NEW ZEALAND

2005 sees record petroleum exploration in NZ but no major finds

IN 2005, record numbers of companies invested near-record amounts of time and money in the New Zealand petroleum sector, spurred on by high global oil prices and ever-increasing domestic gas prices.

2005 sees record petroleum exploration in NZ but no major finds

They drilled a near-record number of wells for the country’s very small energy industry – 32-plus exploration, appraisal and development wells – striking commercial quantities of hydrocarbons in about one in eight wells drilled.

But none of the confirmed discoveries to date – Cardiff, Cheal, Piakau North, and Supplejack – was a true wildcat drilled in a frontier region.

There were no 100-million-barrel oil field discoveries that are desperately needed to improve the sorry state of NZ’s energy self-sufficiency – 18% and falling – and to improve the country’s current account deficit of NZ$12.9 billion, or 8.5% of GDP.

Nor were there any of the 1 trillion cubic feet-plus gas finds needed to reduce the likely gas supply shortfall later this decade or to push back consideration of LNG or CNG imports.

This year, with no offshore rigs available, explorers concentrated on the onshore Taranaki Basin.

Next year may well be different as explorers use the two offshore rigs due in the country – the Ensco jack-up Rig 56, scheduled to drill more production wells in the near-shore Pohokura gas-condensate field, and the Ocean Patriot, scheduled to drill the Tui Area development wells plus several others offshore Taranaki.

Various joint ventures – spurred on by world oil prices forecast to remain above US$55 per barrel and with domestic gas prices almost doubling in the last 18 months to exceed US$4.40 per gigajoule – will be exploring in frontier regions including offshore Canterbury, East Coast and perhaps the Northland Basin, as well as offshore and onshore Taranaki.

These frontier basins, along with the Great South Basin to be drilled later this decade, offer the only real hope of large oil fields likely to significantly improve the country’s current account deficit, or of major gas finds needed to fuel gas-fired power stations and maybe even resurrect the mothballed Methanex methanol manufacturing facilities.

The year started poorly when operator Bridge Petroleum and PEP 38745 partner Westech Energy plugged and abandoned their Hursthouse-1 onshore Taranaki well after failing to find commercial hydrocarbons.

The rig then moved north to drill what turned out to be another duster – the Karaka-A1 shallow well in the Waitara Valley, for newly-appointed PEP 38742 operator Swift Energy and petrochemical manufacturer Ballance Agri-Nutrients.

More dry holes followed, with Kakariki-1 in PEP 38748 and Mirimiro-1 in PEP 38765 for operator Tap Oil and its respective partners.

In March, Austral Pacific Energy wrote down to zero all proved and probable reserves associated with the problematic Kahili-1A-B well in PEP 38736.

But the same month in PEP 38738, Austral said it believed it had found the silver lining to the troublesome deep Cardiff drilling campaign in onshore Taranaki and that it planned to test several pay zones.

Austral said logging of the Eocene-aged Kapuni intervals below 4000m at the Cardiff-2A deep gas well had revealed the presence of hydrocarbons in all three targeted zones.

But Canadian independent petroleum engineering consultants Sproule International wrote down to zero the net proved and probable reserves associated with the Kahili-1A/B well, and Austral subsequently closed the field.

Meanwhile, frustration continued for Austral and its deep Cardiff partners, with a range of downhole problems, as well as blocked zones and water production hampering test flows.

Then in November Austral said it had “a genuine discovery” and was confident recompletion of Cardiff-2A would prove commercial.

But industry analysts said the Sproule International estimate of P2 probabilistic reserves of 215 billion cubic feet was overly optimistic and they doubted Cardiff would ever flow sufficient gas to fire a power station for 40% deep partner and downstream energy player, Genesis Energy.

At the end of the year, Austral was isolating the McKee sands in order to flow-test this gas pay without interference from other test zones. Flow testing of this zone was expected to continue through January to provide flow and pressure data to establish the long-term production potential of the McKee sands, the main producing interval.

Further north of the same licence, the shallow Cheal oil discovery was delivering better news. The Cheal-A4 well continued producing typical Taranaki waxy crude during several months of testing and has now produced over 26,000 barrels.

The shallow partners are considering plans for redeveloping the Cheal-A site to allow all existing and future wells on the site to be produced simultaneously.

In addition, the first two wells from the Cheal-B wellsite are planned for the first half of 2006, followed by another two wells from the Cheal-A site. Success at these wells will significantly enhance the field’s undisclosed oil reserves.

Also, subject to the approval of the Cheal and Cardiff joint ventures, 3D seismic will be acquired in early 2006, covering the combined Cardiff and Cheal structures.

Other dusters included the shallow Oru-1 well in PEP 38716, the shallow Richmond-1 in PEP 38745, the shallow Konini-1 in PEP 38751, and the deeper Terrace-1 near New Plymouth Airport for Todd Energy.

But Houston-headquartered Swift Energy kept quietly drilling away in its Taranaki acreage, with some exploration and development successes.

It announced a US$80 million development program for its Kauri and Manutahi discoveries, on the back of being awarded 30-year petroleum mining permit 38155 for the southern Rimu-Kauri area.

Tawa-B1 – the first of three deep-gas (Eocene-aged or older) wells drilled by Swift Energy in conjunction with downstream player Mighty River Power – proved a duster, but the partners will hoping for better with the more northern Trapper-A1 and Goss-A1, which are currently drilling.

However, Swift did strike paydirt with its Piakau North-A1 and A2 exploration wells.

Likely recoverable reserves have not been mentioned, but Piakau North-A1 did flow up to 7 million cubic feet of gas per day, with 400 barrels of associated condensate.

The Ahuroa South-B1 delineation well, north of Piakau, is currently drilling, and Swift Energy is considering a facilities upgrade to enable more of the Piakau carbon dioxide-rich gas to be processed to pipeline specification quality.

Apart from Cardiff, the other enigmatic wells this year were both drilled by private company Greymouth Petroleum – Turangi-1 and Korito-1.

Greymouth drilled, completed and cased Turangi-1 and later applied for a petroleum mining permit over nearly all PEP 38762, despite not having tested the well.

There were also rumours that Greymouth had struck paydirt in the shallow Urenui, Mount Messenger and Moki formations at its Korito-1 in PEP 38747 near the company’s commercial Kaimiro oil and gas field.

The last discovery was one of the last shallow wells drilled this year – Supplejack-1 in licence PEP 38741 – which flowed gas, with associated condensate, at several hundred thousand cubic feet per day from a 3m-thick Miocene-aged sandstone.

Operator Austral and its partners were sufficiently encouraged to drill the Supplejack South-1 sidetrack well and, in December, it struck up to 2m of good quality oil pay at the top of a 7m-thick reservoir sandstone. Gas-charged sands were also encountered.

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