Test drilling of the Kohatukai prospect is expected before the end of the year.
While NZOG has acknowledged an exploration well is statistically more likely to fail than succeed, the company rates its chances of success and the potential volumes of either gas or gas condensate.
Other interests of New Zealand Oil & Gas (NZOG) include the deepwater Barque prospect off Oamaru's coast and Toroa, south of Dunedin, the former described as a potential ''game-changer'', should it be explored further and developed.
While environmentalists wait for the Government to announce its definitive position on exploration for new fossil fuel sources, NZOG is continuing to invest in the sector, under permits awarded before the change of government.
The Kohatukai permit was granted in 2014, operated by AWE Holdings NZ, then as 51% shareholder with Mitsui E&P Australia holding 49%. Drilling will start by the last quarter of 2018; onshore Taranaki drilling typically costs $5 million to $10 million.
Following numerous asset sales and the Ofer takeover, NZOG has about $84 million cash in hand.
The NZOG 25% buy-in of the Taranaki onshore prospect is estimated, but not confirmed, at less than $5 million.
NZOG chief executive Andrew Jefferies said the Kohatukai gas prospect provided low-cost exposure to an onshore Taranaki prospect, with joint venture partners the company knew well.
''The Kohatukai well targets reservoir objectives that are currently producing at the Pohokura, Turangi, and Mangahewa fields to the north,'' he said.
Subject to regulatory approvals, the joint venture will be Mitsui E&P Australia 37.5%, AWE Holdings NZ 12.5%, and acting as the operator, NZOG 25% and Ofer Global 25%.
Ofer took a controlling 69.87% stake in NZOG last November for $84 million.
Mr Jefferies said the Kohatukai well would test two objectives: known as Matapo and Mangahewa sands, targeting a prospect thought to be similar to the adjacent Pohokura gasfield.
An NZOG spokesman said they had been in talks with AWE since late last year.
AWE had favoured Kohatukai because it was on trend with the Pohokura field to the north; which currently provided about a third of New Zealand's gas and lpg supply.
''We like that it is a relatively low-cost well because it is onshore, drilling this year, and close to existing infrastructure - which means that if it is successful it can be commercialised quickly,'' the spokesman said.
Mr Jefferies said the Kohatukai prospect offered ''reasonable drilling costs'', the opportunity to drill a New Zealand well this year, with an expectation of a gas condensate discovery.
