Offshore staff
(Asia-Pacific) - New Zealand Pty Ltd., wholly owned subsidiary of Australian Worldwide Exploration Ltd. (AWE), has begun development of the Tui area oil project.
The project is located in the offshore Taranaki basin, in PEP 38460, and will be New Zealand's first stand-alone offshore oil project.
Following extensive FEED studies and the negotiation of contracts for the provision of all major equipment and services necessary for project execution, the project has been unanimously sanctioned by the PEP 38460 joint venture(JV) participants.
The final terms of the petroleum mining permit (PMP) for the development have been agreed upon with New Zealand's Ministry of Economic Development (MED), and the JV expects to be granted the permit shortly, subject to formal ministerial approval.
The Tui area oil project will comprise the joint development of the Tui, Amokura and Pateke oil accumulations. These adjacent fields were discovered by the current JV in 2003 and 2004.
The development of the fields, in water depths of around 120 m, will be undertaken via four horizontally drilled and subsea-completed development wells, which will be individually tied back to a leased FPSO.
The committed capital expenditure for the development, which excludes the costs of the leased FPSO, is expected to be US$204 million. AWE will fund its share (US$40.8 million) of the development costs from existing cash reserves.
On Nov. 18, 2005, the operator, on behalf of the JV, executed an FPSO charter contract with Prosafe Production Services Pty Ltd. for provision of an FPSO for the project.
Prosafe will both build and operate the FPSO as part of the charter arrangement. The contract is for a fixed initial term of five years with a contract value of US$178 million with options exercisable by the JV for five one-year extensions.
Recoverable oil reserves for the Tui oil fields are estimated to be 26.8 MMbbl on a probabilistically derived P50 basis. The project facilities are designed for a maximum initial oil flow rate of 50,000 b/d of oil.
Due to the nature of the reservoirs, well productivity is expected to remain high, but with a relatively rapid rise in water production and associated decline in oil rate.
To maximize ultimate oil recovery, the FPSO is being designed to handle up to approximately 120,000 b/d of liquid. The FPSO oil storage capacity will be in excess of 700,000 bbl.
The predominant market for the Tui area oil is expected to be the Asia-Pacific region, including Australian East Coast refineries.
The light sweet Tui Area oil has similar properties to oil produced from similar aged reservoirs at the Maui Field in offshore Taranaki, and this oil is also similar to Bass Strait-produced crude that is a major feedstock to the East Coast Australian refineries.
Due to a rapidly developing shortage of suitable offshore drilling rigs, the PEP 38460 JV signed a contract with Diamond Offshore in May 2005 for the use of the Ocean Patriot semisubmersible rig.
This early contractual commitment will ensure that the development wells can be drilled to a timely schedule and at a favorable rig day rate. The development drilling operation is expected to commence in 4Q 2006 and will take approximately six months for the drilling and completion of the four wells. This drilling schedule will tie in with the scheduled FPSO arrival date in late 1Q 2007, and the first oil target date of early 2Q 2007.
In addition to the development drilling activity, the JV has an option on theOcean Patriot to drill up to three exploration wells. Several prospects, including Tieke and Taranui, have been identified on the existing 3D seismic grid, within the Tui area PMP.
Success at any of these exploration targets could be monetized relatively quickly by the tieback of additional subsea wells to the Tui FPSO.
As part of the MED agreed work program, the JV has committed to drill two exploration wells within the Tui mining permit within 24 months of permit award.
Subject to mutual agreement on rig day rates for the option slots on theOcean Patriot, these wells are planned to be drilled in conjunction with the Tui development drilling.
In addition to the drilling rig and FPSO contracts, the JV has negotiated commercial terms and is close to finalizing contractual arrangements for the provision of all other major equipment and services, including wellheads & subsea trees, subsea well control system, subsea flowlines & umbilicals and their installation, and tubulars for the wells.
Participants in the Tui area oil project and PEP 38460 are: AWE New Zealand Pty Ltd., 20%; New Zealand Overseas Petroleum Ltd. (operator), 45%; Mitsui E&P New Zealand Ltd., 12.5%; Stewart Petroleum Co. Ltd., 12.5%; and WM Petroleum Ltd. Pan Pacific), 10.0%.
11/21/05
