Tui development in pipeline

Development of the Tui area oil fields is set to begin, with two major equipment contracts signed and others in the pipeline, project partner New Zealand Oil & Gas (NZOG) said today.

Under the project the Tui, Amokura and Pateke oil fields will be developed. They were discovered by the joint venture in 2003 and 2004 and are estimated to have recoverable oil reserves of 26.8 million barrels.

Prosafe Production Services was contracted on Friday to provide a Floating Production Storage and Offloading (FPSO) vessel for the development. The US$178 million ($262 million) contract is for a fixed initial term of five years. The FPSO is scheduled to arrive early in the June 2007 quarter.

Excluding the cost of the FPSO lease, the capital budget for the development is US$26 million. NZOG said it would fund its share of the cost from a combination of cash and debt financing -- which is currently being negotiated.

The Tui fields are in the offshore Taranaki Basin, and will be the country's first stand-alone offshore oil development.

The Ministry of Economic Development is expected to grant the necessary Petroleum Mining Permit shortly.

The joint venture has already signed a contract with Diamond Offshore for the use of a semi-submersible rig. Drilling of the four development wells is expected to start in the final quarter of 2006 and take about six months to complete.

The rig could also be used to drill up to three exploration wells.

NZOG said as well as the FPSO and drilling rig contracts, it was close to finalising contracts for all other major equipment and services.

The main market for the Tui Area oil is expected to be the Asia Pacific region including Australian East Coast refineries.

Partners in the project are NZOG, with a 12.5 per cent stake through its subsidiary Stewart Petroleum, New Zealand Overseas Petroleum Limited (45 per cent), AWE NZ (20 per cent), Mitsui E&P NZ (12.5 per cent), and WM Petroleum Pan Pacific (10 per cent).

- NZPA