KEY POINTS:
Oil companies are in the habit of looking forward to the next prospect.
But pay day comes from looking back over the average of the last 30 days in order to calculate what they're making out of their present oil field.
Given the past month where crude prices have bobbed around record highs that's well over $100 a barrel.
At the Tui field, part owned by New Zealand Oil and Gas, light sweet crude is flowing at 40,000 barrels per day.
NZOG chief executive David Salisbury says these are the "fun" times in oil exploration, especially given the company committed to take a stake in the project based on oil at US$ 40 a barrel.
"This is where the industry does get exciting - you can spend a lot of time looking for these opportunities but when they come they can really change the fortunes of a company. For us we go from no operating revenue last year to ... over $100 million this year."
Tui Area Oil Fields have produced more than 3.5 million barrels, worth an estimated $3.5 million, since the end of July and NZOG's share (12.5 per cent) was approximately 437,000 barrels. Exports are already starting to show up in trade figures and in September even made a ding in New Zealand's trade deficit. Oil exports were $141 million compared with $10 million in September last year but remain well below monthly imports of crude oil and refined petroleum products at an average of $329 million a month over the past year.
The three Tui fields - Tui, Amokura and Pateke - were discovered between February 2003 and August 2004, under an exploration permit for the West Maui prospect. The joint venture partners decided to fast track the development of the Tui Area Oil Fields in November 2005.
The four production wells were drilled in December 2006. The facilities were installed from January 2007 and oil stared flowing on July 31 from what are New Zealand's most prolific production oil wells. Reserves for the Tui area oil fields are estimated at 32 million barrels of recoverable oil over the next 10 years.
While this makes a splash in New Zealand, it's dwarfed by the total existing worldwide supply of oil of 85.2 million barrels per day.
The Tui-1 reservoir is drilled from the Umuroa, a converted supertanker which is permanently moored by giant anchor chains to hold it steady in storms in the Tasman.
But other problems can occur. Operator Australian Worldwide Exploration has identified an unspecified incident on October 21, which could be related to the oil found on the Taranaki coast.
The Umuroa has the capacity to store up to 750,000 barrels of oil until visiting shuttle tankers position themselves behind it to take on the crude.
The Tui product, light sweet crude, is a high quality crude with a low sulphur content and attracts a premium, although this fluctuates. It is taken from the Umuroa to refineries in Australia and Southeast Asia. Marsden Point refinery can not handle the daily volume that Tui produces, he says.
Salisbury took up his job at NZOG in April 2007, having returned from Vienna, where he was Vice-President Business Development of OMV Exploration & Production, with responsibility for OMV's worldwide business and development activities. OMV is Austria's largest listed industrial company.
The partners were looking at nearby prospects, less than 10km away, where modelling and some seismic testing has been done.
"Our production base is shrinking - it's like a company chopping down a forest if we don't plant some new tress we go out of business."
NZOG has also has a 15 per cent stake in Kupe whose operator, Origin Energy, has completed a comprehensive review of the schedule and costs for the project which remained on target for first production in mid-2009.
Salisbury told shareholders late last month that while Kupe was generally regarded as a gas field, around half of the value of this project lies in the liquids, the oil condensate and LPG, even at conservative liquids prices.
The Kupe joint venture is planning to drill the Momoho prospect in mid-2008 after the completion of drilling the three Kupe development wells.
TUI PARTICIPANTS
* New Zealand Oil & Gas 12.5 per cent
* AWE (Operator) 42.5 per cent
* Mitsui Ltd 35.0 per cent
* Pan Pacific Petroleum NL 10.0 per cent
