KEY POINTS:
New Zealand oil production has reached a milestone with one of three Kupe wells breaking into a target reservoir.
The Kupe field off south Taranaki is expected to produce nearly 15 million barrels of light oil when it comes on stream around the middle of next year.
Kupe
was originally thought of as a gas field to replace a portion of the diminishing Maui field but with oil prices through the roof, up to two-thirds of its value could be in liquids.
The life span of production is estimated to be 19 years.
Drilling is on target and the bulk of the work on the $1.2 billion project is now onshore, building processing facilities to process gas, LPG and light oil from the field 30km offshore.
Further north the Tui field has been producing since the middle of last year and is on target to reach the 10 million barrel mark next week.
The major offshore Taranaki projects - Tui, Maari, Kupe and Pohokura - will reach peak production by about 2010 and bring 140 million barrels of new reserves into the market.
Total oil production will then be at a record level not seen since Maui was at its peak.
An estimated $3 billion is now being spent on major projects in Taranaki and an estimated 30 wells for exploration, appraisal and development are to be drilled around country in the period between 2007 and 2009.
The message from the Petroleum Conference in Auckland this week was to expect the hunt for oil to get even more intense.
New Zealand Oil & Gas holds a 15 per cent stake in Kupe and 12.5 per cent of Tui.
Its chief executive David Salisbury told the conference New Zealand was "small fry"on a global scale - producing just 0.2 per cent of world oil supply - and suffered from its limited domestic market and labour pool.
Being geographically isolated there were few industry participants and experts and no oil infrastructure outside Taranaki. However, this country was relatively under-explored, there were identified basins with good potential and unlike other countries New Zealand offered a safe, secure location.
The company has flagged a $20 million to $25 million exploration programme for the next financial year.
With easy hits disappearing around the world, New Zealand was looking like a better exploration option, he said.
Further down the track, the Raukumara sub-basin off East Cape has shown early promise of what could be billions of barrels of oil.
