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An Oil Opportunity That’s Off the Beaten Path

It’s no coincidence that energy exploration companies have some of the greatest upside potential in the market today. One successful well can transform an unknown company into a headline story … and turn a couple of thousand dollars into a small fortune.

As I wrote last week, “I think we’ll be hearing more success stories during the coming months and years since exploration companies, armed with increasing amounts of data, will be able to more precisely locate high-potential drilling targets.”

One of the areas worth a good, hard look for oil exploration is New Zealand.

Small and isolated, but beautiful and resourceful, New Zealand is a fully developed country that has a thriving domestic oil and gas industry. It also has potentially massive shale oil reserves in the country’s yet-to-be explored East Coast Basin, which more than one creative writer has dubbed the South Pacific’s “Bakken.”

New Zealand’s seclusion has been one of its biggest energy challenges to overcome since it has historically depended largely on imported supplies of oil and gas. Recent investments in wind and solar infrastructure have helped, but like most places around the world they just don’t produce enough energy to meet growing demand.

Up until the late 20th century New Zealand imported nearly all of its oil. Thankfully for the Kiwis, that finally changed in 1959 when the first of three major oil and gas strikes proved that New Zealand had the potential to eventually reach energy independence.

That year marked the discovery of the huge offshore Kadpuni gas field.

That success was followed a decade later, in 1969, when the massive offshore M?ui gas field was found, showing that NZ had world-class natural gas potential.

Oil was added to the equation a decade later when the onshore McKee oilfield showed that there was an active hydrocarbon system in the Taranaki Basin.

Along with other smaller discoveries, these resources allowed New Zealand to rely 100% on domestic natural gas beginning in the 1970s and to decrease foreign imports of oil in the 1980s.

It was also during this time that the government funded a number of infrastructure projects – including natural gas-fueled power plants – to capitalize on the economic development opportunities that accompanied domestic energy production.

New Zealand now heavily depends on domestic natural gas. The problem is that natural gas and oil production is falling – rapidly.

Maui, by far the biggest producer of oil and natural gas, reached peak production in 1997 and is now in sharp decline. The same holds true for K?puni and several smaller fields.

The country needs more natural gas and oil production soon to avoid returning to the days of foreign dependence. That’s why significant investments in exploration efforts are underway to see if North American-style shale oil and gas reserves exist.

According to GNS Science, a leading earth and geosciences consultancy in New Zealand, the country has a number of sedimentary basins that may host oil and gas. In fact, of New Zealand’s 250,000 square kilometers of landmass and 5.7 million square kilometers of seabed, 20% could hold oil and gas reserves, according to GNS estimates.

Much of this area has been covered only by reconnaissance geophysical surveys and is poorly understood. However, several petroleum basins have been defined based on modern seismic surveys supported, in some cases, by well logs.

At least part of each of these petroleum basins has been licensed for exploration and companies are ramping up exploration programs right now.

It’s certainly off the beaten path but I think there is immense upside in select New Zealand-based oil and gas explorers. I’m out of room today, but in the coming weeks I’ll get deeper into the details on a couple of high potential targets.

Good Investing,

Tyler Laundon, MBA