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August 2017 O&G Wrap

By Neil Ritchie

Consolidations – planned and possible – look to continue in the New Zealand energy industry as participants contemplate what the future may look like for the new and remaining participants.

Top of the hoped-for list is confirmation by Royal Dutch Shell regarding Shell New Zealand’s likely exit from this country as part of its parent’s review of its global operations.

EnergyStream has already reported that companies rumoured to be interested in Shell NZ’s assets range from large listed multinational corporations, such as Austrian giant OMV and Canada’s Vermilion Energy, to smaller private New Zealand firms like Greymouth Petroleum, together with global investment company KKR.

However, one of the latest rumours circulating in the Australasian sector is that Aussie listed giant Woodside Energy is also interested in Shell NZ’s assets.

Woodside is the largest operator of oil and gas production in Australia and also that country’s largest independent dedicated oil and gas company. It operates in Australia, Senegal, Myanmar, and North America.

It is a liquefied natural gas (LNG) operator, responsible for about eight percent of the growing global LNG market. Its producing assets in Australia include the landmark North West Shelf (NWS) Project that has been operating since 1984. Woodside started production from the Pluto LNG plant during 2012 and is now adding additional volumes from its non-operated Wheatstone LNG interests.

It is believed Woodside’s sole existing New Zealand asset is a 70 percent stake in (and operatorship of) the Great South Basin Toroa licence PEP 55794, with New Zealand Oil & Gas holding the other 30 percent. However, it is understood Woodside is keen to establish more of a permanent presence in New Zealand through a successful acquisition of Shell NZ’s assets.

As well, Singapore company Zeta Resources has moved to take control of NZOG, which in 2015 bought 12 percent of Aussie listed junior Cue Energy Resources from Zeta, an investment vehicle associated with NZOG director Duncan Saville.

NZOG currently has almost half (about 49 percent) of Cue Energy’s shares and has said it is likely to review the corporate structure of that Melbourne-based company.

Zeta is already NZOG's largest biggest shareholder, currently holding 21 percent through subsidiary Zeta Energy, and it has recently said, in its quest to gain at least 50.01 percent control of NZOG, that it feels this country’s largest listed oil and gas company is “at a crossroads” and considers NZOG’s overheads to be “excessive.” Zeta is also not in favour of any moves towards “risky” exploration.

Zeta Resources has also recently announced it intends acquiring all the share capital in Aussie listed junior Pan Pacific Petroleum that it does not already own after that Sydney-based company sold its Kiwi production and other assets as part of a rationalisation plan to clear company debt.

But industry commentators say Saville is not really a true “E and P” man, interested in exploration and production, rather an investor whose prime interest is in “squeezing everything out of a company, stripping it of its assets and leaving it a shell, certainly with not enough capacity to do much exploration”.

The NZOG board is saying it will appoint an independent advisor regarding Zeta’s planed move and is advising its shareholders not to take any action at this stage.

This also raises the possibility of the long anticipated merger between NZOG, Cue Energy and Pan Pacific Petroleum.

However, it is unclear what may happen to NZOG's 50 percent stake in (and operatorship of) the Clipper licence (PEP 52717), along with Beach Petroleum (50 percent), which contains the high-risk but promising Barque Prospect, in the frontier offshore Canterbury Basin.

As well, NZOG has recently confirmed that no joint venture participants in the Kupe gas-condensate fieldhave exercised their pre-emptive rights regarding NZOG purchasing former partner Mitsui E&P Australia's minority four percent interest in the offshore Taranaki field for $NZ35 million. This is after NZOG earlier this year sold its 15 percent stake to Genesis Energy for $NZ168 million. Origin Energy owns 50 percent of and operates Kupe through subsidiary Lattice Energy Resources, while Genesis now holds a 46 percent stake and NZOG four percent.

Meanwhile, Austrian giant OMV, which holds the majority stake in and operates the more southern offshore Maari and Manaia oil fields (PML 38160), has told the joint venture partners of potential further developments at the Manaia field. OMV has also said a budget has been approved for the project to enter the concept phase and that all the partners – OMV (69 percent), Todd Energy (16 percent), Aussie listed junior Horizon Oil (10 percent) and Cue Energy (five percent) -- will continue studying all available opportunities for Maari.

The Maari-Manaia fields continue to produce well, with the averageproduction rate during the June quarter being approximately 9135 barrels of oil per day (bopd) gross, though at the end of the quarter, daily gross production had slipped to about 9000 bopd.

And preparations are continuing for the installation of a permanent repair to a fatigue crack in one of 12 horizontal struts of the Maari wellhead platform identified in late 2016. Permanent repairs are scheduled to be undertaken soon.

Shell NZ has finalised the sale of the onshore Taranaki Kapuni field to Todd Energy for an undisclosed sum, meaning that Todd Energy now owns and operates all of this country’s natural gas field that is still producing after 48 years.

As part of the agreement, Shell has acquired Todd Energy’s 50 percent shareholding in Shell Todd Oil Services (STOS) and now, with total ownership of the operating company, has renamed STOS Shell Taranaki Limited (STL).

In addition, the former STOS won the Energy Project of the Year at the 2017 Deloitte Energy Excellence Awards, held in Wellington during mid-August. The significant energy sector project was planned and executed with excellence, delivering significant benefits to the then stakeholders (Shell and Todd) and to the wider community.

Commenting on the finalisation of the Kapuni sale, Shell NZ country chair Rob Jager recently said: “We are fortunate to have such an experienced onshore gas company taking over this important energy asset” and that the Todd acquisition “marks the start of a new era for the field”.

STL, with its 350 employees, continues to operate the offshore Māui gas-condensate field, while Shell NZ continues operating the near-shore Pohokura gas-condensate field, along with the Omata and Paritutu tank farms.

“Shell New Zealand continues exploring divestment options for its remaining Kiwi interests, which is consistent with Royal Dutch Shell reshaping its global portfolio in line with its long-term strategy,” Jager added.