For the commercial production of oil to be possible, several geological requirements must be satisfied. There must be thick “source beds”, i.e., sedimentary rocks which originally contained organic material; a degree of alteration to those rocks, such that the organic material is changed to oil (and/or gas), yet not so great that the rocks became excessively hardened and the oil lost; a “reservoir bed”, in the pore spaces of which the oil may collect during an upward movement brought about by its relatively low density; an impermeable “cap rock” in a traplike shape such that the upward movement is halted; and, finally, an absence of fracturing that might allow the escape of the trapped oil. Geological investigations to find oil areas satisfying these conditions began as early as 1860, and many holes have been drilled from Northland to Southland. Most interest has centred around those areas where oil seeps have been discovered at the ground surface.
In 1911 a reward from the Government of £2,500 for the first 250,000 gallons of oil produced was awarded to the Taranaki Petroleum Co. which was drilling the Moturoa field at New Plymouth. Since then, a total of over 6 million gallons have been refined and sold locally, along with considerable quantities of gas. The modern use of geophysics has allowed reasonably accurate inferences to be made of the detailed structure of unseen rocks deeply buried beneath the ground surface, hence the recent successful drilling at Kapuni and Mangahewa in the same Taranaki region, by Shell B.P. and Todd Oil Services Ltd. A large gas field was discovered, with subsidiary but important oil in the form of a condensate, from a hole drilled to a depth of over 13,000 ft down to thick Eocene coal measures.
Many other areas have been prospected, but oil has been located outside Taranaki only at Kotuku near Greymouth, where a few thousand gallons have been recovered. The East Coast of both islands has so far proved to be too complicated geologically and/or too broken structurally to allow any oil that might have been present to be exploited.
Oil shale is reported from several localities such as Doubtless Bay and the East Coast of the North Island, but appears to have economic possibilities only at Orepuki, Southland, and Nevis, Otago. At the former, 14,000 tons of shale, worth £7,236, yielded a relatively high figure of 43 gallons for oil per ton when worked in 1899–1903. Its reserves, placed at only 7 million tons, make it a less attractive proposition for the future than the hypothetically richer areas at Nevis, where a total of 90 million to 2,000 million tons of shale are estimated to average 12·6 gal of oil and 146 lb of ammonium sulphate per ton.