12 Feb 2009

Credit crunch, price drop chills oil prospecting

3:02 pm on 12 February 2009

The search for oil and gas in New Zealand is slowing as finance dries up and oil prices stagnate.

Both cashflow and potential returns have been squeezed as premium crude has fallen from a high of $US147 a barrel last year, to around $US40 at present.

Large-scale projects continue, such as the development of the Kupe and Maari fields, and there has been more drilling around the Tui field.

However the Petroleum Exploration and Production Association says small companies that rely on financial partners in riskier oil basins will haul in the reins.

The Crown Minerals Group manages the New Zealand Government's oil, gas, minerals and coal resources, is predicting that a shakedown of the oil and gas exploration industry will be likely to favour larger players.

Taranaki contractors say some smaller explorers are already cutting back and will have to renegotiate their work programmes with the Government or relinquish their permits.

The International Energy Agency said on Wednesday that global energy demand this year would post its biggest decline since 1982 under the weight of the economic crisis.

The Paris-based agency said in its monthly report that global oil demand would fall by 980,000 barrels per day in 2009, a decline that would exceed its previous forecast for a 500,000 barrels per day contraction.