Vast store of new reserves in Kupe field

Kupe gas field rig off the Taranaki coast. Photo / Supplied

Almost $700 million of additional oil and gas reserves have been confirmed in the Kupe field off the Taranaki coast.

Light oil reserves are up by 27 per cent on initial estimates to 18.6 million barrels.

Australia's Origin Energy holds a 51 per cent stake in the $1.3 billion Kupe project, state-owned Genesis Energy holds 31 per cent and NZX-listed New Zealand Oil & Gas has 15 per cent. Mitsui E&P Australia holds the remaining 4 per cent of the project which includes a drilling rig 30km off the south Taranaki coast and an offshore processing plant.

Initial 2P (proven plus probable) sales gas reserves have increased by 8 per cent and LPG reserves by 5 per cent at the field where production started in December last year. Just on one million barrels of oil has already been produced.

NZOG chief executive David Salisbury said the outcome of the reserves review was icing on the cake for the project.

"The light oil provides the greatest financial return of the three products, so confirmation that the field is more 'liquids-rich' than initially estimated is particularly significant."

At current prices, the additional NZOG reserves had a sales value of nearly $100 million, he said.

NZOG's share of the reserves increase is about 3 petajoules of gas, 8000 tonnes of LPG and 600,000 barrels of light oil, that comes from gas condensate.

The review updates reserves last declared in 2006, before the consortium committed to the project which has an estimated field life of 15 to 20 years.

Genesis chief executive Albert Brantley said he was pleased with the news at such an early stage of the project.

"We will continue to work with the joint-venture partners to develop the long-term potential of the Kupe field."

Genesis Energy uses natural gas to fuel its Huntly power station and sell to reticulated gas customers. It sells bottled LPG throughout the country and its share of light oil is marketed in the Australasian and Asian fuel markets.

Brantley said no changes to New Zealand gas prices were expected in the short term.

"The reserves review has indicated that the life of the production field may well be longer than previously indicated. Kupe is scheduled to produce around 20PJ of gas per annum and the reserves update is not expected to have any impact on the annual production rate."

The review has also clarified requirements for additional capital spending, including two more production wells and work that could cost $120 million.

NZOG shares closed up 8c, or 6.3 per cent, to $1.35.

DRILLING BOUNTY

* 273PJ of natural gas - enough to fuel NZ homes for 40 years.
* 1,114,000 tonnes of LPG - NZ uses 180,000 tonnes a year.
* 18.6 million barrels of oil - enough for 11 years' use in NZ.