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June 2018 NZ O&G Industry Update

By Neil Ritchie

The next decade should see enough petroleum wells drilled, as well as some field abandonments, to keep the existing oil and gas industry busy both in the waters off and onshore in Taranaki  --  New Zealand’s only commercial energy region.

Every month or so more details are emerging of future planned and possible activities.

Todd Energy is relinquishing its 16 percent interest in the offshore Taranaki Maari-Mania oil field, with existing partner Australian listed company Horizon Oil confirming it is taking up Todd’s stake in licence PMP 38160 that contains the Maari and adjacent Mania producing fields, as well as several presently non-commercial prospects.

Horizon has said consideration for its increased stake is US$17.6 million with the completion payment offset by net working capital adjustments on and from the effective date of 31 December 2017.

These adjustments include sales proceeds from pre-completion “liftings” ( the transfer of petroleum from the floating production, storage and offloading (FPSO) vessel Raroa, capital costs and one-off oil and material inventory acquisition costs.

All these measures reduce the completion payment to US$16.8 million but less US$3.7 million in respect of a May 2018 lifting, resulting in a net aggregate payment of about $US13.1 million with an effective sate of December 31, 2017. The acquisition was funded from Horizon’s cash reserves.

The PMP 38160 joint venture now comprises Horizon Oil (26 percent), operator OMV New Zealand (69 percent) and Australian listed company Cue Energy (five percent). And Horizon’s proven and probable (2P) reserves in the Maari-Manaia project have now increased to 5.0 five million barrels (as at 31 December 2017).

Commentators are not surprised by Todd’s move as the company concentrates on its onshore Taranaki  interests, and its strategic holding  in the near-shore Pohokura gas field.

And  Austrian giant OMV has said it is preparing to drill 12 offshore wells during the next six years, between 2019 and 2025. The programme includes drilling nine exploration wells and three appraisal wells in OMV’s six permit areas in the offshore Taranaki Basin.

OMV is now this country's largest liquid hydrocarbon producer, and the third largest natural gas producer with significant stakes in the offshore Maari-Manaia oil field (69 percent), the near-shore Pohokura gas field (26 percent) and the offshore Maui gas field (93.75 percent fields, and the Pohokura (26%) gas field and production station.

OMV has been actively involved in searching for and producing hydrocarbons in New Zealand since 1999. And, under petroleum exploration permit regulations, OMV has to drill one well in each permit area, or surrender the rights to that licence. And because the permits were already allocated, their proposed drilling programmes are not affected by the Government's recent announcement not to grant any new offshore drilling permits.

Meanwhile, the Ministry of Business Innovation and Employment now estimates proven and probable (2P) gas reserves have been reduced by five percent. MBIE figures show there are just under 1985 petajoules (PJs) of 2P gas reserves in all known fields in New Zealand. MBIE says the main driver for this decline is a 27.2 percent decrease in known 2P gas reserves in the Pohokura gas field.

While the lesser gas reserves are unlikely to affect the domestic gas market, they may affect the country’s largest user, Methanex New Zealand, with its three plants north of New Plymouth.  These plants use about 41 percent of this country’s natural gas production manufacturing up to 2.4 million tonnes of methanol each year. The majority of methanol is exported, predominantly to energy-hungry Asian nations.

Canadian listed junior New Zealand Energy Corp recently released its first quarter 2018 financial results and although NZEC is still making a loss that continues to shrink.

Cash from operating activities was $C111,926 compared with $C124,595 during the first quarter of 2017. The net loss for the first quarter of 2018 was $C544,772 (2017: $580,844).  The material factors for this decline were the cost of a Copper Moki-1 workover and $464,500 in non-cash depreciation, depletion and accretion (2017: $473,397).

NZEC achieved average net daily production of 141 barrels of oil equivalent per day (boepd) with 82 percent of this being oil. Primarily because of the Copper Moki-1 workover, this 141 boepd was lower than to 159 boepd (88 percent oil) achieved during the first quarter of 2017. Combined flows of Copper Moki and the nearby Waihapa-Ngaere field at the end of March was about 240 boepd, which has been sustained through April and May.

Company chairman James Willis has recently said: “Copper Moki-1 is continuing to produce at approximately 175 bopd through April and May, which is contributing to the company’s cash position. Production from Waihapa-Ngaere is stable. We are progressing (with) stage four of the Waihapa enhanced oil recovery project (installation of new downhole pump at Ngaere-1 (and) . . . installation is expected in July.”   

And it is known that Todd Energy’s preparations for drilling six new wells (and the hydraulic fracturing of those wells) at the onshore Taranaki Mangahewa field are well underway.

As well, fellow Canadian listed junior TAG Oil has appointed US and Canadian businessman and investor Peter Loretto to its board of directors.

Loretto, who has over 30 years of investment banking and listed company experience, has worked in several sectors, including resources and technology. His previous experience includes being an executive and director of Trans-Orient Petroleum, which merged with TAG Oil in late 2009.

Finally, one industry commentator has welcomed news of the continued activity, planned and planned – and views the next few years as “interesting”.

“It will be interesting over the next year or two, with the presently increasing oil prices jumping from the forties a few years ago to the more recent, and hopefully stabilising, prices floating around eighty dollars”, he said referring to oil prices almost doubling from about US$40 per barrel to the current oil price hovering around US$80 per barrel.

There was also the relative decline of the Kiwi dollar against the Greenback, which meant “some prospects, mainly in onshore Taranaki, are certainly looking more attractive than they were three years ago.”