East Coast gas discovery buoys New Zealand prospects

Where New Zealand may have new gas supply [191,487 bytes]

A Denver independent appears to have established New Zealand's first commercial hydrocarbons production outside the Taranaki basin.

Completion of a dry gas well at Wairoa near the eastern shore of the North Island opens pay in the East Coast basin.

Kauhauroa-1 tapped dry gas on a structure judged on seismic to cover 5-6 sq miles, said Westech Energy Corp., Denver. Westech made the discovery at the first of four wildcat it planned to drill with Enerco New Zealand Ltd., Auckland, the country's largest utility. The wellsite is 150 miles east of nearest production in the Taranaki basin (see map, OGJ, Oct. 27, 1997, p. 81).

Westech-Enerco holds two tracts just off the coast from the discovery, and Indo-Pacific Energy Ltd., Vancouver, B.C., operates or holds interests in several adjacent blocks.

Recent drilling

Kauhauroa-1, on 1.37 million acre PEP 38329, stabilized at 11.5 MMcfd of gas with 2,100 psi flowing tubing pressure after 60 hr of testing. It flowed at rates as high as 15.9 MMcfd. CAOF exceeded 70 MMcfd.

The producing zone, which was the primary exploration objective, is a mix of Miocene Makaretu sands and limestones at 3,600-4,008 ft. It was tested open hole with no stimulation. No water or condensate surfaced, and gas analyzed 100% methane.

The companies had not yet tested a zone at 2,300 ft, where they detected gas during drilling.

Marketing options face the firms. A gas pipeline extends eastward to Gisborne, and the gas could also be used to produce methanol.

The firms were running casing last week at Awatere-1, 4.3 miles southwest of Kauhauroa-1, to test favorable log indications in Makaretu. TD is 7,007 ft.

The first four wildcat locations are on separate structures and target Miocene sands at 3,000-8,500 ft.

Oil and gas seeps are numerous in the region. Westech said other sites have a higher chance of encountering oil. It has a total of six prospects on the permit.

Asia Pacific Oil Sdn. Bhd., Indo-Pacific, and others plugged Waitaria-1 in mid-1997 on PPL 38312 near Patutahi west of Gisborne. It encountered drilling problems related to swelling clays and mudstones. TD is 4,408 ft, about 656 ft above the main target reservoir, Mid-Mio- cene Tunanui sandstones. The company halted a sidetrack at 3,772 ft and was unable to run logs. However, it reported several drilling breaks that it said might have been evidence of the presence of gas charged sandstones.

Geology, outlook

The East Coast region, or Eastern structural belt, has many surface structures too intense to be worth investigation, the Ministry of Commerce reported. However, several areas contain gentler structures.

The east coast has about 250 gas seeps, at least four major oil seeps, and 50 localities where formations are impregnated or stained with oil. Rocks in these localities include porous sandstones and some fractured formations.

"Plays include Cretaceous sandstone towards the western margin, Oligocene, Lower and Mid-Miocene submarine fan sandstone in the basin axes and eastward, and porous Pliocene limestone in various sub-basins. Some of these probably overlap," a Ministry report said. "Additional possibilities are shallow facies Miocene towards the west, fractured shale and limestone, and possible oil in place within the Waipawa black shale."

About 40 wells have been drilled in the basin since 1874. Westech-Enerco hopes to drill offshore within a year. Water is 60-100 ft deep in Hawke Bay.

Indo-Pacific has begun acquiring seismic, with PEP 38328 and 38332 to get 75 km each and PEP 38330 to get 50 km.

Acreage and interests in the other blocks are:

PEP 38332, 1,012,000 acres, Indo-Pacific 42.5%, Trans-Orient Petroleum Ltd. 20%, and Boral Energy Resources Ltd. 37.5%.
PEP 38328, 785,000 acres, Indo-Pacific 40%, Trans-Orient 22.5%, and Boral 37.5%.
PEP 38330, 1.08 million acres, Indo-Pacific 34%.

