Operator Australian Worldwide Exploration said yesterday afternoon that the joint venture had approved a 9% budget increase to account for slower than anticipated drilling rates and the lengthening of the Tui-2H horizontal production well, which intersected a more extensive oil column than predicted.

Total development costs will increase from $US225 million to $245 million.

But the project remains on schedule for first oil by June 30, with anticipated initial peak production of about 50,000 barrels of oil per day.

The partners still expect to recover their costs within four months of full production if the price of oil remains above $50 per barrel.

AWE said three of the four production wells (Tui-2H, Tui-3H and Pateke-2H) had had their top-hole sections drilled and cased, with the subsea production trees installed.

The fourth well, Amokura-2H, would be drilled and have the last subsea tree installed immediately after the completion of Tui-3H, which is currently being drilled.

The first production well, Tui-2H, had been completed and was suspended ready for production after being lengthened and completed with a 1850m horizontal producing section.

AWE managing director Bruce Phillips said the oil column intersected by that well was about 5m thicker than expected but it was too early to tell if this would mean an increase in 2P reserves – currently at 27.9 million barrels of oil.

“We are delighted we got a good result from the first well,” he told PetroleumNews.net.

“But we will have to wait until the end of development drilling, and for the completion of our reservoir simulation models, before we can be definite on recoverable reserves.”

Phillips said the joint venture planned to complete the other wells with horizontal sections about 1000-1200m long.

Any reserves upgrade would not mean increased initial oil flows, as these were constrained by the processing capacity of the Umuroa floating processing storage and offtake vessel, according to Phillips.

“However, if there turns out to be more oil, then we could produce at or near our maximum for longer, perhaps for several more months,” he said.

AWE also said yesterday that significant progress had been made on construction activities, thus reducing overall project risks.

All major construction components had now been manufactured, with most already in New Zealand.

Installation of the facilities was now well underway, with the anchors and chains for the FPSO successfully pre-installed. Two of the four mid-water arches, the most weather-sensitive installation activity, were installed in a favourable weather window last week.

The FPSO was also in the final stages of construction in Singapore and was scheduled to arrive in New Zealand in mid-April.

The PMP 38158 partners are AWE with a 42.5% stake, New Zealand Oil & Gas (12.5%), Mitsui E & P New Zealand (35%) and Pan Pacific Petroleum (10%).