Gisborne District Council has granted TAG Oil consent to drill an exploratory oil well at the Waitangi Valley-1 well site near Gisborne.
The Canada-based company said earthwork activity was already underway to build an access road and drilling pad and the drilling rig was expected to be working by the end of June.
Chief executive Garth Johnson said the East Coast basin compared to the big oil fields in North America such as Bakken Shale where fracking is used on a massive scale to extract oil.
Mr Johnson said the potential oil resource in the East Coast region was significant by world standards, with independent estimates of potentially 14 billion barrels of oil.
He said TAG Oil's vision was to establish the country's first unconventional oil production, or fracking, at Waitangi Valley-1 and prove the potentially large resource is commerically viable.