Drilling for off-shore oil has stopped in New Zealand
New Zealand's rockstar economy: “Never
mind dairy, we’ve still got the Christchurch rebuild (oops –
another quake!) and we’ve still got drilling for oil (OOPS!)" -
paraphrasing John Key
oil price hits exploration sector
drilling for oil and gas has ground to a halt in New Zealand amid low
2011 52 wells were drilled in Taranaki. Photo: 123RF
Todd Energy and its partners Cue Energy Resources abandoned the
wellsite Te Kiri North-1 in coastal Taranaki last month, it meant
there was no longer any exploratory drilling for oil and gas taking
place in the region or the rest of New Zealand.
2013, 32 wells were drilled in Taranaki alone - 18 of those
exploratory wells - and at its peak in 2011, 52 wells were drilled in
and gas analyst with Woodward Partners John Kidd said with oil prices
at 10-year lows - of less than $US30 a barrel - many companies were
unable to finance exploration.
is under severe pressure at the moment. Oil prices are really seeing
the sector go through a quite extended period of revenue, and
therefore earnings, and therefore cashflow decline.
that does severely effect their ability to be able to undertake their
work programmes in Taranaki and elsewhere in New Zealand."
recently as 2014 oil fetched $US110 a barrel, but Mr Kidd said he did
not see those prices returning any time soon.
a general sense in the market that the recovery will be one of longer
rather than shorter duration so rather than weeks or months it maybe
a case of quarters or years before we see oil prices recover to ... I
call it more sensible pricing but really it's a case of being at a
price level which enables new production to be able to be justified."
Exploration and Production Association chief executive Cameron
Madgwick said deferring drilling programmes made sound economic sense
in the current climate.
the economic circumstances are as they are at the moment, then
participants in the exploration sector have to act in a financially
prudent manner and when you consider an exploratory well could cost
in excess of $100 million to drill that's not probably not
financially prudent at the moment."
Madgwick said the industry was resilient and would continue with
background work while it waited for oil prices to turn.
these sorts of times a bit more time is taken to perhaps look more
closely at the geology and do more of the scientific work that's
required to firm up the decision around whether you would drill or
example of this is Shell Todd Oil Services' $10 million seismic
survey at Kapuni which aims to update information on the field which
has been producing gas since 1969.
same company and its partners are also just completing a $70 million
maintenance programme at their Pohukura rig, offshore from Waitara,
and about to begin a similar project at its onshore production
firm OMV is also currently undertaking a $60 million upgrade of the
mooring system for its floating production platform, the Raroa,
at the Maari oil field off the South Taranaki coast.
while these projects are providing valuable work for the companies
which service the oil industry they are still being hurt by the
2013 the oil industry in New Zealand directly employed 4600 people,
3900 of those in Taranaki, but Graham Wells, the chairman of the
Engineering Taranaki Consortium which represents 11 engineering firms
in the province, said that was not the case today.
less activity around at the moment than there was two years ago and
so the workforce involved in oil and gas work has reduced. Probably
at this stage down 20 to 30 percent."
Wells said Taranaki engineering firms had seen downturns before and
had become more flexible as a result.
said not even the prospect of Shell exiting New Zealand after more
than 100 years would knock them off their stride.
Shell was to look at selling their assets there would still be a
requirement for those facilities to be maintained and kept running by
whoever is the new owner."
which employs 400 people in New Zealand, announced in December last
year that its interests here were under review.
country chairman Rob Jager told RNZ at the time that options ranged
from "business as usual to a full country exit" or anything