“An under-the-radar market is high on reserves but low on production… signaling for an immediate investment boom” —
Its majestic landscapes and natural beauty is the stuff of fantasy. Quite literally.
With stunning waterways weaving throughout an oasis of lush mountains and valleys, it’s hard to think of a more scenic backdrop for the ethereal world of Middle-Earth — precisely the reason why Peter Jackson’s chose New Zealand as host of his Lord of the Rings trilogy.
But this south pacific nation is much more than just an idyllic film locale for Hollywood’s next big blockbuster.
It also happens to be one of the world’s most prolific oil and gas regions.
In fact, for investors in the know New Zealand is an energy Mecca that’s still in its infancy.
Although indications of exploration can be traced as far back as the 1860’s, it wasn’t until 1959 when the Kiwis finally arrived in the modern era of global energy.
It was that year that the massive offshore Kāpuni gas field was discovered – paving the way for New Zealand’s newfound economic prosperity.
The energy industry soon took notice, as the likes of Royal Dutch Shell, BP, Todd Petroleum and others began arriving on its shores.
Over the course of the next two decades, a second large offshore gas field was discovered along with an onshore oilfield. The economic success from both the Māui gas field and McKee oilfield enabled New Zealand to rely very little on foreign energy – and that remains true to this day.
In fact, the tiny island nation has enjoyed gas independence and nominal oil imports since the 1980s.
However, their holidays may soon be over as production levels are currently under serious threat.
Like any economically developed country, New Zealand requires a great deal of fuel to keep its engine running.
With domestic energy demand rising exponentially, production from Kāpuni, Māui and other fields are falling — each discovery well past peak production.
But even these are not capable of stemming the demand tide.
The much lauded Tui field which began production in 2007, reached peak production in less than five years. It’s expected to slowly drip out its remaining few million barrels before being fully depleted by 2020.
Although it would appear that New Zealand might be headed back to the gloomy days of foreign energy dependence, there’s now an incredible investment opportunity in the making.
Just a couple weeks ago, the New Zealand government enacted a new law called the Crown Minerals Act.
The ruling is aimed to attract more interest from foreign companies to the country’s current and future exploration permit auctions, which includes both oil & gas and minerals.
As Energy and Resource Minister Simon Bridges explains, his government is aiming for “incremental and deepening activity by the existing international players we have,” adding that he has seen “renewed interest” among companies that haven’t done exploration in New Zealand yet.
The players certainly aren’t going to wait long to get their drilling started.
Already, three offshore rigs are due to arrive in December. They are expected to drill 13 wells at a cost of US$837.6 million.
But New Zealand’s new resource strategy won’t just be exclusive to multinationals. The locals can also play at this game.
These two companies look set to cash in on their homegrown opportunities as oil and gas supplies continue to dwindle:
Endeavour Energy is a 100% subsidiary of Canadian-based Marauder Resources East Coast Inc. (MES:TSX). They are actively exploring unconventional oil plays in the East Coast Basin of New Zealand. Late last fall, they were awarded an exploration permit covering over 238,000 acres in the Basin. They are currently in discussions with a potential JV partner to begin exploring the permit. The light oil shale formations found there have often been compared to the characteristics seen in the Bakken in North Dakota.
TAG Oil (TAO) is a New Zealand explorer and producer who has properties in the Taranaki Basin as well as the East Coast Basin. They currently own nearly 3 million net acres of land that’s estimated to contain 42.5 billion barrels of oil. TAO recently completed a production facility expansion at their Taranaki/Cheal property, giving them the means to rapidly commercialize all future discoveries. The high-quality oil produced from the Taranaki/Cheal property is sold at Asia-Pacific Tapis pricing, which is typically at a premium to WTI due to its low sulfur content.
Being one of the most stable geopolitical environments in the world and having a government that is eager to exploit more of its natural resources, it’s amazing that New Zealand hasn’t made a bigger splash on Wall Street, if any.
Then again, savvy investors wouldn’t want it any other way.
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