Ann: MINE: NZO: Pateke-4H begins drilling

• Release Date: 10/02/14 14:05
• Summary: MINE: NZO: Pateke-4H begins drilling
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					NZO
10/02/2014 12:05
MINE

REL: 1205 HRS New Zealand Oil and Gas Limited

MINE: NZO: Pateke-4H begins drilling

The Kan Tan IV semi-submersible drilling rig has began drilling the Pateke-4H
well in PMP 38158 at 10.45AM (New Zealand daylight time) yesterday, the
operator has advised.

At 06:00AM today a 36" hole had been drilled to a depth of 234 metres.
Preparations are being made to run and cement a 30" conductor.

Pateke-4H is a northern extension of the existing Pateke reservoir in the
producing Tui area oil fields, approximately 50km off the coast of Taranaki,
New Zealand, in water depth of about 124 metres.

Pateke-4H is expected to take around two months to drill to a planned total
measured depth of 5,361 metres, including a 1,271 metre horizontal section.

The operator's pre-drill estimate is of an un-risked 2C Contingent Resource
of 2.5 million barrels for the joint venture, or 687,500 barrels net to New
Zealand Oil & Gas. (The resource information was estimated using a
deterministic methodology, based on the Pateke reservoir simulation model and
the evaluation is current. This report is based on information compiled by
Andrew Jefferies, Vice President of Operations and Engineering at New Zealand
Oil & Gas. Mr Jefferies is a Society of Petroleum Engineers Certified
Petroleum Engineer.)

In the event that commercial volumes are discovered the well will be
completed and later tied into the existing Tui production facilities.
Production of first oil would be in the first half of 2015 or later

In October last year New Zealand Oil & Gas increased its interest in the
field from 12.5 per cent to 27.5 per cent. The other Tui joint venture
partners are: AWE Limited 57.5% (Operator); and Pan Pacific Petroleum 15%.

BACKGROUND TO PATEKE-4H
Pateke is one of three separate accumulations of oil developed in the Tui
Area Oil Fields - Tui, Amokura and Pateke.

GEOLOGY
The Tui oil accumulations are in Kapuni-F sandstones, deposited during the
Paleocene epoch 66 to 56 million years ago in the 'Kapuni' shoreface (shallow
marine) fairway. The reservoir is at a depth of around 3,650 metres subsea.

Organic-rich shales and coals of the Late Cretaceous (145 to 66 million years
ago) and Paleocene are the likely sources of the oil. The oil may have
orginated from a source kitchen deep within the Taranaki basin, possibly the
East Maui Graben to the east of Tui.

Vertical migration occurred through faults and fractures and then laterally
via sandstone carrier beds, finally accumulating in Paleocene sandstone
reservoirs within structural trap closures.

The structural traps are low relief, dip-closed features. The reservoirs are
clean, laterally extensive, high permeability marine sandstones, with the oil
accumulations overlying strong aquifer drives.

PATEKE-4H
The aim of the Pateke-4H well is to explore a northern extension of the
Pateke lobe that geologists believe may not be fully exploited by the current
producing well, Pateke-3H.

The theory being tested is that the reservoir in the Pateke structure is
separated into two areas, and that Southern area was drained by the 3H well
in the early stages of the Tui development, while the northern may not have
been and is the target of the 4H well. (See diagram)

The well will be drilled horizontally because the reservoir is thought to be
over 1000 metres wide but less than ten metres deep, which reduces the
ability of a vertical well to recover efficiently.

DEVELOPMENT OF THE TUI OIL FIELDS
The Tui-1 well, drilled in February 2003, encountered a 10 metre oil column
in excellent quality reservoir. A marine seismic survey was carried out over
250 square kilometres in April 2003 to delineate the Tui field accumulation
and other nearby structures.

Based on the 3D seismic mapping, further exploration wells were drilled on
nearby structures similar to the Tui field during 2004. The Amokura-1 well
was drilled in April 2004, and encountered a 12 metre oil column. The
Pateke-2 well was drilled in August 2004 and also encountered a 12 metre oil
column.

Production from the Tui fields began on 30 July 2007 and is expected to
continue until around 2020. To date the field has produced over 30 million
barrels of oil.

The Tui development comprises four horizontally drilled and subsea completed
wells.
The extended horizontal production sections in the oil reservoirs range from
819 metres to 1,850 metres. Each is tied back to a leased Floating Production
Storage and Offtake (FPSO) vessel, the Umuroa. In May 2008 an agreement was
signed extending the charter of the Umuroa through to 2015, with one year
rights of renewal until 2022.

John Pagani,
External Relations Manager,
DDI: +64 4 471 8333, MOB: +64 21 570 872
End CA:00246793 For:NZO    Type:MINE       Time:2014-02-10 12:05:45