Kahili Gas Flow Commences

Commissioning of processing and pipeline systems for the Kahili field, onshore Taranaki, has entered its final phase, with the first gas flowing through the newly-built separator equipment to NGC's gas treatment plant at Kapuni, New Zealand.

The Kahili well was opened on August 21, 2004 to allow the well stream to flow through a new 4km pipeline to the separation plant, which separates raw natural gas, condensate and water. The raw gas was then flowed through a new 8km pipeline into an existing NGC pipeline for delivery to the Kapuni plant.

Further processing at Kapuni, including LPG extraction, treats the gas to the specification required for retail gas market consumers.

The Kahili separation plant is located on Tariki Road, about 15km east of Inglewood. It occupies approximately a third of a hectare and comprises skid-mounted separator, stabilizer and chilling equipment, as well as storage tanks for condensate and water.

The Kahili field, discovered in November 2002, is operated by Austral Pacific Energy (NZ) Limited on behalf of the Kahili Joint Venture. Condensate produced at the separation plant is owned by the joint venture and is transported from the site by road.

NGC Chief Executive Phil James said today final commissioning activities include the fine-tuning of plant and equipment, and operational processes. Completion is expected by the end of next month

He described the flow of Kahili gas to the Kapuni treatment plant as a significant milestone in NGC's gas gathering initiative, designed to facilitate the development of previously uneconomic gas reserves and to increase the utilization of NGC's strategic assets.

"This project is a prime example of industry participants working co-operatively to ensure alternative gas supplies are available as New Zealand moves to a post-Maui supply position."

For Kahili, NGC had undertaken to build, own and operate the processing and pipeline infrastructure, and to buy all of the raw gas produced from the field. This is estimated to be about 5 petajoules (PJ) from the current single producing well on the field. Production could increase if the Kahili Joint Venture drills additional wells in the future.

The separation plant and the 12km of pipelines, built at a cost of about $9 million, were completed during July. The facilities are operated remotely from NGC's Kapuni plant.

Mr. James said the commissioning also marked a change in role for an existing NGC pipeline that had been used since 1986 to transport carbon dioxide-rich Kapuni gas north from NGC's Kapuni plant to Waitara for methanol production.

With those supply contracts now completed, this pipeline had been reclassified as a gas gathering pipeline and had been reversed-flowed to receive Kahili gas and deliver it to the Kapuni gas treatment plant.

The Kapuni plant, itself, had recently been restored to full gas treatment capability in a $14 million project involving the recommisisoning of the third treatment train, and adding a 100-ton LPG storage vessel. Recommissioning of the third train has enabled greater quantities of gas from the Kapuni and other fields to be processed for retail market requirements. In the year ended June 30, 2004, treated gas production totaled 20PJ, compared with about 13PJ annually in the past when a large proportion of Kapuni gas was contracted for methanol production.