Pohokura prospects bode well

Fletcher Energy's Taranaki well could be the third-largest local producer, reports FIONA ROTHERHAM.

Fletcher Challenge Energy will begin production testing this weekend on the Pohokura-2 well offshore Taranaki to confirm the prospect as New Zealand's third-largest gas discovery.

In its latest drilling report, FCE said production testing was warranted after core samples from its second appraisal well revealed good quantities of at least marginal quality hydrocarbon.

The production testing, expected to take 10 days, would show how well the gas and condensate flows and reduce uncertainty on the size of the find.

The well is about 8.5km offshore from the Methanex Motonui methanol plant. FCE estimates it could contain up to 500 billion cubic feet (bcf) of gas, about twice New Zealand's annual consumption. That makes it the third-largest gas discovery behind the Maui and Kapuni fields.

It is big enough to extend Methanex's continued presence in New Zealand beyond 2005, and has implications for the electricity industry, where a third of generation is gas-fired.

Due to problems with rig availability, it will be later this year before a third well is likely to be drilled from onshore, and deviated out under the seabed to test the southern limits of the 37sq km field.

The Pohokura prospect is operated by Fletcher Energy, which has a third share. The German firm Preussag Energie has a further third, Shell Petroleum Mining 18.3 per cent and Todd Petroleum Mining 15 per cent.

An analyst says the find, once proven, could add 40c a share to Fletcher Energy's share price, which closed 18c down yesterday at $5.57.

The real bonus for the joint venture partners was the higher-than-expected quantities - about 1200 barrels a day - of condensate (light oil) found within the first appraisal well.

"If that is sustained, the high condensate rates will make the economics much better," FCE's Stephen Jones said.

Development would be sped up if the joint venture partners find a customer willing to rapidly sign up for gas. "There are opportunities to market the gas in New Zealand currently," Mr Jones said.

Development is likely to be in two stages. The cheapest option is producing as much of the gas and oil as possible from onshore.

This would provide economically priced gas for Methanex, which refuses to pay more than $US1 a gigajoule in order to stay world-competitive.

FCE will drill a well by the end of the year at its Tuihu onshore prospect.

It is trying to farm out some of the Tuihu prospect to other explorers.