Changes to ExxonMobil / Todd Energy Great South Basin permit

Energy and Resources Minister Gerry Brownlee today welcomed the acceptance by Crown Minerals of an application by ExxonMobil and Todd Energy to seek changes to the work conditions for Permit 50117 for the Great South Basin.

In July 2007, the Crown awarded the ExxonMobil and Todd Energy consortium a petroleum exploration permit for the frontier region. Crown Minerals has agreed today to an application from the consortium to defer the date for deciding whether to make a commitment to drilling or not by 12 months (to 10 October 2010). The date by which a well has to be drilled also moves out a year, to 10 October 2011.

"This was not an unusual application. Such applications are completely normal practice and to be anticipated for regions that carry a high level of risk," said Mr Brownlee.

The ability for permit holders to make changes to their work programme conditions is set out in the Minerals Programme for Petroleum, which is governed by the Crown Minerals Act.

"We welcome ExxonMobil's and Todd Energy's decision to continue to explore for petroleum, and look forward to their decision in 12 months time. The change in conditions now means the programme is more consistent with other consortias' work programmes in the area, with a decision on a commitment to drill expected from the OMV consortium in nine months time."

"The original programme set down by the ExxonMobil/Todd Energy consortium was particularly aggressive for a frontier region such as the Great South Basin. Obviously there is more work that needs to be done before a commitment to drilling can be made," said Mr Brownlee.

"This coming summer will be a busy one for petroleum exploration. The Kan Tan IV will be drilling for AWE in Taranaki this summer, and Crown Minerals is preparing to acquire new seismic data for the government over the summer season. I will be making further announcements on this shortly."

QUESTION AND ANSWERS

•1. Is it standard practice for an exploration company to seek a Change of Conditions to its work programme?

Yes, it is normal process for a permit holder to seek changes to a work programme. The ability to do so is set out in the Minerals Programme for Petroleum, which is governed by the Crown Minerals Act. Each application is evaluated on its own merits, and assessed in terms of its compliance with the regulatory regime.

•2. What has the Crown agreed to?

In this case, the ExxonMobil and Todd Energy consortium have sought changes to the work programme conditions of permit 50117 for petroleum exploration in the Great South Basin.

Crown Minerals has agreed to an application to defer the date for deciding whether to make a commitment to drilling or not by 12 months (to 10 October 2010). Accordingly the date by which a well is to be drilled moves out to 51 months from the date the permit was awarded (to 10 October 2011).

The exploration programme set down under Permit 50117 was particularly aggressive for a frontier basin, which carries considerable risk associated with exploration. The application is considered prudent and ultimately beneficial to all parties to ensure exploration risks are addressed in an appropriate timeframe. The change in conditions now means the programme is more consistent with the work programmes of other consortia in the Great South Basin and more normal for a frontier programme.

•3. Will this change in work programme mean a well will be drilled, and if so, when?

The application was for a deferral in dates for decision around committing to drilling. The work programme conditions otherwise remain the same. If the ExxonMobil/Todd Energy consortium decides to commit to drilling they will need to do so by 10 October 2010 and drill a well by 10 October 2011. The ExxonMobil/Todd Energy consortium continues to have the right under the Crown Minerals Act to surrender the permit at any time prior to the commitment dates.

•4. Does this mean ExxonMobil have given up their interests in the Great South Basin?

No, ExxonMobil have not indicated they are giving up their interest in the Great South Basin. Rather, the ExxonMobil/Todd Energy consortium has stated it is necessary to move out commitment dates to facilitate more effective exploration of the permit area and to seek farminees (that is, additional partners for their operation). This is normal industry practice to reduce risk associated with exploring frontier areas such as the Great South Basin.

•5. What impact will this have on the plans of the OMV consortium?

The OMV consortium will make its own decisions on meeting its work programme obligations. The OMV consortium has until 10 July 2010 to commit to drill within its work programme. The ExxonMobil/Todd change of conditions better aligns commitments to drill and actual drilling dates across permits within the Great South Basin.

•6. Does the Crown still believe the Great South Basin is prospective for oil and gas?

Yes, based on all the technical information available to the Crown the Great South Basin is regarded as being prospective for oil and gas.