Transworld JV to Drill in Tui Permit Early 2004

Two and possibly three offshore wells are planned by the Transworld Oil joint venture in early 2004 in the offshore Taranaki permit PEP 38460 following the Tui oil discovery early this year.

Announcing the program, New Zealand Oil & Gas Ltd said the participants are now in the process of arranging a semisubmersible rig.

The first well, Amokura-1, will target a prospect some 4 kilometers northwest of the Tui-1 well to test a Kapuni F-sand closure similar in style to Tui. The second well will target the larger Pukeko prospect with potential recoverable oil in the Kapuni C sands of over 80 million barrels and the potential for more oil in the deeper Kapuni F sands.

A third exploration well may be drilled, dependent on results from the first two wells.

NZOG and associated firm Pan Pacific Petroleum NL also said they have entered into a heads of agreement for a farmout with an unnamed major international company, to meet a substantial portion of the two companies' costs of drilling two to three wells, plus initial field development costs within PEP 38460.

In return, NZOG will assign a 7.5% interest in the permit to the company with NZOG retaining a 12.5% interest. Pan Pacific will have half of its costs met and in return will assign a 5% interest in the permit to the unnamed company. The transaction is conditional on regulatory and other approvals and completion of the formal sale and purchase agreement.

NZOG chief executive Tony Radford said the terms of the deal demonstrate the importance of the Tui oil discovery. The envisaged program will allow rapid evaluation and decisions for early development if the exploration drilling is successful.

NZOG exploration manager Eric Matthews said the 3D seismic data acquired this year confirms a structural closure over Tui with potential recoverable oil of 10-15 million barrels.

In addition to the Tui field, several other prospects, with individual potential to recover 10 to 40 million barrels of oil, were delineated by the 3D seismic survey. He said identification of further oil pools within the permit area will be an important factor in any decision by the joint venture parties to commence commercial production.

Amokura-1 will also help understanding of the seismic imaging which could increase the potential of Amokura from 15 million to more than 35 million barrels of oil.

Dr. Matthews said the Tui discovery points to a source of oil further west in the Kahurangi Trough. This upgrades the Pukeko, Hector and Tahuroa prospects in the southern area of permit. Pukeko is some 70km south of Tui, so any commercial discovery would require a separate development.

Currently NZOG holds a 20% interest in PEP 38460 through subsidiary Stewart Petroleum Company Ltd, while Pan Pacific holds 15% through subsidiary WM Petroleum Ltd. Operator New Zealand Overseas Petroleum Ltd, a subsidiary of Transworld Oil, has a 45% interest and AWE New Zealand Pty Ltd 20%.