KEY POINTS:
Slower drilling and a well extension has blown out the Tui Area oil development budget by $29 million, New Zealand Oil & Gas said yesterday.
The first production well, Tui-2H, had to be lengthened after the oil reservoir was found to extend further than originally mapped on a seismic study.
A joint venture including NZOG, which owns 12.5 per cent of the Tui field, approved a budget increase of 9 per cent, or US$20 million ($28.8 million) gross, to cover the cost of the extension and slower than expected drilling rates.
The project remained on schedule for oil to start flowing by June 30.
An NZOG spokesperson said it was getting close to payback time "so that's certainly still good news".
The discovery of a bigger oil column was seen as a "positive indicator" but it was too early to say whether there could be more oil than first thought, she said.
"In terms of the Tui-2H production well it's a positive result but in terms of how it impacts on the overall oil development of those four wells it's too early to say."
The Tui Area is about 50km off the Taranaki coast. When fully commissioned with four wells, production was expected to peak at 50,000 barrels a day.
Chairman Tony Radford said progress to date had been positive.
"The remaining risks associated with this type of development are being carefully and competently managed through the joint venture operator," Radford said.
NZOG shares closed steady at 89c.
