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NZ O&G November 2017 Wrap

By Neil Ritchie

The New Zealand energy industry is continuing consolidating but with the price of oil now about $US60 per barrel further oil and gas exploration is likely in the next few years, as well as planning for the decommissioning of several existing offshore Taranaki fields.

The Todd Corporation is selling its 16 percent stake in the offshore Taranaki Maari-Manaia oil field to fellow partner and ASX-listed Horizon Oil for US$17.6 million as the country's wealthiest family continues reshaping its energy portfolio.

Horizon has signed an agreement with Todd Energy that will increase the Sydney-based company’s stake from 10 percent to 26 percent, with operator OMV’s stake remaining at 69 percent and Aussie company Cue Energy with a 5 percent stake.

"We would hope that the larger interest will give Horizon Oil a greater say in the on-going management of the fields, including reservoir management to maximise oil recovery and cost control," company chief executive Brent Emmett has said recently.

"Importantly, the acquisition will meaningfully increase net operating cashflow from China and New Zealand, which we expect to average US$60 million to US$70 million over the next five years," he added.

The Maari-Manaia field was producing about 8840 barrels of oil per day in early November.

And Austrian giant OMV is believed to be proposing an investment decision be made by early 2018 for an appraisal well to be drilled in part of the Maari-Manaia licence PMP 38160 by the 2018-19 summer.

OMV may also be considering buying some of the 3D seismic due to be acquired this summer by Schlumberger that may include the OMV-operated licences PEP 51906, PEP 57075, PEP 60089, PEP 60091, PEP 60092, and PEP 60093, with possible exploration drilling planned during the 2019-20 summer in several of these offshore licences.

And possible exploration drilling in the Great South Basin licences PEPS 50119 and PEP 54863 (both operated by Shell New Zealand) during early 2019 depends on which company or companies end up buying Shell NZ’s remaining New Zealand assets. 

Shell NZ is aiming to sell its majority (83.75 percent) stake in the ageing Maui field, its major (48 percent) stake in the near-shore Pohokura gas-condensate field, its remaining offshore exploration interests, operator Shell Taranaki Ltd, and its interests in the associated Omata and Paritutu tank farms and infrastructure assets. It is understood final bids are due by the end of November.

It is further understood that options being considered for Pohokura – Shell’s prized possession -- include more well interventions, both onshore and offshore, during 2018-19.

And New Zealand Oil & Gas has reiterated its belief that the promising Barque Prospect in the Clipper licence PEP 52717 off the Canterbury-Otago coast could hold up to 1.5 billion barrels of liquids and about 11 trillion cubic feet (tcf) of gas. If developed, NZOG says Barque could be an economic game-changer for the country, particularly for the South Island that has no reticulated natural gas, if developed. The licence is a 50-50 joint venture between NZOG and ASX-listed Beach Energy.

NZOG says development of Barque could double New Zealand's current oil and gas production, bring in up to NZ$15 billion in gross domestic product (GDP), NZ$32 billion in royalties and taxes over the life of the field. In total, up to 5740 full-time equivalent (FTE) jobs could be created during construction and about 2000 additional jobs to run any offshore processing plant, or any gas pipeline to shore and associated onshore processing plant.

NZOG chief executive Andrew Jefferies says these scenarios are explored in a recent study that is co-funded by the permit joint venture and New Zealand Trade & Enterprise, and undertaken by consultancy Martin Jenkins, drawing on data from Beca, Methanex, Coogee, Ravensdown, Fonterra, Prime Port Timaru and others.

And he reiterates NZOG’s belief that New Zealand natural gas has environmental benefits as an ideal energy source for the transition to more renewable energy, with carbon emissions reducing if dairy factories transition from coal to natural gas, together with further fertiliser and methanol plants being built here instead of overseas. “If this occurs we believe natural gas from New Zealand would be better for the globe than alternative energy sources such as Canadian tar sands, Venezuelan bitumen or coal seam gas from Australia.”

The PEP 52717 joint venture has until next April to decide whether to commit to drill an exploration well by mid-2020.  The joint venture is still actively seeking international
partners with the capability to drill such an exploration well.

In NZOG’s other offshore interest, licence PEP 55794, which Australian giant Woodside operates with a 70 percent stake (NZOG 30 percent) possible farm-outs are still proceeding.

In addition, various offshore operators and their respective joint venture partners are believed to be busy discussing such topics as optimising stakeholder engagements, considering “de-risking” costs and schedules, and assessing decommissioning specialists.

Tui oil field Tamarind Management is understood to be undertaking reservoir modelling in the Tui Area mining licence PMP 38158, with a view to possibly drilling two or three wells during the 2018-19 summer.

Meanwhile, in onshore Taranaki, Todd Energy is understood to have completed its Mangahewa Expansion Compression (MEC) project, with the facility fully commissioned and operating, and that there may be further Mangahewa development drilling from mid-2018.

Queensland’s Westside Corporation, which operates the onshore south Rimu, Kauri and Manutahi fields, is undertaking gas lift projects at several Kauri and Rimu wells, doing several well workovers and reinstating several Kauri and Manutahi wells – all aimed at increasing liquids production.

Operator and ASX-listed AWE and partners in the onshore Taranaki licence PEP 55768 continue with plans to farmout some of the licence and perhaps also drill the Kohatukai-1 exploration well.

Canadian listed junior TAG Oil has seen its revenue for the three months to September increase by 11 percent – from C$5.4 million for the previous quarter to C$6 million. However, its net onshore Taranaki production averaged about 1110 barrels of oil equivalent (boepd) -- down slightly on the 1169 boepd average achieved during the June quarter.

The decline was mainly due to the Cheal-A12 well being shut-in because of a pump failure and the associated waterflood programme taking longer than expected to begin increasing production.  However, more recent workover activity has restored production to about 140 boepd for the Cheal-A12 well, meaning TAG hopes to end the March 2018 fiscal year with total production of about 1300 boepd.

The decline in production has been partially offset by the recent rise in the price of Brent crude. Over September, the average price received by TAG was approximately US$58 per barrel after taking into account the quality differential that TAG receives for its oil.

And preparations continue for the drilling of the Pukatea-1 exploration well in onshore Taranaki licence PEP 51135 (TAG 70 percent and East West Petroleum 30 percent). The well should spud in late January and will be targeting the Tikorangi Limestone Formation up-dip and above the lowest known oil produced from the adjacent and formerly prolific Waihapa oil field.