NEW ZEALAND ENERGY 2008

Cheal producing from second horizon

AUSTRAL Pacific Energy and partner TAG Oil have started producing from a second horizon at their ...

Austral said yesterday that the Cheal-A1 well had been tied-in to the production facilities earlier this week as the first well producing from the Miocene-aged Urenui formation, shallower than the primary Miocene-aged Mount Messenger zone.

The company said the well would be brought onstream slowly and combined with production from the Mt Messenger.

The partners expected Cheal-A1 to produce at rates of 500 million cubic feet per day of gas and 45-50 barrels per day of crude, adding to total present field oil production of over of 700bpd, Austral said.

“We have more wells to recomplete as producers in the Urenui, which you go through on the way to the Mount Messenger anyway,” Austral chief executive Thom Jewell told PetroleumNews.net from Wellington this morning.

Jewell said the Mt Messenger formation was better for producing oil, with associated gas, and the Urenui was better for gas, with associated oil. Therefore, it made sense to produce from other zones if overall Mt Messenger production declined.

“We are pretty focused on managing the field, the various reservoirs, very carefully to get the most out of them,” he added.

Final design work for two additional wells from the A and B sites was complete and ready for joint venture approval.

Surface casing had been set at the A site and a manifold was in place at the B site to expedite the tie-in of these wells to the Cheal production facility.

Jewell also said the partners were looking at producing from both the Urenui and Mt Messenger zones at the same time with these new wells. This was likely within the next 12 months.

“We have a whole string of options we are looking at after that, some wildcats, some appraisal, some drilled into other adjacent sands,” he said. “We have an ongoing development program for the next two or three years.”

Austral operates Cheal with a 69.5% interest, while Canadian listed junior TAG Oil holds the remaining 30.5%.

Meanwhile, Austral also said flow testing of the primary prospective Eocene-aged K3E formation at the nearby Cardiff field was scheduled to start within 10 days.

“This test is an important component of the ongoing field appraisal and development activities,” Jewell said, referring to the Cardiff-2A sidetrack well that was drilled over two years ago but has yet to flow sustained commercial flows from any of several Eocene-aged zones.

Late last December, Austral said it was raising $US15 million ($A16.5 million), primarily to accelerate development and appraisal of its Taranaki interests, and that it had signed agreements with a number of accredited investors to privately place 12.5 million ordinary shares, with attached warrants, at $US1.20 per unit.

Yesterday, the company said it had received $US11.1 million ($A12.2 million) of that sum and expected to receive the final $US3.9 million ($A4.3 million) on February 22.

It said it would use most of the proceeds to increase the Cheal field reserve base and increase production flows, targeting normalised field production of up to 1500bpd.

Austral also said it had used part of the proceeds to pay the additional cash component of the previously announced purchase of the 19.8% stake in the Cardiff gas project (PMP 38156) previously held by International Resource Management Corporation.

The Cardiff partners are operator Austral Pacific Energy (44.9%) and Genesis Energy (55.1%).

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