New Zealand—Wildcat Country Awakening
Contents
In the 134 years since the country's first well was spudded, near New Plymouth in New Zealand (NZ), there have only been another 300 or so wells drilled. According to prominent NZ oil personality Rick Wilkinson, that makes the region almost pure wildcat country.
With the withdrawal of direct government involvement in the industry during the late 1980's and early 1990's by privatisation of its exploration, production and downstream processing interests, and changes to the fiscal regime, more explorers have been encouraged to venture into the ‘land of the long white cloud'.
Daniel Johnston, a fiscal regime analyst in Dallas, Texas, is just one of a number of analysts who believe the fiscal and allocation regime developed by the New Zealand Government as one of the best in the world. "Most countries in Southeast Asia, and the rest of the world for that matter, are re-thinking their competitive strategy and their position in the global market, few have shown the willingness to change, and fewer still have made the kind of enlightened concessions as those now found in New Zealand", he said. The Acceptable Frontier Offer (AFO) program, which opened up all of the country's sedimentary basins, is a big part of the new regime.
The AFO
Virtually all areas of New Zealand, whether on or offshore, over which there are no current permits, are available for exploration on the basis of the AFO program. The AFO allocation scheme allows an explorer to submit a non-competitive bid, obtain a permit and commence exploration activity within a short time frame.
Recent Activities and Permits
Subsequent to the introduction of the AFO in 1995, the country has experienced an aggressive and successful phase of petroleum exploration, seismic acquisition and drilling. Recent economic studies of exploration activity in New Zealand using a basic recursive modeling approach, show that there is a positive reward for effort relationship in exploration since 1970 with 0.92 MMBOE reserves being found for every kilometer drilled.
By the start of 1999 there were 54 exploration permit licenses and 10 mining permit licenses. In the newly closed block offer round, there were nine applications for five of the six onshore Taranaki Basin blocks. Two received multiple bids.
Block Offers are advertised and bidded for, and block winners are judged on the basis of the best staged-work program bid. A staged-work program for the first three years is required, with a decision on the next two years work made in the third year of the permit.
Cash bonus bidding is also occasionally used in areas of high prospectivity.
Onshore Taranaki (North Island) Block Offer Permits (back to top)
US explorer Westech Energy New Zealand Ltd made a significant entry into onshore Taranaki by winning three of the five petroleum exploration permits awarded by Crown Minerals in its July 1999 blocks offer. Westech has been awarded PEP 38732, 38733 and 38734, which lie between the Ngatoro and Kaimiro fields to the west, and the McKee, Tariki and Ahuroa fields to the east.
Ed Davies, Managing Director of Westech's New Zealand operations, said from Denver that the company planned to be "fairly active" in Taranaki and would start acquiring 3-D seismic later this year in its two northernmost permits (PEP 38732 and 38733) near Inglewood. He said that the company did most of its exploration in the US in more mature areas similar to onshore Taranaki. The work programs for the new areas would fit in well with those of the Westech-Orion Exploration Ltd joint venture in the East Coast Basin. The joint venture is currently drilling ahead on its Kauhauroa-3 appraisal well at its onshore Kauhauroa gas find near Wairoa (PEP 38329) and has recently acquired 590 km2 of 3-D seismic in its two offshore permits in Hawke Bay (PEP 38325 and 38326).
Amity Win Small Block
Amity Oil New Zealand Ltd has been awarded PEP 38735. This small area lies on the south-east boundaries of the Ngatoro and Kaimiro fields and also adjoins Amity's other permit to the west, PEP 38727. Amity is a subsidiary of Perth-based Amity Oil NL, which currently operates 11 petroleum exploration permits in Australia.
Indo-Pacific Win Adjoining Permit
Indo-Pacific Energy (NZ) Ltd and Millennium Oil and Gas Ltd have been awarded PEP 38736 on the southern edge of the McKee field boundary. The new permit adjoins two other permits that Indo-Pacific Energy holds, PEP 38706 and 38720. Indo-Pacific Energy, whose technical office is in Wellington, is a subsidiary of North American-based International Resource Management Corporation (IREMCO). Millenium is a private company guaranteed by IREMCO, which has been set up to attract New Zealand market funds.
