from nz oil and gas

NEW Zealand Oil & Gas says it will become a "substantial diversified energy company" within three years once its cornerstone projects – the offshore Taranaki Tui oil and Kupe gas-condensate developments, and West Coast Pike River coal scheme - have been completed.

"The past 12 months has seen very major progress towards NZOG becoming a substantial diversified energy company," NZOG executive chairman Tony Radford told the company's 2006 annual meeting in Auckland this morning.

During that time, NZOG – currently the only "home-grown" oil and gas company listed on the New Zealand Stock Exchange – had embarked on the development phase of all three projects, investing $NZ43 million in Kupe, Tui and Pike River, Radford said.

Last November saw the positive final investment decision for the now $US225 million (almost $A300 million) Tui Area oil development and last June, the positive FID for the $NZ980 million (about $A860 million) Kupe project.

Radford reiterated earlier comments that Tui's initial full production rates, of up to 50,000 barrels of oil per day (bopd), would enable "payback" of NZOG's share of project costs in as little as three to four months from mid-2007.

He said the semi-submersible Ocean Patriot rig – currently drilling Cutter-1 off the South Island for four Australian mid-cap companies headed by operator Tap Oil – was scheduled to arrive in Taranaki waters next month to drill the Tieke prospect, then the four Tui development wells.

A further satellite prospect, Taranui, would be drilled after the Tui development wells, in the second quarter of 2007.

Radford said the proximity of these two prospects to the Tui development area wells – Tieke being 7km and Taranui being 15 km from the Umuroa FPSO site – would enable any discovery "to be quickly brought to production by tying in to the FPSO, for relatively modest additional cost".

If successful, Tieke and Taranui could more than double total Tui Area reserves, currently estimated at 27.9 million barrels, with Tieke delivering up to 15MMbbl.

Radford said Kupe production remained on target to start by mid-2009.
"It is significant to note, that although the (renegotiated) Kupe gas contract was key to making the development decision, the condensate and LPG to be recovered, which start at 1.9 million barrels and 90,000 tonnes per annum respectively, are likely to generate roughly the same revenues as the gas," he added.

"The Kupe permit also has reserves upside, some of which will be determined through drilling the production wells. The facilities are being built with very substantial excess capacity so that increased volumes of product could be handled easily."

Kupe would contribute about 15% of New Zealand's current gas requirements, about 150 petajoules per annum.

NZOG was also stepping up its exploration program.

In addition to Tieke and Taranui, there were also several other exciting opportunities, particularly Hector within the Hector South Sub-block (PEP 38483).

"Hector is a tremendous prospect that could deliver substantial rewards and prove the existence of a new oil migration fairway within our permit areas,"said Radford.

Discovery at Hector, which had potential recoverable oil of 50-60MMbbl, would trigger drilling of follow-up targets. The Ocean Patriot is scheduled to drill Hector-1 following Tui and Taranui.

The Tui (PMP 38158) partners are operator AWE NZ (42.5%), Mitsui E&P NZ (35%), NZOG (12.5%) and Pan Pacific Petroleum (10%).

The PEP 38483 partners are operator AWE NZ (44.317%), NZOG (18.864%), Mitsui E&P NZ (22.728%) and Pan Pacific (14.091%).