Sydney-headquartered NZOG announced yesterday, after the New Zealand and Australian stock exchanges had closed, that it had agreed to sell 4% of its 19% equity in the Kupe gas-oil project to Mitsui E&P New Zealand, a wholly-owned subsidiary of Mitsui & Co for NZ$9.2 million, together with a provision, subject to certain conditions, to repurchase 2.5%.
NZOG said the sale was subject to regulatory approval, as well as the pre-emptive rights of existing co-venturers in the project (presently current operator Genesis Power and the government).
"NZOG looks forward to strengthening its ties with Mitsui through the sale of a portion of NZOG's interest in Kupe. This agreement follows the transaction of last October by which Mitsui acquired from us a significant stake in the PEP38460 joint venture, in respect of which drilling is to recommence at the end of March," said NZOG Tony Radford.
Commentators are not surprised by the move, though they say this deal could add another dimension to the Kupe project.
"New players nearly always look to acquire more than a single interest in countries they enter and Japanese EP companies typically like to take several small, non-operating stakes," one commentator told EnergyReview.Net today.
"However, will Mitsui now move to stop or delay the proposed Genesis-Origin deal? Will Mitsui seek a farm-in deal with Genesis?" Although such things are unlikely, they may be possible.
"Genesis actually doesn't need to have any direct interest in Kupe, it just needs acceptable terms and conditions and access to the gas."
Genesis and Aussie major Origin Energy are in the final stages of negotiation for Origin to take up to 50% stake in the Kupe project and become operator of the offshore south Taranaki field.
The commentator said he hoped the existing and new partners would together move quickly to finalise their respective agreements to ensure the speedy development of the field, which is seen by Genesis as a partial replacement for Maui gas for use in its existing and planned Huntly thermal power stations.
NZOG exploration manager Eric Matthews told ERN today that he felt it unlikely there would be any exercising of pre-emptive rights. "The underlying message from this and other recent announcements is simply this, Kupe is going," he said from Sydney.
It was probable NZOG would use the proceeds from the Mitsui sale to help fund its share of Kupe development costs, he added. Costs for the total Kupe project were likely to exceed NZ$200 million.
Last October Mitsui agreed to purchase a 12.5% stake in the West Maui licence PEP 38460 from NZOG and former associate company Pan Pacific Petroleum.
Kupe is New Zealand's second largest undeveloped petroleum resource after the possible 1 tcf Pohokura field further north. Kupe's recoverable reserves are estimated to be about 260 Petajoules of gas and 16 million barrels of oil.