The remaining area, the northernmost block near Waitara, did not receive any permit offer.
Block Offer Awards May Lead To 15 More Wells
The New Zealand Minister for Enterprise and Commerce, Max Bradford, said that about NZ$55 million may be spent on up to 15 exploration wells over the next five years in the recently awarded onshore Taranaki petroleum exploration permits. About NZ$12 million is scheduled to be spent over the next 12 months in the new permits. "Given the intense international competition for petroleum exploration investment dollars, it is particularly pleasing to see such a high level of interest in the permits on offer", Bradford said.
North Island—Offshore (back to top)
Conoco Plugs And Abandons Waka Nui-1
The Conoco joint venture has plugged and abandoned its deepwater exploration well Waka Nui-1 in offshore Northland (PEP 38602) after reporting that it did not find commercial hydrocarbons. The drillship Deepwater Frontier departed mid-July for Singapore. The rank wildcat Waka Nui-1 well was drilled about 90 miles north-west of Auckland in an ocean depth of 1460 meters, the deepest water drilled in off New Zealand. Conoco affiliate, Conoco (UK) Ltd, operated the well and holds a 56% interest in the Northland block along with Inpex Northland Ltd and Todd Petroleum Mining Co. Ltd. Under the permit, the partners are committed to drill a further well by April 2003.
Fugro Site Survey For Jack-up Rig At Pohokura-1
Australian surveying firm Fugro Survey has completed a site survey for Fletcher Challenge Energy (FCE) in preparation for the drilling of the Pohokura-1 well, close offshore North Taranaki late this year. Fugro started the survey work off the Methanex Motunui methanol plant in early July, using the 180-ton Sea Surveyor, which also acted as a site survey vessel during the Awatea-1 drilling program, further north off Taranaki in late 1996.
FCE sustainable business services manager, Rachel Palmer, said the purpose of the latest survey was to investigate the seabed for any obstructions that would restrict the siting of a well and to identify any hazardous shallow gas. It is probable that operator FCE and its German partner in PEP 38459, Preussag Energie GmbH, will bring a jack-up drill rig from overseas to drill the Pohokura-1 well by the end of the year. FCE has said it believes the Pohokura prospect has the potential to contain up to 300 billion cubic feet of gas in Kapuni group sands.
Fletcher Challenge Energy To Separate From Parent Company
Fletcher Challenge Energy Ltd (FCE) is to be separated from the re-amalgamated Fletcher Challenge Ltd parent company in a move aimed to more clearly establish FCE as an upstream oil and gas company. No firm timetable or process for the split-up has been established.
Reports suggested the separation of FCE could make it a takeover target of a larger oil company. FCE has, however, indicated that it is getting ready to make fresh investments. It has made $269.5 million from the sale of its third share in Natural Gas Corporation Ltd (NGC) to fellow NGC partner, the Australian Gas Light Company Pty Ltd. FCE has also indicated it may sell other assets which could bring in a further $300 million. These are mooted to include the company's 68% stake in the Maui gas pipeline and its 15% holding in listed oil refining company New Zealand Refining Co. All proceeds would be used to reduce debt. FCE communications manager, Stephen Jones, said the NGC sale meant the company was getting into a position to re-gear itself for further expansion. FCE Chief Executive Greig Gailey agreed further sales of non-core assets were likely, but was as yet unwilling to give details.
Fletcher Challenge said in a statement about the split that FCE needed to grow substantially to succeed as a stand-alone exploration and production company. In the short term FCE would move quickly to extend its current reserve base and production levels. Most of the immediate growth was likely to come from acquisition of existing producing fields which display production upside. The company was likely to look beyond current geographic areas for this growth.