New Zealand ratings

New Zealand rates in the top echelon of world rankings when it comes to geological risk, political stability and fiscal/taxation regimes for the petroleum industry.

U.S. independent explorer and chairman of the Independent Petroleum Association of America, George Yates, told the New Zealand Petroleum Conference in Queenstown in late March that the country rates No. 7 in what he termed country risk, described as comfort with geological potential and minimum danger of political problems such as rebellion and insurrection. In comparison the U.S. rated No. 31.

Looking purely at fiscal terms, New Zealand has been rated in a recent survey by global consultancy group Petroconsultants as a four star country and 58th in the world, he said. The country fell well ahead of New Mexico (138th), Texas (180th), and Louisiana (138th).

The tax regime's neutralization of risk has made New Zealand attractive to U.S. independent oil and gas explorers who are ready to become involved in non-U.S. programs.

Some 10% of U.S.-headquartered independents have made the break into international regimes, and another 15% have decided to go international during the next 5 years, Yates said. New Zealand, with its geological opportunities, attractive fiscal terms, and absence of a retrograde regulatory regime, is seen as an attractive destination.

Exploration shifts

New Zealand's exploration scene the past 2 years has seen a proliferation of new players and a change in the type of companies involved.

J.M. (Mac) Beggs of GeoSphere Exploration said integrated major oil companies have been progressively supplanted by what he calls "junior" and more focused companies. In addition there has been some emerging participation by local downstream interests notably Enerco and ECNZ. The trend has been most noticeable in the Taranaki basin.

Prior to the 1995 blocks offer, exploration in the province was effectively a duopoly of Petrocorp (now Fletcher Challenge) and New Zealand Oil & Gas. Today these companies have been joined as operators by eight other companies including independents of various sizes from the U.S., Canada, and Australia and New Zealand companies.

1998 drilling

This could be the busiest year for Taranaki land exploration for a number of years, Beggs noted.

Fletcher Challenge will delineate the 1997 Mangahewa gas find and try to enlarge other existing fields. Several newer operators, such as Bligh, Santos, Swift, and Indo-Pacific, have scheduled wildcats to test a range of prospect types.

Offshore Taranaki has been quiet the past year, but Shell Todd is to drill the Maari 1 well (to offset the 1983 Moki oil discovery) under farmout from Cultus when a suitable rig becomes available.

Beggs said this rig mobilization is likely to result in drilling several other wells in the region, including a prospect for NZOG west of Maui.

Outside Taranaki the East Coast basin has attracted most attention, with nine new permits awarded the last 2 years. The province is now effectively fully covered by active permits.

Programs in other frontier basins are not so advanced, and drilling is not expected before 1999. However Conoco is committed to two wells offshore Northland, Antrim is scheduled to drill one well in the Great South basin, and Pacrim may drill a well off Canterbury by mid 1999.

Beggs believes the next 3 years will test the true success of the New Zealand government's move in extending the AFO permitting regime. If all or even most of the permits awarded the past 2 years sustain exploration through to the drilling stage, the aggregate investment will approach and possibly surpass record levels, he said.

Mangahewa gas

A key exploration and development highlight of 1997 has been the successful efforts to obtain production from Mangahewa discovery in the onshore Taranaki Basin.

The find was singled out at the New Zealand Petroleum Conference in Queenstown by keynote speaker James Willis, a partner in the legal firm Bell Gully, as a field which could substantially alter the commercial dynamics for gas production in the country.

He pointed out that the prospect is located close to the main Maui pipeline to northern gas markets and the NGC high pressure gas transmission network. It is also near the Methanex-operated petrochemical plants at Waitara Valley and Motunui.

The fracture stimulation process appears to be successful, and even though expensive in production terms the costs of field development at Mangahewa are likely to be much lower than the costs of development of any offshore finds.

The gas itself is of high quality, requiring relatively minor processing. It also has an associated liquids stream to assist the overall project economics.

Although further appraisal is required, Mangahewa is potentially the new low cost high volume gas producer in New Zealand.