Last Friday Canadian listed junior explorer TAG Oil, which holds a 30.5% interest in Cheal, said the changes proposed by operator Austral Pacific Energy (69.5%) would significantly increase the previously approved budgeted development cost of $NZ25 million ($A22 million).
TAG president Drew Cadenhead said the proposed changes -- aimed at increasing long-term field productivity, oil lift efficiencies, and reducing production costs – would also mean a delay of at least six months in achieving full initial production.
However, this morning Austral Pacific Energy chief executive Rick Webber told PetroleumNews.net from Wellington that the proposed changes were essentially all “good news”.
“We are revising the budget to reflect the additional facilities needed to process additional hydrocarbons from the northern part of the field, including pipelines from the northern B wellsite to the A site where the production station is being built,” he said.
“All these things are reflected in the upgrade; more facilities, more cost.”
He told PNN there was “considerable” upside potential within the Cheal mining licence PMP 38156.
Total recoverable 3P (proved, probable and possible) reserves were about 4.4 million barrels of oil within the area of the A wellsite, plus significant potential for additional reserves within the area of the B wellsite.
“We also see upside potential to the northeast and southwest, as well as to the northwest, across a fault, towards Cardiff,” Webber said, referring to the nearby troublesome Cardiff gas-condensate prospect that has not flowed commercial hydrocarbons despite two years of exploration and testing.
Webber did not specify the likely additional development costs but said Austral and TAG were due to consider a revised budget and supporting economics shortly.
Cadenhead said that TAG had recently hired an experienced independent engineer to review and evaluate Austral’s proposed alterations and recommendations, together with the associated economic benefits.
The six wells drilled so far -- the Cheal-A3 and A4 discovery wells and the four development wells at the B wellsite– had total production capability 1000-1500 barrels of oil per day (bopd).
However, until the permanent production facilities were finished, and a way was found to increase available storage, Cheal field production would be limited to about 500 bopd, primarily from the Cheal-B3 well, Cadenhead added.
Webber said Austral was investigating several alternatives to increase available storage at or near Port Taranaki, New Plymouth, and that he expected full production of about 1900 bopd to be achieved sometime during the third quarter instead of the original scheduled July.
Cadenhead said that based on current projections, TAG expected operating costs per barrel to decline significantly once the permanent facilities were completed.
“TAG will soon determine the most optimal way to proceed under the terms of the joint venture operating agreement . . . we’re expecting the Cheal facility to ramp up later this year, and plan to enjoy relatively strong cash flow as a result.”
Despite these setbacks, TAG realised a wellhead price of $C65 during the fourth quarter of 2006, with netbacks on Cheal field operations equating to $C34.64 per barrel. Revenue from the sale of TAG’s share of production, being 8686 barrels, during the quarter was $C572,227.
