Tap and Canadian-incorporated company Indo-Pacific Energy have agreed that Tap is to acquire major stakes, between 30-50%, in three small onshore Taranaki permits. In addition, Tap has jointly bid with Indo-Pacific for four new exploration onshore blocks, for which Crown Minerals called tenders earlier this year.

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Tap Oil managing director Paul Underwood says the expansion across the Tasman does not signal a change of direction or focus for the company, but rather that the company has reached a stage of growth where an additional area of interest is sensible and represents a practical diversification of both opportunity and risk.

Underwood said Tap Oil had also agreed to acquire further interests in the offshore Carnarvon basin of Western Australia.

The Tap Oil/Indo-Pacific agreement covered Tap taking stakes in PEP 38723, 736 and 741: a contiguous package of exploration permits. Tap Oil would contribute approximately $A4 million to a program of 75 square kilometres of 3D seismic and the drilling of the Kahili-1A appraisal well next month in PEP 38736. Tap Oil would earn a 30% interest in PEP 38736, and a 50% stake in each of the other two licences.

Tap had previously expressed its intention and reasons for seeking an additional area of focus having the same hallmarks as its Carnarvon Basin acreage. "New Zealand is a favorable investment regime for oil and gas exploration and production and Tap has accumulated considerable knowledge of the area over the past few years in the lead up to this transaction."

The gazetted exploration blocks for which Tap had jointly bid with Indo-Pacific were adjacent to the existing permits. Tap Oil's proposed stakes in the new acreage were as follows: Block J 50%, Block K 25%, Block M 37.5% and Block S 25%.

Crown Minerals is expected to announce the successful bidders for the new onshore and near-shore Taranaki acreage next month.

Underwood said onshore Taranaki had the same potential for growth as did the Carnarvon Basin. The Taranaki Basin was largely under explored and, like the Carnarvon Basin, had proven generation and entrapment of both oil and gas, together with a multitude of different play concepts at various levels.

Furthermore, it had numerous producing commercial oil and gas discoveries and spare processing capacity, as well as an undersupplied gas market.

Tap's Taranaki strategy will be to initially focus on the smaller low risk-high reward shallower oil-prone Mt Messenger Formation targets around the 2000m mark, using 3D seismic, along with a less aggressive effort on the higher risk-high reward deeper and larger prospects at the Kapuni level.

Drilling activity will start next month with the Kahili-1A appraisal well, which would be a sidetrack of the Kahili-1 well drilled last January. Kahili-1 encountered a 58.5m gross oil column (44m net reservoir) in the Tariki sandstone and a four-hour drill stem test recovered a small amount of oil. Tap estimated potential recoverable Kahili reserves of around 14 million barrels of oil and 18 bcf of associated gas (on a P50 basis).

Other drill targets had been identified but further drilling would await the results of the proposed 3D seismic program. Very little 3D seismic had been recorded onshore to date, but where it had been, the success rate for the Mt Messenger Sandstone had been approximately 50%.

Indo-Pacific chief executive Dave Bennett said from Wellington that he was pleased with the Tap Oil deal and the Western Australian company's belief in the prospectivity of onshore Taranaki.

He added that planning for the seismic had started, but acquisition, across all three permits, would not start until late 2002-early 2003.

Underwood said drilling activity in the Taranaki Basin had been low, with an average of five wells per year since 1996, compared to 57 wells per year for the Carnarvon Basin.

"Notwithstanding the low drilling activity in the Taranaki basin, its prospectivity speaks for itself with around 455 million barrels of oil and condensate and seven tcf of gas reserves having been discovered to date.

"The area has numerous, developed oil and gas fields currently in production and consequently infrastructure for processing and transporting both oil and gas is readily available. Two of these processing stations are very close to Tap's acreage and have spare processing capacity."

Hence, any commercial discoveries would require minimal development and capital expenditure costs, Underwood added.