OMV find could earn Govt more than $1b
WELLINGTON: Development of an oil and gas discovery off the Taranaki coast has the potential to deliver the Government more than $1 billion in royalties and taxes and could help secure longterm energy supply if there is sufficient gas to warrant piping it ashore.
Energy consultancy Enerlytica last year modelled a development of the potential discovery in the Toutouwai prospect 50 kilometres off Cape Egmont.
Operator OMV said yesterday its drilling had encountered hydrocarbons in several layers of sandstones in the 4300metredeep Toutouwai1 well.
Enerlytica director John Kidd said that indication of ‘‘stacked pay’’ — possibly multiple layers of producing reservoir rock — was ‘‘extremely positive’’.
Petroleum Exploration and Production Association chief executive John Carnegie said the discovery was ‘‘good news at a time when New Zealand’s economy really needs it’’.
‘‘There is still plenty of work to be done before any development is confirmed, but the potential benefits to Taranaki and all New Zealand are substantial.’’
Viennabased OMV is New Zealand’s biggest gas producer and operates the offshore Pohokura and Maui fields.
Toutouwai was the third of four wells the firm had planned to drill as part of a campaign to ensure longterm gas supplies for New Zealand and potentially for export. The previous wells were unsuccessful and the final well, Maui8, has been deferred due to the Covid19 outbreak.
Even with the recent collapse in oil prices, yesterday’s discovery is likely to increase debate over the role of gas in helping meet the country’s emissionreduction goals and providing longterm energy security.
International explorers have largely abandoned the country since the Government’s surprise
April 2018 ban on the issuing of new offshore exploration permits.
Gas already meets about a fifth of the country’s primary energy needs. It is an important fuel for industry on the North Island, provides backup electricity generation during winter and in dry years, and is considered a lowcost, loweremission alternative to coal.
Tight gas supplies the past two years have seen electricity prices soar, just when the Government has also been advocating greater electrification of transport and industry in order to reduce emissions.
Yesterday the Meat Industry Association said the Government’s proposal to ban the use of coal in lowtemperature boilers by 2030 was ‘‘inherently unfair’’ on the sector and cited the absence of gas on the South Island as an example of the obstacles it faces.
It estimated the cost to the sector of converting to electricity or biomass by 2030 at about $80 million, when the rest of the economy got 30 years to transition from fossil fuels and was also able to offset emissions with forestry planting along the way.
Petroleum Exploration and Production Association chief executive John Carnegie said the country had only about 11 years’ supply of gas, based on known reserves and current usage.
‘‘We haven’t had a commercial discovery since 2006. If we don’t develop our own energy, then we are at the mercy of overseas producers, and could end up importing lng. We think it’s much better to produce our own energy here in New Zealand instead.
‘‘The energy provided by natural gas and oil still has a very important role to play as we transition to a lower emissions world.’’
While full testing of
Toutouwai1 was not possible because of Covid19 restrictions, OMV on Monday released a report Enerlytica prepared last year ahead of the company’s fourwell summer drilling campaign.
Toutouwai lies in about 130 metres of water and is northwest of the depleted Tui oil field and the ageing but still producing Maui gascondensate field.
If it was mostly condensate, the field would probably be developed with a floating production and storage vessel, Enerlytica said. If there was more gas, it could possibly be piped to the Pohokura gas field further north and brought ashore for processing at Waitara.
Assuming Toutouwai holds the equivalent of 90 million barrels of condensate and gas — mostly condensate — Enerlytica estimated the cost of development at about $US1.5 billion ($NZ2.5 billion), with commissioning possible in 2027.
Assuming a longterm Brent crude oil price of $US65 a barrel and a New Zealand dollar exchange rate of 64 US cents, the firm estimated the net present value of returns to OMV and its partners Mitsui E&P and Sapura Energy at close to $690 million.
The Government’s potential take in royalties and taxes was close to $1.68 billion in present value terms.
‘‘Declining indigenous thermal fuel availability — meaning deliverability — is leaving large industrial gas users with no alternative but to import more carbonintensive fuel from overseas at substantial additional cost,’’ Enerlytica said in the December report.
‘‘If successful, and if gas rich, the Taranaki basin component of the OMVled programme would add muchneeded new supply capacity to the North Island gas market. Success would materially improve security of domestic energy supply and dull the inevitable mediumterm market impact that the decommissioning of Maui would inflict.’’ — BusinessDesk
❛ If we don’t develop our own energy, then we are at the mercy of overseas producers,
and could end up importing lng