"It represents a significant investment in the future growth of NZOG at a time of high oil prices and solid progress with the company's developments," the company says.
As well as having an interest in the Tui oil field (PMP 38158) where four production wells will be drilled by the Ocean Patriot offshore drilling rig from October to March 2007, NZOG will have a stake in three other exploration wells being drilled by the same rig in nearby oil plays. Two are within the Tui mining permit.
The drilling program in offshore Taranaki (all operated by AWE) will commence in the last quarter of 2006 with the Hector oil exploration prospect in PEP 38483 — in which NZOG will have a 19% interest.
NZOG says Hector will be drilled into the Kapuni C sands with the primary target being clearly delineated by 3D seismic. Hector is a structural closure and has a similar setting to Tui. NZOG says the Hector structure has in the order of 50 million barrels potential.
After the Tui production wells are completed, two further wells Tieke and Taranui will be drilled from the second quarter of 2007 in the same PMP 38158 permit. The two wells will be drilled into the Kapuni F sands and the targets have been delineated on 3D seismic.
NZOG has a 12.5% interest in the Tui permit.
NZOG says the Tieke and Taranui prospects have individual potential indicatively in the range 10 to 20 mmbbls recoverable oil.
"Success at either of these exploration targets could be monetized relatively quickly by linking additional subsea wells by flowlines to the Tui FPSO", the company says.
The Tui oil field discoveries and the presence of oil shows in the Pukeko well drilled in 2004 some 70 km south of Tui, show that there is wider potential for oil discoveries by demonstrating that oil has been generated and expelled from source rocks in the area west of the Maui field, NZOG says.
Meanwhile in the Felix and Opito Area in PEP 38729 on the north Taranaki coast, which NZOG has a 75% stake in, the refraction line seismic survey in the onshore region of this permit was completed in February 2006.
The company is considering acquisition of an onshore/offshore transition zone seismic survey to tie existing marine and land seismic datasets on the permit.
NZOG says it has entered into a US$38 million financing agreement with the Commonwealth Bank of Australia to fund NZOG's share of the Tui development.
Tui is expected to generate a strong cash stream for NZOG once production commences in the first half of next year, with initial flow rates from the fields expected to be around 50,000 barrels a day (NZOG's share 6,250 barrels/day).
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