Kupe

The inlet compression project will reduce inlet pressure and allow extension of the plateau production rate, while maximising recovery from the Kupe field. The cost for the 4 per cent New Zealand Oil & Gas share of the compression project is less than $4 million.

The Kupe gas fields will produce at below maximum plant capacity until then. Once completed, the aim of compression is to restore production to the maximum rate of 77 terajoules per day.

In May  2017 New Zealand Oil & Gas  agreed to purchase Mitsui E&P Australia's 4 per cent interest in the Kupe gas and light oil field for NZ$35 million.

The effective date of the transaction is 1 January 2017. The transaction requires joint venture and regulatory approvals.

At that date the transaction added 2.6 million barrels of oil equivalent to New Zealand Oil & Gas reserves, made up of 11.27PJ of gas, 0.37 mmboe of condensate, and 47,564 tonnes of LPG. See the reserves statement below. Mitsui's Kupe interest is a good portfolio fit for New Zealand Oil & Gas. Our 4 per cent interest provides ongoing income from an asset we see as high quality, in our heartland, and it is an appropriate investment in relation to our size and scale.

It provides us with rights in the event of any further transactions in the joint venture, along with further prospectivity within the licence area.

Read details of the acquisition of Mitsui's share

HISTORY

New Zealand Oil & Gas held the Kupe licence through discovery in the 1980s, and retained a 15 per cent share through development of the field and first production in 2009.

We sold our 15 per cent interest to Genesis Energy in 2016, with an effective date of 1 January 2017.

With the subsequent purchase of Mitsui's share, New Zealand Oil & Gas has economically never been out of the Kupe permit.

KUPE DEVELOPMENT

Kupe was discovered in  the mid-1980s but assessed to be sub-commercial at the time. In the early-2000s the New Zealand gas market changed as the previously-dominant Maui field entered its decline phase and a final investment decision for the development of Kupe was made on 29 June 2006.

By then, New Zealand Oil & Gas held a 15% interest in the permit. The initial plan of development comprised three wellheads, an unstaffed offshore platform connected to shore by a 30 kilometre pipeline, an onshore production station near Hawera, and oil storage facilities at New Plymouth.

In 2007 the ENSCO-107 drilling rig arrived from Singapore to drill the three Kupe development wells and install the offshore platform. 30 kilometres of offshore pipeline was welded together at a base in Picton and in early January 2008 the specialist vessel Apache arrived to lay the pipeline and associated umbilical, which supplies power and chemicals to the platform.

Kupe entered production in December 2009. Following a commissioning period, permanent production was declared on 22 March 2010.

The onshore production station processes raw gas to meet the specification for the main North Island gas transmission system and separates out the light oil/condensate and liquid petroleum gas (LPG). The condensate is transported to Port Taranaki (New Plymouth).

Kupe light oil/condensate is generally exported, while the LPG is sold into the domestic New Zealand market.

Kupe Production: New Zealand Oil & Gas share*

* Production figures are approximate and are provided as a guide only. Actual gas allocation varies as it is based on daily nominations from the gas buyer. New Zealand Oil & Gas had a 15% share of Kupe production until 31 December 2016. On 18 May 2017 New Zealand Oil & Gas announced its intention to purchase Mitsui E&P Australia’s 4% interest in Kupe with an effective economic date of 1 January 2017.

NET RECOVERABLE 2P (PROVEN AND PROBABLE) RESERVES FOR THE KUPE CENTRAL FIELD AREA.

(Developed + Undeveloped) Reserves (NZO Share)

* Reserves are adjusted for change in equity  from 31 December 2016.