Kea Petroleum Gets Backing for Deep Gas Well in NZ

Methanol producer Methanex New Zealand is to wholly fund Kea Petroleum's drilling in the next few months of a deep gas well in onshore Taranaki, the Beluga-1.

The prospectus for Kea Petroleum's admission to AIM says that Kea Exploration, a subsidiary of Kea Petroleum, has entered a funding and gas offtake agreement with Methanex.

The Beluga prospect is a large, untested gas play in PEP 51155, which onlaps the eastern flank of the McKee oilfield. The primary target is Tariki sands with shallower Mt Messenger sands and in Tikorangi Limestone as secondary targets.

Kea Petroleum says in the prospectus that the best estimate of Beluga's prospective resources are 446 bcf with condensate yield of about 27 million barrels. This is comparable in size to the adjacent Mangahewa and Pohokura gas fields and potentially large enough to fully supply the gas demand of Methanex's New Zealand operations.

The anticipated capital cost of the Beluga-1 well is £5.7 million (approximately $NZ12.6 million).

The prospectus says that under the gas off-take agreement with Methanex, the gas price will be tied to international methanol prices, with a floor price of US$1.20 per GJ at a methanol price of US$200 per tonne. The price will increase on a graduated scale of US$1 per GJ for every increment of $100 per tonne in the methanol price with a cap of US$4.50 per GJ.

Immediately before Beluga-1 is drilled, Kea Petroleum will drill the Wingrove-2 appraisal well targeting oil prospects in PEP 51153.

Wingrove-2 is planned to be drilled in March 2010 as a deviated well designed to test the updip potential of the good shows seen in the basal Mt Messenger (Mako Sands) in the previously drilled Wingrove-1 well.

In the event of successful oil production at Wingrove-2, the directors consider several offset wells could be drilled during 2010 without further pre-drilling evaluation, to target the same reservoir sands and increase production and reserves.