Pateke, Oi exploration wells blow budget
One of the partners in the offshore Taranaki Tui field has revealed a cost blowout in drilling wells at Pateke and Oi recently, with total costs of about US$162 million for all the partners.
The costs were about double initial estimates of drilling costs at both Pateke, which was a success, and at Oi, which was dry.
Pan Pacific Petroleum, a 15 per cent partner in the Tui field, said the exploration well, Oi, had been "a very significant well for PPP" because it had elected to take sole risk for a 50 per cent share if it came in as a commercial well.
But both wells, drilled by Tui field operator AWE, saw "significant delays because of operational difficulties and weather conditions" pushing up costs significantly, PPP said.
The new Pateke-4H well is just north of the Tui field and is planned for production in the June quarter of 2015.
Listed Pan Pacific Petroleum says in its latest quarterly report that due to "operational and weather-related delays" costs for the Pateke-4H well jumped to a total of US$111m, almost double the estimates before drilling started. PPP's share of the cost was US$17m.
The Tui field is off the Taranaki coast, northeast of the giant Maui gas field.
In October last year New Zealand Oil & Gas increased its interest in Tui from 12.5 per cent to 27.5 per cent. Field operator AWE holds 57.5 per cent of Tui.
In its latest report AWE said the Pateke-4H well faced a number of challenges during drilling. Its share of the drilling costs was US$64m.
Earlier estimates suggest Pateke-4 could hold about 2.5 million barrels, with PPP's share about 375,000. The drilling indicated "excellent reservoir properties" and an initial evaluation suggested the resource was in line with pre-drill estimates.
The total cost for the unsuccessful Oi-1 and Oi-2 wells was about US$50.9m, with PPP's share at US$24.45m. That was almost double the pre-drill estimated total cost.
PPP had elected to increase its share of Oi to 50 per cent, under an arrangement through the Tui field joint venture. AWE holds 31.25 per cent of Oi and NZOG's share is 18.75 per cent. AWE's share of drilling Oi was US$16m.
The Pateke-4H well will be tied into the Tui floating production, storage and offloading (FPSO) ship. The tie-back costs are budgeted at US$47m gross, of which about US$12m has been committed on long-lead times. The net remaining cost to PPP to tie in Pateke-4H for production has been estimated at US$5.3m.
PPP held the equivalent of A$45m in cash at the end of the June quarter.
Following the payment of outstanding drilling costs of about A$25m, PPP would retain about A$20m cash, equal to about 3.5 cents a share.