New Zealand's petroleum and mining regulator has granted a 10-year petroleum mining permit in the onshore Taranaki region as the country seeks to increase natural gas supply to the domestic market.

New Zealand Petroleum and Minerals (NZP&M) on Thursday granted Matahio NZ Onshore Limited a 10-year petroleum mining permit for the Puka field, a small oil and gas field discovered in 2012. The permit area also includes the Oru prospect, which the New Zealand government described as promising.

Taranaki, on New Zealand's North Island, is the country's only commercially producing oil and gas region, making new permits there particularly significant for near-term supply.

According to Resources Minister Shane Jones, the new petroleum mining permit is expected to "bring additional natural gas to the domestic market over the next decade and generate valuable export earnings from new oil production."

Matahio estimates that recoverable reserves from the Puka discovery are about 170,000 barrels of oil and 1.3 billion cubic feet of gas. An independent assessment of the Oru prospect estimates prospective resources at 1.8 million barrels of oil and 1.2 billion cubic feet of gas.

"At a time when New Zealand faces ongoing energy security challenges due to our declining gas reserves, every new source helps," Jones said in a statement.

"Gas will continue to remain critical to our energy mix in the decades to come. It supports electricity generation during periods of low hydro inflows and renewable generation, and it provides energy and feedstock for many businesses that are important to our economy," the minister said.

At present, all gas produced in New Zealand is used domestically by industrial users and as fuel for electricity generation when renewable energy sources cannot meet demand. New Zealand's electricity system is heavily reliant on renewable sources — primarily hydroelectricity and geothermal power — but gas-fired generation serves as a critical backstop during dry periods when hydro lake levels are low. The light, high-quality oil produced in Taranaki is sold into international markets and is typically refined into petroleum products, the government said.

Earlier this year, New Zealand's government awarded the first offshore oil and gas exploration license after lifting a ban on drilling imposed last year by the previous government, which had sought to accelerate a transition away from hydrocarbons and toward electricity from low-carbon sources. The policy reversal marks a notable shift for a country that has legally committed to net-zero greenhouse gas emissions by 2050 under its Climate Change Response Act, highlighting the tension between near-term energy security goals and longer-term decarbonization commitments.

By Tsvetana Paraskova for Oilprice.com