The year began with the Ocean Patriot semi-submersible rig drilling Tui Area oil wells off Taranaki, but slower than anticipated drilling saw the project’s budget blow out from the original $US225 million to $US245 million and then to $US269 million.
However, this was offset by rising oil prices and two increases in recoverable reserves. The final investment decision had been based on a 27.9 million barrel estimate, but this was upgraded to 32MMbbl following completion of the development drilling campaign, and then 41.7MMbbl after re-assessment of seismic and integration of production data with a more detailed assessment of the producing reservoir.
The only real blemish on the project came in October, when Tui’s floating processing, storage and offtake vessel, Umuroa, accidentally discharged contaminated produced water, estimated to have contained about 23 cubic metres of crude. Tar balls and contaminated sand were found dotted along a 10km stretch of coastline, about 60km from the Tui project. According to AWE, human error, rather than equipment failure, appeared to be to blame for the discharge. Clean-up costs were not expected to be material.
Meanwhile, two other major projects – the Maari oil development and the Kupe gas/condensate scheme – are gearing up. As is usual for big projects, nowadays, both have had budget blowouts.
In August, both Maari and Kupe suffered budget blowouts of about 10% each. Total development costs at that time were estimated to be about $NZ594 million ($A532 million) and $NZ1080 million ($A969 million) respectively, according to minority partners Horizon Oil and New Zealand Oil & Gas.
However, the construction timetables for both projects remain on-track.
Maari operator OMV has said that its FPSO, Raroa, is almost ready for commissioning and first oil is expected in August next year, but this will depend on availability of the Ensco 107 jack-up rig.
This rig arrived in New Zealand in October and is currently busy drilling development wells for Kupe operator Origin Energy. First gas from Kupe is expected in 2009.
On a more modest scale, the small onshore Taranaki oil field, Cheal, was opened in October. Operator Austral Pacific Energy said the development would provide a platform for further growth for it and partner Canadian-listed TAG Oil.
Unfortunately, TAG has not enjoyed similar success with its exploration programs. The company downsized its New Zealand operations after several disappointing onshore wells. Company president Drew Cadenhead subsequently resigned and returned to his native Canada towards the end of the year.
Another North American explorer, Houston-headquartered Swift Energy, also had to address problems with its New Zealand operations.
In June, Swift hired oil and gas merger and acquisitions specialist Scotia Waterous to help it decide what to do with its disappointing New Zealand assets.
In December, Swift announced it was selling nearly all its New Zealand assets to Origin Energy and affiliated company Contact Energy for about $US87.8 million ($A102 million). Origin and Contact are buying the onshore Taranaki Tawn (Tariki, Ahuroa, Waihapa and Ngaere) fields and the Rimu, Kauri and Manutahi fields; the Waihapa and Rimu production stations; separate oil and gas pipelines from Waihapa to New Plymouth; and offshore exploration permits.
At least this indicates Origin’s faith in New Zealand. Indeed, Origin and two other operators of major New Zealand projects – Tui operator AWE and Maari operator OMV – acquired additional New Zealand exploration acreage during the year.
Among the big players already in New Zealand, only Pohokura operator Shell said it was uninterested in expanding its New Zealand footprint.
But Shell’s lack of enthusiasm has been more than offset by the entry of supergiant ExxonMobil into New Zealand exploration.
In July it was announced that ExxonMobil had teamed up with New Zealand's largest private energy company Todd Energy to acquire Great South basin licence PEP 50117. A joint venture between OMV and Japan's Mitsui Exploration and Production, and Thailand's PTTEP Offshore Investment Company also acquired three leases in this deepwater frontier basin.
Later that month, it was announced that another local private energy company, Greymouth Petroleum, had won PEP 50122 in the basin’s northern margin.
The ExxonMobil and OMV-led JVs have already begun their GSB seismic campaigns.
Another move in frontier exploration included the completion of GNS Science’s technical review of the deepwater Taranaki Basin. GNS said it found that several significant structures could hold up a billion barrels or more of oil each, prompting Denver-based Global Resource Holdings, holder of an outer Taranaki Basin permit to plan a new 2D seismic survey to confirm known prospects.
Global Resource Holdings and the GSB explorers will be hoping for better luck than that experienced at wells recently drilled in New Zealand frontier regions.
Drilling in the onshore East Coast Basin by Westech Energy, which produced uncommercial gas flows, and L&M Petroleum – which listed on the ASX and NZX in January at premiums – saw its share price plummet during the year following a string of unsuccessful exploration wells in onshore Southland.
Indeed, the most successful onshore drilling in New Zealand in 2007 was anything but a frontier operation.
Greymouth’s Moturoa field, which almost surrounds New Plymouth’s Port Taranaki harbour district, was first drilled in the nineteenth century and produced about 250,000 barrels of oil over several decades before it was closed in 1972. Greymouth’s rejuvenation project is delivering modest but commercial quantities of oil at low cost.
Such an approach has proved to be much less problematic than exploration drilling, which was very disappointing in New Zealand this year.
The year began with the Ocean Patriot semi-submersible rig drills and cements the surface casing of three of the four Tui Area oil wells off Taranaki for AWE. These wells turned out to be the highlight of the Patriot’s 12-well New Zealand campaign as none of the other offshore Taranaki wells, plus Cutter-1 drilled off Canterbury late last year, struck commercial hydrocarbons.
