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2011 - the Year in Review

By Neil Ritchie

The New Zealand oil and gas industry was very busy during 2011, with most activity still centred around Taranaki and all of the few new discoveries made in the country’s only producing petroleum province.

The highlights far outweighed the lowlights, with more companies than ever exploring regions, from Northland to Southland and Otago, for conventional petroleum products, the unconventional coal seam gas, shale oil and gas, and now even mudstones and siltstones.

The disappointment of global major ExxonMobil and New Zealand’s Todd Energy withdrawing from the Great South Basin at the bottom of the South Island during late 2010 is long forgotten.

Indeed, the entry of fellow global player Royal Dutch Shell into two Great South Basin licences last August has boosted the overall confidence of the industry, as has the entry of United States major Apache Corporation on the East Coast, in association with existing player Canadian junior TAG Oil, a month later.

And Brazilian giant Petrobras successfully completed a major seismic survey operation off the East Coast despite the protests of some environmentalists and Maori.

While UK-listed Kea Petroleum was disappointed its onshore Taranaki Wingrove-2 well failed to flow commercial quantities of hydrocarbons, TAG Oil is over the moon about the flow rates it has achieved from some of the wells at its nearby Cheal oil field and Sidewinder oil and gas field.

Private company Greymouth Petroleum has also confirmed the more northern Onaero gas discovery as a commercial success. It is also continuing to drill appraisal and/or development wells in its nearby Turangi and Kowhai fields.

Australian company AWE, which runs the offshore Taranaki Tui oil field, continues to surrender a number of exploration licences off Taranaki and one near the Marlborough Sounds at the top of the South Island.

And Austrian company OMV also surrendered one offshore Taranaki exploration lease without drilling a well.

But Australia’s Origin Energy, which runs the offshore Taranaki Kupe gas field, has recommitted itself to New Zealand, gaining a second five-year term for its sole offshore Northland exploration block.

Origin is also involved in two offshore Canterbury leases, run by US major Anadarko, which has confirmed its commitment to New Zealand, winning or applying for second five-year terms for those leases plus its Deepwater Taranaki Basin exploration permit.

Overall, the oil and gas sector – which started in 1865 when the Alpha well was dug by hand on the New Plymouth foreshore then later drilled by a rig -- is as busy as ever.

And wherever activity occurs, it is often Taranaki-based service companies supporting New Plymouth or Wellington-headquartered explorers. As well, the generally high costs of operating in New Zealand are reduced through the sharing of equipment, particularly offshore drilling rigs and seismic vessels.

Newcomer Canadian-based junior New Zealand Energy Corporation emulated the success of now departed American independent Swift Energy by hitting hydrocarbons with its very first New Zealand well, Copper Moki-1. Swift Energy struck oil and gas with its Rimu-A1 well in December 1999.

NZEC reported then record flows for a shallow onshore Taranaki well, with Copper Moki-1 flowing about 1100 barrels per day of waxy crude oil. However, it and listed junior L&M Energy later failed to find hydrocarbons at their more southern Talon-1 well.

Not to be outdone, TAG later announced new record production rates from a shallow well, with about 1700 barrels per day of crude and condensate (light oil) flowing from its Cheal-B5 well.

TAG also successfully brought into production several Sidewinder wells and officially opened the small Sidewinder production station just south of Inglewood, which is already operating at its capacity of 30 million cubic feet of gas per day, plus as much crude and condensate as can be produced.

Below: work in progress on Sidewinder:

Kapuni field owners Shell and Todd were granted a 21-year extension to the mining permit for their onshore Taranaki field – an indication of the confidence they have that Kapuni will be producing for a total of 60 years or so.

Early this year there were high hopes that New Zealand would see a gigantic semi-submersible rig operating off Taranaki and Canterbury this summer. However, Anadarko was not able to find a suitable rig in time but is still keen in bringing “a big floater” down under for the 2012-13 summer, probably for a multi-well programme over several basins by several operators.

The sole offshore well drilled this year was Ruru-1 on the southeastern edge of the Maui gas field, though severe autumnal weather disrupted drilling in April.

There were, however, several offshore seismic surveys conducted this year, which complemented the smaller onshore programmes, largely in Taranaki. The state-of-the-art Polarcus Alima ship completed a major three-dimensional (3D) survey in the Deepwater Taranaki Basin and then started an even larger survey in the Great South Basin during mid-December.

Shell and Todd and OMV started a gas reinjection project for the near-shore Pohokura gas field, aimed at increasing the amount of gas and liquefied petroleum gas (LPG) that can be recovered from the country’s largest gas resource.

They also announced a third “workover” programme for the Maui field, aimed at bringing more bypassed pockets of gas into production and extending further the economic life of the 32-year-old field.

So, while no “elephant sized” fields were discovered off the coast of New Zealand during 2011, the overall health and diversity of the oil and gas industry have never been better, with Taranaki still playing a pivotal part in this multi-billion-dollar sector.