Kupe oil field going well

New Zealand Oil & Gas (NZOG) says commissioning of its Kupe oil field off the coast of Taranaki is progressing well and it hopes to have permanent production up and running by March.

The first raw gas stream was taken from Kupe in December and piped ashore to the processing plant near Hawera. December also saw the first sale of LPG and last month the first shipment of light crude went to Australia.

The amounts of oil and gas from the field were variable but the commissioning process was going very well, said chief executive David Salisbury.

The commissioning period would continue until NZOG was prepared to declare the field ready for permanent production, which was expected to happen next month, he said.

"Once in permanent production, Kupe will supply 10 to 15 per cent of New Zealand's annual gas demand and around half of the country's LPG requirements. For NZOG it will provide long-term income from three revenue streams."

NZOG has a 15 per cent stake in the $1.3 billion project. The other stakeholders are Origin Energy as operator and 50 per cent owner, state-owned Genesis Energy with 31 per cent, and Mitsui with 4 per cent. The field is expected to have a life of 15 years.

Meanwhile, the Tui field, in which NZOG has a 12.5 per cent stake, saw production for the December quarter hit 1.3 million barrels, or an average of 14,200 barrels a day.

However, technical issues meant it might not meet the full-year production target of 5.1 million barrels.

In its summer drilling programme NZOG would be spending about $30 million, Salisbury said.

The programme got off to a disappointing start when only traces of oil and gas were found in the Albacore-1 wildcat exploration off Taranaki. NZOG concluded it was not commercial and it was plugged and abandoned.

The Kan Tan IV semi-submersible rig is expected to start drilling a Hoki exploration this month.

Hoki-1 will be further from shore than any previous offshore Taranaki well, in a steep upper continental slope in water depths of more than 300m.

"It is a relatively high-risk prospect, which has the possibility of containing significant recoverable oil resources," Salisbury said.

NZOG was looking to explore another Taranaki field, named Gamma, in which it had a 100 per cent interest, he said. It also planned to explore its Barque field, northeast of Dunedin, in which it has a 40 per cent stake.

Meanwhile, NZOG withdrew last month from a study group which was considering bidding for drilling in Romania.

NZOG became concerned that Australia's Nexus Energy had withdrawn from the group and about the lack of progress.

However, Salisbury said Romania was still on the map.

"We still like Romania as a destination but we have elected not to continue in that joint venture."

- NZPA