KEY POINTS:
New Zealand's largest oil field, Tui, is on target to begin production at the end of the month as long as the weather behaves.
Partners in the estimated 28-million barrel Taranaki field, 50 kilometres offshore, still have some work to complete before the first oil is pumped up, including the installation of subsea flow lines.
Three of the four wells have been drilled, although the fourth does not have to be completed before production begins.
"If the weather is kind to us, we'll make June 30. If the weather is unkind, we might be a week or two after that," said Bruce Phillips, managing director of 42.5 per cent stakeholder Australia Worldwide Exploration.
"Then you will always have commissioning problems with any project that starts up, so you won't start straight off at full capacity."
The field is expected to produce up to 50,000 barrels a day, although production for the first year is forecast at an average 30,000 barrels a day. It will have a lifespan of around 10 years.
The oil is transferred to a floating production, storage and offtake vessel (FPSO), which can hold about 700,000 barrels, where it is treated and stored. Once storage is filled, the oil is transferred to a shuttle vessel which takes it to a refinery.
Tui crude is marked to Tapis oil, currently trading about US$78 a barrel or about US$10 more than benchmark West Texas Intermediate crude.
"It's a high quality crude that's in high demand by refiners, because it's low in sulphur," Mr Phillips said.
The first shipment of oil has already been sold, to an undisclosed east coast Australian refinery.
"We'll continually bid the oil into the open market, we'd like to sell as much as we can to the New Zealand refinery if it's competitive, that's obviously our first choice," Mr Phillips said.
"But there's a global market for oil, and a very very deep spot market..."
The Tui field had the capacity to meet New Zealand's needs for a period, but it was not the answer to self-sufficiency, Mr Phillips said.
Until OMV's Maari oil field comes onstream, Tui will be the biggest oil production field in New Zealand.
AWE and joint venture partners have spent hundreds of millions of dollars in "drop dead" exploration expenditure in recent years.
"We've been the biggest explorer offshore, and yes we've found something that's going to get all that money back plus more, but we do plan to plough back in to further exploration," he said.
Tui's development was not expected to exceed the US$245 million budget.
NZ Oil and Gas owns 12.5 per cent of Tui and Japan's Mitsui E&P owns 12.5 per cent.
- NZPA
