NZ offshore project costs blow out by 10%

THE offshore Taranaki, New Zealand Maari oil and Kupe gas projects have suffered further budget blowouts of about 10% each. Total development costs are now about $NZ594 million ($A532 million) and $NZ1080 million ($A969 million) respectively, according to minority partners Horizon Oil and New Zealand Oil & Gas.
NZ offshore project costs blow out by 10% NZ offshore project costs blow out by 10% NZ offshore project costs blow out by 10% NZ offshore project costs blow out by 10% NZ offshore project costs blow out by 10%

But construction of the two projects remains roughly on schedule, with first Maari oil still on track for mid-2008 and first gas from Kupe about mid-2009.

Sydney-headquartered Horizon, in its June quarterly report released yesterday afternoon, said increased costs associated with deferring the sail-away of the Maari wellhead platform (WHP) from Asia to New Zealand, plus increases in forecast development drilling costs, meant its 10% share of forecast capital expenditure now stood at $US45.7 million (about $A53.5 million), excluding contingencies.

This compared with the original budget at the time of Financial Investment Decision (FID), in October 2005, of $US36.5 million and a subsequent revised forecast of $US41.9 million.

Horizon said the Maari field development was 49% complete at the end of June, with the WHP 62% complete and the floating production, storage and offtake (FPSO) vessel Raroa 73% complete.

But the jack-up Ensco Rig 107 – due in New Zealand waters in September for Kupe operator Origin Energy – would not become available to the Maari partners until next April.

The later than initially scheduled arrival date of the rig had allowed the Maari joint venture to postpone the sail-away timing of the WHP to coordinate better with the anticipated rig movement. This had added certainty to the transportation-installation process, allowing more completion of work on the WHP before sail-away, said Horizon.

This would not affect the start of field production, which was still scheduled for July 2008.

But Horizon said there were cost increases associated with deferring the WHP sail-away and with the forecast development drilling, with 90% of the goods and services now tendered. The company said its 10% share of increased capital expenditure before first oil would be covered by cost overrun facilities arranged with Bank of Scotland International.

In its June quarterly activities report issued yesterday, Wellington-based NZOG said Kupe operator Origin Energy had advised that “cost pressures” were likely to increase total capital expenditure by about 10%.

But the project remained on schedule for completion by mid-2009, with the jacket due in Taranaki waters from Thailand by mid-August, NZOG said.

The jack-up Ensco Rig 107 was still expected to arrive from Vietnam by September to install the wellhead platform and drill the three scheduled Kupe development wells, according to the quarterly report.

Following the Kupe development wells, the rig should drill the Momoho (formerly called Stent) wildcat well, only 5km from the Kupe production facilities, NZOG said.

Good progress continued to be made with the production station site earthworks and civil works, the fabrication of the jacket, topsides and offshore pipeline.

Recoverable reserves from Kupe’s central field area (CFA) are 253.5 petajoules of gas, 14.7 million barrels (MMbbl) of condensate, and 1.06 million tonnes of liquefied petroleum gas. There is also significant upside potential – of up to 200PJ of gas and 1.7MMbbl of condensate – from northwest of the CFA and other nearby prospects.

The Maari partners are operator Austrian major OMV (69%), Todd Energy (16%), Horizon Oil (10%) and Cue Energy Resources (5%).

The Kupe partners are operator Origin (50%), Genesis Energy (31%), New Zealand Oil & Gas (15%), and Mitsui E&P NZ (4%).

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