NGC last night said it was entering into commercial arrangements to buy gas from the Kahili partners - operator Indo-Pacific, Tap Oil and IRM - for the duration of the field's life. And, in a $NZ8 million deal, NGC will construct, own and operate pre-treatment facilities and an export pipeline to deliver the gas to the company's existing Taranaki infrastructure, including (in the future) its Kapuni gas treatment plant.
The field's sole producing well, Kahili-1B, was expected to produce approximately 5 Petajoules and gas recovery could increase if the Kahili partners decided to drill additional wells in the future, said NGC.
"These arrangements represent a further development of NGC's gas trading portfolio and further demonstrate NGC's commitment to provide practical assistance to exploration companies and to facilitate the development of new sources of supply for the New Zealand gas market," said company chief executive Phil James.
"I am extremely pleased to have secured this agreement with NGC, as this represents a significant step for Indo-Pacific, as a national supplier of gas, and for New Zealand, which has a pressing need to secure new gas supplies," an effusive Indo-Pacific chief executive Dave Bennett told EnergyReview.Net today.
"It will also ensure Kahili and any other nearby discoveries can be linked readily to market - and we believe there are some exciting prospects still to drill."
Bennett said additional infrastructure opened up further opportunities for companies to bring new discoveries onstream quickly.
"We look forward to further expanding and developing this relationship with NGC, to our mutual benefit and the nation's benefit," he added.
The project is expected to start once contract terms have been finalised, with the whole project being commissioned next March. An 11km export pipeline will be run from the Kahili well site, within licence PEP 38736, to NGC's untreated gas pipeline between the Kapuni plant and the more northern Methanex methanol plants. At the NGC pipeline, a pre-treatment facility will be built to separate and store the condensates before injection of the untreated Kahili gas into the pipeline.
Indo-Pacific will remain responsible for the operation of the well. While NGC will purchase the gas and LPGs, the Kahili partners will truck the condensates to the Omata oil tank farm, on the outskirts of New Plymouth, for export and sale.
These arrangements will mean NGC selling Kahili gas to Methanex, in addition to the small amount of Surrey gas it started supplying the methanol manufacturer earlier this year, effectively substituting for some of the CO2-rich Kapuni gas used by Methanex.
Earlier this year NGC secured a 10-year first right of negotiation option for future gas discovered by Indo-Pacific, in return for a $NZ2 million prepayment. The latest agreement means a proportion of Kahili gas will be accessed by NGC under that prepayment arrangement. NGC also signed a two-year agreement with Westech Energy for the purchase of gas from the nearby Surrey field, which is expected to involve the purchase of at about 1PJ per annum.
The price NGC will pay for Kahili gas and the price it will charge Methanex remain commercially sensitive. However, Swift Energy recently said its average New Zealand gas price is now about $US1.75 per gigajoule.
