2012 - O&G Industry kicks off to a great start

By: Energystream  05-Apr-2012

By Neil Ritchie

The 2012 year started with a hiss and a roar with news that Methanex New Zealand and Todd Energy plan to spend up to $860 million restarting a second methanol facility and drilling more Mangahewa wells.

Methanex is spending up to $100 million refurbishing and restarting the production unit commonly known as “Meth One” at the giant methanol manufacturing facility at Motunui and hopes to have the second “train” operational by mid-2012, producing up to 650,000 tonnes per annum of additional methanol and almost doubling New Zealand’s production to about 1.5 million tonnes per year.

Below: Methanex Motunui plant: Methanex New Zealand owns two methanol facilities in the province of Taranaki on the west coast of the North Island. They are known as the Motunui and Waitara Valley sites.  Methanex’s Motunui facility has two methanol production trains. Methanex is currently operating the Motunui #2 plant which was restarted in 2008 after being idled in 2004 due to limited gas availability. In January 2012, the company announced plans to restart the Motunui #1 plant by mid-2012.

And Todd Energy is spending $760 million or so on drilling up to 25 new wells in its Mangahewa gas field, inland from the Methanex plants, over the next five years and more than doubling the size of its nearby McKee production station to handle the larger volumes of gas produced by the field.

Todd has signed a 10-year gas supply contract with Methanex to supply enough gas to enable the methanol manufacturer to run the additional train at Motunui into the next decade. Most of the new gas will be from Mangahewa, though Todd can also supply gas from the other onshore and offshore Taranaki gas fields it holds stakes in.

And the Todd-Methanex contract underpins expected production of about 7.5 million tonnes of additional methanol which, at current world prices, represents revenue of about $US3 billion. 

This is the most significant New Zealand energy announcement for years – certainly since the late 2005 development approvals of the offshore Taranaki Maari oil and Kupe gas fields.

These latest investments will bring substantial economic benefits to Taranaki and New Zealand. Most of the $860 million will be spent in Taranaki, with greater utilisation of Port Taranaki and associated infrastructure. And consultancy company Business and Economic Research Ltd estimates the investments will add considerably to the country’s gross domestic product, as well as increasing the Government’s royalty and tax revenue by up to $1.2 billion over the next 10 years.

Elsewhere, other energy companies are also gearing up for what could prove to be one of the busiest and, hopefully, one of the most successful years for a long time.

There are major workover and drilling programmes aboard each of the offshore Taranaki Maui A and B platforms, extending the economic life of this middle-aged gas field to probably beyond 2020 for partners Shell, Todd and Austrian firm OMV. There is also the smaller gas reinjection project at the younger near-shore Pohokura gas field for the same partners.

And there is the likely arrival of a sophisticated deepwater semi-submersible drilling rig late this year for what should be a multi-well programme by different joint ventures off Taranaki, Canterbury and in the Great South Basin off Otago and Southland.

United States major Anadarko and its Australian partner Origin Energy are scheduled to drill one well in the geological Canterbury Basin, while New Zealand Oil & Gas and its partners may decide to drill the Barque well, also off Canterbury.

Anadarko and different partners are scheduled to also drill one well in the Deepwater Taranaki Basin, while Shell, OMV and their GSB partners could drill perhaps several wells in those often hostile South Island waters.

Each well is likely to cost $US100 million or more to drill.

As well, several other different joint ventures are considering utilising a smaller, less expensive jack-up rig to drill a number of different types of wells in a number of different fields in shallower waters off Taranaki.

These range from Singapore’s STP Energy drilling perhaps several exploration wells off north Taranaki, probably called Awakino South, to joint ventures headed by NZOG drilling Kakapo and Aussie company Roc Oil drilling Kaheru off south Taranaki.

There is also expected to be further development, appraisal and-or exploration wells at the commercial Maari-Manaia oil field and Kupe gas field for joint ventures headed by OMV and Origin. There may also be further exploration wells near these two fields.

The onshore programmes and fields are less expensive and spectacular than their offshore counterparts and attract less attention. However, they still play important roles in producing the petroleum products that are a pivotal part of the New Zealand economy.

In addition to Todd’s Mangahewa wells, Todd and Shell are planning to drill two tight gas wells in the middle-aged onshore Kapuni gas field.

New Zealand company Greymouth Petroleum is continuing drilling and further evaluating its many north Taranaki fields, including Onaero, Ohanga, and Kowhai.

Origin is continuing evaluating the further potential of its many central and southern Taranaki oil and gas fields including, it is believed, an injection project for its Manutahi field.

Canadian listed juniors TAG Oil and New Zealand Energy Corporation also plan active onshore Taranaki exploration and appraisal programmes, with TAG scheduling more wells at its Cheal and Sidewinder fields. NZEC is currently drilling the second, and then the third, Copper Moki wells, with perhaps some Skinner and Horio wells later.

NZEC is also planning a second Ranui well on the East Coast, while TAG and US major Apache are planning four East Coast wells, two north of Gisborne and two near Dannevirke in that region’s most intensive exploration programme for a while.

London-listed Kea Petroleum may drill the onshore-offshore Mauku well north of Mokau plus some other more southern wells, while junior explorer L&M is hoping to bring the idled Kahili field back into production through further drilling.

L&M and other companies, such as Brisbane’s Comet Ridge and the government’s Solid Energy, are also exploring non-conventional petroleum resources, such as coal seam gas in Southland, Otago, the West Coast and Waikato. Solid Energy is also investigating underground coal gasification in Waikato.

As well, such players as Contact Energy and Mighty River Power are continuing their active geothermal programmes around the Central Plateau.

However, Taranaki remains home for nearly all of the energy industry’s expertise and the focus of much of the sector’s exploration efforts.

Commentators say that any future successes, either offshore or onshore, over the next year or so will further lift the country’s standing as an internationally competitive and attractive exploration destination, with Taranaki still the main centre of attention.

The information in this article was current at 27 Mar 2012

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EnergyStream seeks to connect the New Zealand oil and gas and support industries through a portal that assists those within the industry and educates those beyond it. EnergyStream is developed and maintained by Venture Taranaki, the regional development agency for Taranaki, New Zealand’s foremost energy region. The EnergyStream site introduces, explores, explains and enables all aspects of the O&G industry in New Zealand.