Shell New Zealand spending Hundreds of Millions of Dollars looking for Something in the Great South Basin to Sell

Posted by PITHOCRATES - May 6th, 2012

Week in Review

Bringing fossil fuels to market is expensive.  People look at the profits these oil and natural gas companies make and cry foul.  But few look at the cost side.  Which is very, very steep (see Shell NZ takes control of exploration in Great South Basin by ALAN WOOD posted 5/4/2012 on Stuff.co.nz).

Shell New Zealand has taken over control of a joint venture exploration in the Great South Basin, saying there are good indications of natural gas after $100 million of exploration in the “frontier” area.

However, to push into full development the explorer would need to find a field of a similar size to Maui off Taranaki, given that it would be need to spend $10 billion-plus on a processing facility if gas was found, the chairman of the Shell companies in New Zealand, Rob Jager, said…

Shell has assumed operatorship of the New Zealand exploration licence PEP 50119 in the Great South Basin from joint venture partner OMV New Zealand. The venture partners had spent about $100m exploring the area, including $50m early on, then another $50m on a just-completed seismic survey…

The cost of drilling a single offshore well in New Zealand was in the order of $200m given the expense of bringing a specialised rig from somewhere like the Gulf of Mexico…

“Certainly we would hope that we would be in a position to start seriously thinking about looking for and contracting a rig in the next six to 12 months … so you’re not looking at drilling realistically until the summer of 2014/15.”

Let’s add up the numbers.  Just to explore cost Shell New Zealand $100 million.  Drilling a single well will cost another $200 million.  And then the special natural gas processing equipment is another $10 billion.  All of this spent, of course, before they earn a dime of revenue off of this field.  That’s a lot of money. 

When you look at profit as percentage of revenue the oil companies aren’t as profitable as some other companies.  Such as Apple or Microsoft who are by far more profitable.  Yet we attack the rich oil companies as being too rich.  Who have to risk hundreds of millions of dollars JUST to see if there is a CHANCE that there may be something down there they can sell.

Despite all of this once they find something down there to sell they can bring it to market to sell in less than a year.  And that includes that $10 billion processing facility.  Incredible.  Compare that to the ‘smart’ green energy of the future.  That the Obama administration invested heavily into.  Only to see a string of failures.  And lost taxpayer money.  Just look at what the oil companies can do without any help from the government.  Some would even say while fighting the government’s attacks on their industry.  While the ‘smart’ green energy of the future has been working on government money for close to 4 years with NOTHING to show for it.

Perhaps it’s time to stop attacking the oil companies who are giving us the oil and natural gas we crave and need without the government subsidizing it.  And turn some of our anger on all that wasted taxpayer money on the ‘smart’ green energy of the future which is proving NOT to be the smart investment.

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