Oil hunt in Central Otago

A UK-Australian mining company has begun exploring for oil shale in a remote Central Otago valley with the hope of one day extracting petroleum from the thick shale rock.   BY LINDSAY CLARK

The government minerals and petroleum agency, Crown Minerals, has awarded Xtract Energy Plc a 10,000 hectare mineral exploration permit in the middle of the long mountain-bounded Nevis Valley that runs between northern southland and Cromwell.

‘The Nevis’ contains the largest known oil shale deposit in New Zealand, estimated to contain as much as 2000 million tonnes of oil shale containing solid organic compounds known as kerogen – a type of immature oil.

With crude oil prices remaining high and global oil supplies remaining tight, there has been a renewed interest in extracting oil from extensive world supplies of oil shale rock.

Traditional methods of extracting oil from shale have usually involved heating up the kerogen by retorting and extracting the oil as vapour for cooling. These methods have been costly, inefficient and environmentally damaging.

The current thrust of oil shale work has been on developing new technologies that are cheaper and more environmentally sound.

The London-based Xtract Energy is investigating a new Australian-developed technology involving pressure and heating of shale oil in the presence of a solvent.

Melbourne oil and mining entrepreneur Robert Annells, who is also chairman of Lakes Oil, which has recently applied for a petroleum exploration permit in southern Wairarapa, says Xtract’s supercritical solvent hydrogenation process extracts oil from shale totally within enclosed vessels. The process is carried out at moderate

temperatures that do not liberate carbon dioxide, he says.

Xtract Energy has rights to a significant area of surface oil shale at Julia Creek in northern Queensland and has now added the Central Otago shale rights to its portfolio.

The Nevis oil shale is thought to have formed in the early Miocene age in sediments of a large freshwater lake in the middle of Central Otago which geologists now call Lake Manuhenkia. The lake existed well before more recent periods of mountain building began.

The exposed Nevis sequence comprises about 270 metres of freshwater silts and shales, with the oil shales about 75 metres thick.

Xtract Energy says in its permit work programme that it plans to carry out geological mapping and surveying and collect core samples from the Nevis for preliminary solvent extraction testwork at a laboratory in Australia.

This will be followed up within three years by a planned programme of at least 15 test drill holes.

According to Te Ara Encyclopedia an oil shale plant operated in New Zealand over a century ago at Orepuki in western Southland. The plant worked between 1899 and 1903 and processed around 6300 tonnes of oil shale, yielding around 179 litres of oil per tonne.

But the Orepuki operation ceased as mining was costly, the shale deposit was quite small, and a duty on imported oil products at the time was removed.

Shale from the northern Southland Waikaia valley, immediately east of the Nevis valley, in 1919 yielded 130 litres a tonne of oil when tested by government scientists.