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16 June 2006

South Pacific Lease Operations Limited
  PO Box 305-017 Triton Plaza
  North Shore City
  New Zealand

Attention: Paul Twynham

Dear Paul

SHARE PURCHASE AGREEMENT 
INTER-COMPANY DEBT

| | 1 | We refer to the Share Purchase Agreement dated 9 May 2006
      between South Pacific Lease Operations Limited (SPLO), TAG Oil (NZ)
      Limited (TAG NZ) and TAG Oil Limited (TAG) (the
      Agreement). All capitalised terms used but not otherwise defined in
      this Letter Agreement have the meanings ascribed to such terms in the
      Agreement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amendment of the Agreement

| | 2                                                                                         | As discussed, we have agreed that, effective
        as of the date of this Letter Agreement:   
| | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------
| |                                                                                           |                                                                                                 
| | 2.1                                                                                       | clause 2.2 of the Agreement is amended as
        follows:                                      
| |                                                                                           |                                                                                                 
| |                                                                                           | (a)                                                                                             
| |                                                                                           |                                                                                                 
| |                                                                                           | (b)                                                                                             
| |                                                                                           |                                                                                                 
| | 2.2                                                                                       | clause 2.4(f) of the Agreement is deleted;                                                      
| |                                                                                           |                                                                                                 
| | 2.3                                                                                       | clause 3.2 of the Agreement is amended by
        deleting subclause (b);                       
| |                                                                                           |                                                                                                 
| | 2.4                                                                                       | a new clause 3.2A is inserted into
        the Agreement as follows:                            
| |                                                                                           |                                                                                                 
| |                                                                                           |                                                                                                 
| |                                                                                           |                                                                                                 
| | 2.5                                                                                       | Schedule 3 of the Agreement is amended by replacing
      it in its entirety with the following:
| |                                                                                           |                                                                                                 
| |                                                                                           |                                                                                                 
| |                                                                                           |                                                                                                 
| | 1. Cheal Petroleum Limited: $22,284,245 split
      between Deep and Shallow as follows:

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| |    |                                                       | Deep: $1,956,000
      Shallow: $20,328,245            
| | -- | ----------------------------------------------------- | -------------------------------------------------------
| |    |                                                       |                                                        
| | 2. | PEP 38757 Limited: $99,372 (i.e., $100,000 less $628)
| |    |                                                       |                                                        
| |    | 3.                                                    | PEP 38757 Limited: $99,027 (i.e., $100,000 less $973).

SPLO Warranty

| | 3 | SPLO warrants that the figure referred to in paragraph
        2.5 above is the full amount of any outstanding inter-company debt owed
        by the Companies to the Seller and that there is no debt owed to them
        by any of their related companies.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Status of this Letter Agreement

| | 4 | This Letter Agreement shall take effect on the date
        set forth above, when executed by each party to the Agreement. This Letter
        Agreement may be executed in any number of counterparts and by different
        parties hereto in separate counterparts, each of which when so executed
        shall be deemed to be an original and all of which taken together shall
        constitute one and the same Letter Agreement. Delivery of an executed
        counterpart of a signature page to this Letter Agreement by facsimile
        or by email shall be effective as delivery of a manually executed counterpart
        of this Letter Agreement.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 5 | Except as expressly amended by this Letter Agreement,
        the terms of the Agreement will remain in full force and effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 6 | Please acknowledge your consent to the above by signing
        and returning the enclosed copy of this Letter Agreement to us by facsimile
        or by email (in pdf format).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Yours sincerelyTAG Oil Limited and TAG Oil (NZ) Limited





Drew Cadenhead
  President and CEO

Accepted and agreed by South Pacific Lease Operations
  Limited by:



| | Name:     | 
| | --------- | 
| | Position: | 

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