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May O&G Wrap

By Neil Ritchie

The first sniff of success in the current campaign of the semi-submersible rig Kan Tan IV has the energy industry hoping the rig’s next wells will also be as good, if not better, in finding more replacement oil reserves this country needs to boost its flagging foreign exchange earnings.

The Kan Tan has now drilled the Pateke-4H well to a revised total measured depth of 4772m, including a 749m horizontal section through the targeted Eocene-aged Kapuni F10 sandstone reservoir, shorter than anticipated due to the high quality of the reservoir encountered.

The development well will now be completed and suspended to enable production to start during early 2015, following the installation of subsea flowlines and other infrastructure enabling the well to be tied back to the Tui floating production, storage and offloading vessel Umuroa.

While the official estimate – by field operator AWE, New Zealand Oil & Gas and Aussie junior Pan Pacific Petroleum – of the total amount of recoverable oil from this in-fill well is about 2.5 million barrels there are rumours that may be exceeded by a substantial margin.

The Kan Tan is only part way through some extensive campaigns – for AWE, then Maui field operator Shell Exploration NZ, as well as perhaps other joint ventures. Its next scheduled exploration effort will be the nearby Oi-1 well targeting a prospect containing recoverable oil reserves of about 11 million barrels.

And the smaller jack-up Ensco Rig 107 is starting its own campaign – an extended programme of development wells and water injection wells at the more southern Maari oil field for operator Austrian giant OMV and its partners.

While oil products are still this country’s fourth largest export earner, petroleum royalties have slid to $333.7 million, the lowest in five years. Total oil production is declining by about 13% per annum and, at about 40,000 barrels per day, is only one third of the volume pumped in 2008.

Meanwhile, various activities continue around the Taranaki region, from Todd Energy’s northern inland Mangahewa gas field development programme south to several central Taranaki appraisal and development campaigns.

Canadian listed junior TAG Oil plans to spend at least C$60 million (NZ$64 million in the March 2015 fiscal year, with the onshore East Coast Waitangi Valley-1 well the only exploration well not to be drilled in the geological Taranaki Basin.

TAG's 2014-15 budget will be funded entirely by forecasted cashflow and existing working capital and focus on three key components: low-risk shallow development drilling, high-impact deep and offshore drilling in the Taranaki Basin, and the fractured source rock prospects on the East Coast.

The Vancouver-headquartered company plans to drill a total of nine new shallow onshore Taranaki development wells -- six within the Cheal and Greater Cheal area and two at the more northern Sidewinder-B site targeting oil-prone prospects. Seven of these wells will be drilled with a 100% interest, one will drilled with a 70% interest in the new Cheal-E site acreage, and one well has already been drilled at the Southern Cross site east of Stratford.

Total current average daily production is approximately 2000 barrels of oil equivalent per day (boepd), with 1800 boepd of that going to TAG and 75% of total production being oil.

For the 2015 fiscal year TAG estimates cashflow from its operations of approximately C$40 million, with production averaging approximately 2000 boepd net to TAG, with oil contributing 80% to daily production estimates.

Finding replacement reserves, of oil or gas, is a key component of any successful exploration and development.

And TAG has already identified more than 50 shallow, low-risk development drilling locations on the company's Taranaki acreage, which is a five-year inventory based on the current pace of drilling.

TAG has also outlined progress at some recent shallow and deep Taranaki wells, with mixed results.

It says the Cheal area development and step-out campaign “continues to achieve excellent results”, with the successful Cheal-E1 step-out well placed on production last November 2013, and this success “substantially extends” the oil saturated area of the greater Cheal field. To date the Cheal-E site has produced approximately 90,000 barrels of oil with current stabilised production of approximately 650 barrels of oil per day (bopd), with 455 bopd net to TAG, plus solution gas from three wells.

Separately, in a 50-50 joint venture with fellow Canadian listed junior East West Petroleum, TAG drilled a total of four shallow exploration wells and one exploration side-track well within the Cheal South and Southern Cross areas. TAG presently plans to production test the Cheal-G1 well as a potential new discovery, while the other three are being plugged and abandoned.

TAG has not yet given up on the presently sub-economic tight gas Cardiff field, though testing of the deepest of three potential producing zones at the Cardiff-3 well has produced gas, oil and condensate with no formation water, though not at the commercial rates expected.

TAG is now planning to move uphole and initiate testing on the second of the potential zones, while incorporating the results of the K3E zone to the overall completion strategy for the well.

A third Canadian list junior, New Zealand Energy Corp, and partner L&M Energy are still bringing more Tariki, Waihapa and Ngaere (TWN) wells back into production.

But NZEC has announced a loss of more than C$9.3 million (NZ$9.78 million) for the 2013 calendar year.

Despite the company ending 2013 with more producing wells than at the end of the previous year – ten compared to four – oil production slumped, with only 77,484 barrels of oil last year, less than half the 2012 total of 162,444 barrels.

Revenue also suffered, with only C$10.7 of total revenue compared to C$16.5 million in 2012. NZEC also spent C$37.7 million on property, plant and equipment, including the C$33.5 million TWN acquisition last June from Australian company Origin Energy. Overall gross profit per barrel fell during 2013 – from C$70.08 per barrel to only C$44.38 per barrel, though that is trending back up to C$60.34 per barrel.

London-based Kea Petroleum and new partner, listed Aussie junior MEO Australia, are working on their programme to boost existing production and assist future field appraisal at the Puka oil and gas field east of TAG’s Cheal field and NZEC’s Copper Moki field. Kea and MEO are also to further test the nearby suspended Douglas-1 well.

Greymouth Petroleum continues its preliminary exploration activities at its Dettling North and Dettling South wellsites near Midhirst, as does TAG Oil from its nearby Cross Rd wellsite. Greymouth is also drilling again at its middle-aged Kaimiro oil and gas field near Egmont Village.