Full steam ahead for NZ Oil and Gas

New Zealand Oil and Gas, fresh from a year of successful exploration and a surging share price, has unveiled a busy programme for 2005.

Its shares have soared nearly 70 per cent in the past 12 months, fuelled by oil strikes and moves to bring the Kupe gas field - in which it owns a 15 per cent stake - into production.

They closed yesterday at a record high of $1.17, up from 52c a year ago.

In a quarterly activities report delivered to the stock exchange yesterday, NZOG said the joint venture that owned the Kupe offshore gas field had set October as the target date for a final financial investment decision.

Australian oil and gas giant Origin Energy owns half of the Kupe field and is the operator. State-owned Genesis Energy owns 31 per cent, while Japanese company Mitsui E&P owns the remaining 4 per cent.

As the once-dominant Maui gas field sputters to an end, newer, smaller fields such as Kupe and Pohokura will provide the fuel needed to keep thermal power stations and industry firing.

NZOG also gave details of the engineering needed to bring oil from the new Tui oil field, estimating costs to be between $169 million and $211 million.

The proposal is for a floating production, storage and off-take facility, which would be connected to four or five "subsea wells" bringing the oil from under the seafloor.

There are an estimated 20 million to 30 million barrels of recoverable oil in this Tui area. This number is classified "proved and probable", meaning there is possibly more oil.

NZOG owns 12.5 per cent of the field, while US company and operator Transworld owns 45 per cent.

A contract to start developing the field is due to be awarded this month. A final investment decision will then be made by August, with oil planned to start flowing late next year.

NZOG's foray into coal mining - its Pike River coal subsidiary - has already signed two Japanese steel mills as customers. However, the preliminary agreements depend on a final price being agreed.

The first coal is expected to come from the underground mine early next year, with full production of 1 million to 1.2 million tonnes a year starting in 2007. Strong demand from China and India has driven world coal prices to record highs.

While many investors are anticipating a Pike River spin-off and initial public offering of shares, NZOG has yet to commit to this path.

"The merits and desirable mix of financing the mine development through project debt/equity, including a public offer, continue to be assessed," the report said.