Rough weather among the many or­deals for oilfield off New Zealand

The Weekend Australian - Travel - - Resources - Keith Orchi­son

IN­STALLING a float­ing pro­duc­tion ves­sel in New Zealand wa­ters to de­liver prof­itable light crude oil has not been all plain sail­ing for fast-grow­ing Aus­tralian pe­tro­leum com­pany AWE Ltd. ‘‘ Mar­ket­ing and plan­ning ship­ping from a new crude oil project is al­ways a headache,’’ says AWE’s New Zealand de­vel­op­ment and pro­duc­tion man­ager Ian Palmer, be­cause re­fin­ers need to fill their slate two months ahead of de­liv­ery, and are un­der­stand­ably ner­vous about com­mit­ting to a new field with its in­her­ent risk of start-up prob­lems and crude qual­ity un­cer­tainty.’’

Op­er­a­tor AWE holds a 42.5 per cent stake in the Tui oilfield, 50 km west of the south­ern tip of the North Is­land, and in wa­ter 125m deep. Other share­hold­ers are Mit­sui (35 per cent), New Zealand Oil and Gas (12.5 per cent) and Pan Pa­cific Pe­tro­leum (10 per cent). When fully com­mis­sioned, the project will be New Zealand’s largest oil pro­ducer.

Tui, which be­gan op­er­a­tion in Au­gust four years af­ter oil was dis­cov­ered, is one of the few de­vel­op­ments in New Zealand us­ing a float­ing pro­duc­tion, stor­age and of­fload­ing (FPSO) ves­sel and the first us­ing sub-sea well­head tech­nol­ogy. Tui is AWE’s first off­shore oil project op­er­a­tor.

Tech­ni­cally, the de­vel­op­ment has been com­pli­cated by the oil reser­voirs con­tain­ing large vol­umes of wa­ter which have to be sep­a­rated from the crude and re­turned to the sea. The Tui de­vel­op­ment FPSO ves­sel Um­bra has been de­signed to han­dle 120,000 bar­rels of fluid a day, cop­ing with wa­ter lev­els of up to 118,000 bar­rels a day.

To add to the stress, weather con­di­tions dur­ing the con­struc­tion phase have been some of the worst seen in 25 years.

AWE, which took over op­er­a­tions in Fe­bru­ary last year, es­ti­mated the cost of bring­ing Tui to pro­duc­tion at $US225 mil­lion, but, in line with con­struc­tion price pres­sures around the world, this has blown out to $US275 mil­lion. It could have been higher, but the joint ven­tur­ers signed the ma­jor con­struc­tion con­tracts be­fore costs es­ca­lated even higher. Up­stream pe­tro­leum project de­vel­op­ment charges are now 50 per cent higher than they were two years ago.

The up­side for the joint ven­ture is that the prod­uct from Tui — and the ad­ja­cent Amour and Pataki fields in the Taranaki Basin linked to the FPSO Um­bra — is light sweet crude, which sells at a pre­mium to the in­ter­na­tional

role as an bench­mark West Texas In­ter­me­di­ate oil, and that global prices re­main at his­tor­i­cally high lev­els — well above the level as­sumed when the project was given the go-ahead.

The oil is find­ing a ready mar­ket in re­finer­ies in New Zealand, on Aus­tralia’s east coast and in Asia.

De­spite all the plan­ning and de­vel­op­ment pres­sures, AWE suc­ceeded in mak­ing Tui’s first oil off­load to the shut­tle tanker al­most ex­actly on sched­ule, 19 months from the de­ci­sion to pro­ceed with the project. It is now pro­duc­ing crude at close to the de­sign rate of 50,000 bar­rels a day.

‘‘ Achiev­ing this first off­take on sched­ule so soon af­ter start-up is very en­cour­ag­ing,’’ said Ian Palmer. ‘‘ Now that the re­fin­ers can see we are stable pro­duc­ers and we can pro­vide sam­ples for as­say­ing to them, we ex­pect that the job of our mar­ket­ing agent, Mit­sui & Co, will get a lit­tle eas­ier.’’

Other di­vi­sions of AWE and its part­ners are fo­cus­ing on lo­cat­ing fur­ther re­serves to feed the project. AWE has be­gun a four-well ex­plo­ration pro­gram, with drilling to con­tinue for most of this year. Two of the wells to be sunk are thought to have po­ten­tial to each con­tain more than 100 mil­lion bar­rels of oil.

In pro­duc­tion: Tui’s float­ing pro­cess­ing ves­sel was a first for New Zealand’s off­shore oil in­dus­try

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