Tamarind ordered to halt production after oil spill spotted near Tui fields

On Tuesday the owners of the Umuroa said they were preparing to leave the Tui fields because of unpaid debts owed by Tamarind Resources. Photo / Supplied

Tamarind Taranaki's battle to continue operating has hit more trouble with the Environmental Protection Authority ordering it to halt production after oil was spotted near its wells.

Administrators of the Malaysian-owned company are currently battling to maintain the confidence of creditors to continue production for at least a few months in a bid to generate revenue to help cover debts of around $200 million.

On Wednesday the EPA issued Tamarind Taranaki with an abatement notice "following notification of an oil spill" near the company's fields off the Taranaki coast.

This means it has to immediately cease production until it can conclusively identify the source of the spill and satisfy the EPA that production will be secure when it restarts.

On November 21 an oil sheen was spotted on the sea surface, around 400 metres from the Umuroa, the floating vessel which collects oil from Tamarind's three Tui oil fields, 50km off the Taranaki coast.

The EPA said Tamarind estimated that around 100 litres of oil had been spilled based on the size of the sheen, with a survey detecting a gash in the outer layer of the flowline from one of the wells.

Jason Kardachi of administrators Borrelli Walsh said the company was "actively taking steps to address the situation and is working with the regulator to mitigate its concerns".

He added: "We hope that these can be resolved in the coming days and our intention remains to continue and maintain operations."

On Tuesday the owners of the Umuroa, BW Offshore said it "has started preparations for disconnection and demobilisation" of the vessel, a floating production storage and offloading (FPSO) facility which has gathered oil from the Tui oilfields since 2007.

BW Offshore's contract with Tamarind was terminated in September and the company says the unpaid bill could hit its earnings before interest, tax, depreciation and amortisation by US$23m (NZ$35.8m).

As operator of the Tui fields, Tamarind Taranaki is liable for the clean-up and decommissioning of the wells on the sea floor when production comes to an end.

While Tamarind Taranaki's Malaysian owners have provided the Crown of a guarantee for the clean-up costs, its mounting troubles have raised concerns that it will not be able to cover the bill.

The Ministry of Business, Innovation and Employment has said if the company cannot cover the costs of the clean-up itself, the costs would fall on the Government.