Swift To Start Its Rimu-A1 Well
US oil exploration company, Swift Energy New Zealand Ltd has begun drilling its first New Zealand well as operator, the Rimu-A1 in south Taranaki permit PEP 38719, eight km south-east of Hawera. Swift Energy NZ President, Don Morgan, said the primary target in the Rimu prospect is a four-way structural closure in the Eocene-age sands within the Kapuni formation. The shallower fractured Tikorangi limestone is a secondary objective. The well is expected to take about 60 days to reach the estimated target depth of about 4570 meters.
Indo Pacific's Exploration Program
Indo-Pacific Energy (NZ) Ltd is considering drilling a well that may spud late in September in onshore Taranaki PEP 38720 near Inglewood. This would target Mt Messenger sands. Over the next few months the company will also drill onshore in the one of its East Coast permits, PEP 38328, at the Whakatu-1 well near Hastings.
In the South Island, Indo-Pacific's interest is focussed on the onshore Canterbury Basin (PEP 38256) where it is investigating leads in the Hinds and Cust areas.
Water depths of over 1000 m throughout much of the offshore extent of the basin have discouraged exploration until recently. Conoco Northland Ltd and its joint venture partners Inpex Northland Limited and Todd Petroleum Mining Co Limited have acquired new seismic data and will probably drill the first offshore well in the basin soon.
Taranaki Basin
Taranaki Basin continues to be New Zealand's most important exploration theatre. Onshore interest remains strong with the area almost fully covered by exploration permits. Several of these are held by smaller companies, new to the local exploration scene.
In-fill drilling in several onshore fields has yielded additional oil reserves, and further wells and seismic surveys are planned. Several of the newer operators, including Bligh Oil and Minerals (New Zealand) Ltd, Santos Petroleum (NZ) Limited, Swift Energy New Zealand Limited and Indo Pacific Energy (NZ) Ltd have scheduled wildcat wells to test a range of prospect types.
Bligh subsidiary Marabella Enterprises Ltd has been awarded an area in the south of Taranaki Peninsula to add to its other two onshore licenses in which drilling plans are well advanced.
Recent advances in geological knowledge have shifted interest further offshore than the producing fields, to the Western Platform. NZOG and partner Pan Pacific NL have announced a commitment to drill west of the Maui field, having identified prospects on two trends. NZOG believes that there is great potential for the area west of Maui to contain oil, estimating that 150 million barrels of oil can be recovered from each of two levels within the Hochstetter prospect. Stewart Petroleum Company (an NZOG subsidiary) was recently awarded a further area west of the Maui field, with drilling scheduled for 2001.
East Coast
The East Coast region had already emerged over the last three years as a second focus of exploration in New Zealand, when a commercial discovery injected excitement into the local exploration industry. Virtually the entire region is under licence by local and international companies, including Westech Energy NZ Ltd, Enerco Exploration Ltd, Indo Pacific Energy (NZ) Ltd, GEL Exploration Ltd, Asia Pacific Oil Co, and Tyers Petroleum Pty Ltd of Australia.
The Westech-Enerco joint venture discovery of gas is the first in commercial quantities outside the Taranaki Basin. A five-hole wildcat program produced two gas discoveries (Kauhauroa-1 and Awatere-1) and three dry holes. Early indications are that the Kauhauroa structure may contain at least several hundred billion cubic feet of dry gas. The partners have commissioned a feasibility study for the construction of a 100 km pipeline from Wairoa to Napier, where connection to the North Island pipeline grid can be made.
Indo Pacific Energy and its partners are ready to start drilling in each of their three East Coast permits. Tyers Petroleum and partner GEL Exploration have increased their holdings on the East Coast with award of permits covering much of the onshore Wairarapa and a part onshore part offshore area covering much of unexplored Cook Strait.
Mike Beanland (mike@oilfield.com.au) is Editor of Oilfield Publications, Australian based publishers for PESA (Petroleum Exploration Society of Australia), the ASEG (Australian Society of Exploration Geophysicists) and regional contributor to oilandgasonline.com