact details see www.kensingtonswan.com