That means onshore, near-shore and parts of offshore Taranaki should remain the focus of most exploration effort for the foreseeable future. Only relatively large, 1tcf-plus of gas or 20-million plus of oil, offshore discoveries may be considered economic to develop if they are distant from existing facilities.

This is illustrated by NGC Holdings last week announcing it had signed a two-year agreement with Westech Energy for the purchase of gas from the small Surrey field in onshore Taranaki.

While the Surrey find, in licence PEP 38734, and Westech's earlier Windsor discovery, in nearby PEP 38732, are believed to be about the same size, NGC is presently only interested in Surrey, despite Windsor, discovered in 2000, having proven reserves of 4 Petajoules of gas.

Westech Energy New Zealand downstream operations director Kevin Johnson told EnergyReview.Net that the closeness to NGC's high-pressure pipeline was a key factor in the decision to develop Surrey.

"We are doing a stand alone review of Windsor, reviewing ways we can get it to market. Although the gas price is rising, the economics of the two fields are rather different."

It was only a kilometre from the small Surrey-1 separation facilities to NGC's North Island pipeline system. However, it was 5-6km from any Windsor wells to the NGC system, he said.

Under the agreement, NGC will buy at least 1 Petajoule of Surrey gas each year from the field, which lies southeast of Inglewood. Gas deliveries are due to commence this week and will ultimately be directed through NGC's Kapuni gas treatment plant for processing to reticulated market specification.

Johnson said Westech, a subsidiary of Energy Corporation of America, was planning to drill probably two more wells in the Surrey field within the next six months or so.

An added bonus for Westech was the shallow oil from the Surrey-1 well. Last December the well flowed 116 barrels of oil and 1.26 million cubic feet of gas per day, with no water, through a ¼ inch choke from the Miocene-aged Mount Messenger sands. The gas was dry gas, composed of 97.1% methane (C1) and 2.16% ethane and higher (C2+) hydrocarbons, with no hydrogen sulphide (H2S) and negligible carbon dioxide.

Johnson said Westech had an arrangement with Shell New Zealand regarding the transportation and export from Port Taranaki of the 30 degree API oil.

Although commercial details of the NGC-Westech deal remain confidential, it is known onshore gas is now fetching $3.00-3.50 per Gigajoule.

NGC chief executive Phil James last week said the deal with Westech was a further important step in NGC's development of its gas trading portfolio. This followed last month's agreement with Indo-Pacific Energy, whereby NGC made a $NZ2 million prepayment against future gas purchases and is entitled to negotiate first for gas produced by Indo-Pacific for the next 10 years. This excludes Indo-Pacific's recent Kahili gas-condensate discovery.