NZ energy news

NZ: Oil drilling plan over next two years on ‘unprecedented’ scale

Almost 90 new oil exploration and production wells are planned in New Zealand over the next two years in a programme that independent analysts Edison Investment Research say will cost oil and gas companies as much as $2.3 billion.

Scoop,

22 August, 2012

Almost 90 new oil exploration and production wells are planned in New Zealand over the next two years in a programme that independent analysts Edison Investment Research say will cost oil and gas companies as much as $2.3 billion.

The estimates are contained in Edison’s inaugural New Zealand Petroleum Yearbook, perhaps the most comprehensive private sector compilation of the prospects for the local energy sector ever attempted.

Some 60 of the 88 potential wells identified in the report are onshore, while some of the 28 offshore wells are planned for deepwater prospects off the Taranaki and Canterbury coasts and in the Great South Basin.

The plans raise the spectre of controversial deepwater exploration activity in election year, after the Texan explorer Anadarko announced recently it had been unable to source a deepwater rig for the coming summer but was aiming to bring equipment to New Zealand waters in 2013/14.

The surge in onshore activity is partly owing to a jump in successful drilling, particularly by the mid-sized Canadian company, TAG Oil, workovers of the McKee and Mangahewa onshore fields by Todd Energy, and activity by a new entrant explorer, New Zealand Energy Corp.

Edison estimates as many as 28 offshore wells are also planned, including workovers at the Maui A and B platforms, and could see Anadarko, Shell, OMV and Origin Energy – all of whom have deepwater offshore prospects – forming investment “clubs” to share the cost of rig mobilisation, with decisions likely by the end of this year for drilling late next year.

Led by researcher John Kidd, who also authored the 2009 “Stepping Up” report for then Energy Minister Gerry Brownlee on unlocking New Zealand’s petroleum resources, the report says Anadarko has “a strong preference for a specialised harsh-environment deepwater rig to accommodate possible southern ocean conditions.”

While none of the wells is a sure bet either to be drilled or to find oil and gas, Edison says “the underlying theme is clearly one of an extremely full and well-funded forward expansion programme of investment.”

Also possible is an extended contract for a Chinese national oil company rig, leased at present by Shell-Todd Oil Services to drill three wells in the Kapuni field, which could see activity in the Taranaki Basin activity alone exceeding $2.5 billion in a “very short time.”

The predictions come as Economic Development Minister Steven Joyce steps up the government’s rhetorical support for the oil and gas industry, along with intensification of agriculture and increased mining as major elements in the government’s drive to lift economic growth rates.

Legislation establishing a new regime for economic activity, including oil drilling, in the Exclusive Economic Zone passed through Parliament earlier this month, paving the way for deep sea exploration.

NZ Refining turns to first-half loss on slimmer refinery margin, high kiwi

New Zealand Refining, which operates the nation’s only oil refinery, turned to a first-half loss as its refinery margin shrank and a high kiwi dollar ate into its processing fee revenue.

Scoop,

23 August, 2012

The net loss was $1.5 million in the six months ended June 30, from a profit of $31 million a year earlier, the company said in a statement today. Revenue tumbled 28 percent to $113 million, while operating expenses rose 1.7 percent to $113.9 million.

The shares rose 2.3 percent to $2.66 and have fallen 8.9 percent this year. The company will pay a first-half dividend of 2 cents, against forecasts that it may omit this year’s interim payment.

NZ Refining’s average gross refinery margin was US$4.36 a barrel in the first half, down from US$6.56 in the same period last year. The kiwi dollar averaged 80 US cents in the last period from 78 cents in the first half a year earlier.

“The impact on the profitability of our competitor refineries is apparent with closures continuing in Europe, the US and Australia, where Shell brought forward the closure of its Clyde refinery and Caltex Australia revealed plans to close Kurnell near Sydney,” the company said. “Further reduction of the overcapacity in the global refining sector will go some way to easing the pressure on refiners’ margins.”

It said margins have strengthened “slightly” since the end of June though it can’t be sure that will be sustained for the remainder of the year. It didn’t give a forecast for full-year earnings.

“Continuing poor growth in global economies, in particular, slowing growth in China and India, has contributed to a falling off in demand for oil products,” it said.

The refining company said a highlight of the first half was winning shareholder approval for its $365 million continuous catalyst regeneration platformer project.

Energy companies are the biggest shareholders in the company. Mobil Oil New Zealand owns 19 percent, Z Energy owns 17 percent and BP New Zealand holds 15 percent