New Zealand Oil & Gas and Australia Worldwide Exploration both issued statements after the ASX and NZX had closed yesterday, confirming what industry commentators had believed for months - that the triangle of discoveries in the northwest corner of PEP 38460 was ripe for development.

NZOG and AWE said the joint venture partners had determined the Tui-Amokura-Pateke (Tui Area) oil fields were commercially viable to develop.

The decision was based on a proved and probable (P2) reserve base in the range of 20-30 million barrels of recoverable oil and a development concept consisting of three or four subsea wells tied back to a floating production, storage and offloading facility (FPSO). Capital costs for the subsea and subsurface components of the development are expected to be in the range of US$120 million to US$150 million. If an FPSO were to be purchased rather than leased, additional investment would be required.

The joint venture has approved a budget for commencement of initial engineering and design work which should enable the venture partners to make a final financial commitment to project development by next June. Assuming the timely receipt of regulatory approvals, first oil is planned for mid-2006.

Reservoir quality of the three wells drilled so far is excellent, with 100% net-to-gross in the Eocene-aged Kapuni F sands. Commentators believe Tui could contain up to 16 million barrels of recoverable oil and Amokura-Pateke 35 million barrels or more, with horizontal production wells each capable of flowing in excess of 5000 bopd.

“It is pleasing we are now underway with steps that will hopefully lead to an off-shore oil development,” NZOG executive chairman Tony Radford told the company’s annual meeting in Auckland today.

“While the development concept for the fields is straightforward it needs to be stressed that a final investment decision will not be made until we have completed the engineering studies and secured a suitable production facility. This work is now underway moving towards a target date for project sanction in mid-2005”.

AWE managing director Bruce Phillips said the decision was an important initial step in the process of “commercialising our oil discoveries in New Zealand”.

Permit operator is Houston-based Transworld Oil through its New Zealand Overseas Petroleum subsidiary.