Austral chairman David Newman yesterday afternoon said the changes in the scope of development were made primarily to ensure continuous, efficient production of the waxy Cheal crude at minimal operating cost.

He said the increased budget, from $NZ25 million to about $30 million, reflected the cost of upgrading the facilities and included five pipelines linking the northern Cheal B site to the A site where the production station was being constructed.

In addition, pipelines between the sites had been upgraded to handle hotter fluids than had been foreseen in the original estimates.

Newman said the revised budget estimate also included the cost of a gas pipeline from the A site to Swift Energy’s nearby Waihapa production station for Cheal gas and LPG sales.

Austral’s independent consulting engineers estimated total recoverable 3P (proved, probable and possible) remaining reserves, as at last December, to be 4.1 million barrels of oil within the A and B sites.

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

Earlier this month, departing Austral chief executive Rick Webber said there was considerable upside potential within the Cheal mining licence PMP 38156 to the northeast and southwest, as well as to the northwest, across a fault, towards the nearby Cardiff gas-condensate prospect.

Austral expects full commercial production, of about 1900 barrels of oil per day to be achieved at Cheal during the third quarter.

“The Cheal project remains very profitable and with the upgraded facilities, we can take advantage of any incremental production,” Newman said.