New Zealand's oil production to bounce back to growth tempor New Zealand's oil production to bounce back to growth temporarily
BMI View: Oil production will return to growth in 2015 following six years of heavy declines. Key to this pick up will be the redevelopment projects at existing fields and the addition of new onshore wells. However, declining output at major fields will reverse this trend from 2017.
New Zealand's oil production has been in decline since 2008 when Greymouth Petroleum's Kowhai and Nagtoro fields began a rapid decline. Oil output has fallen from 62,800 barrels per day (b/d) in 2008 to an estimated 38,900b/d in 2014. However, we expect an uptick in oil production over the next two years as efforts to stem declines come to fruition.
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Key to New Zealand's return to oil production growth in 2015 and 2016 will be the regeneration projects aimed at maximising production from producing assets. OMV, TAG Oil and New Zealand Energy Corp (NZEC) will be the most prominent companies conducting these projects.
OMV is undertaking a USD350mn upgrade programme at the offshore Maari oilfield, where five new wells will help boost overall output. This will include a new extended reach well into the Manaia structure, as well as a dual lateral well targeting the deeper Mangahewa sub-structure of the Maari field. New water injection wells will also be added to the mature Maari structure increasing overall output.
The redevelopment at Maari is expected to add an extra 7,000b/d to production at peak, a significant increase from the approximate 11,000b/d the field produced over 2013. The Raroa FPSO, the production unit at the field, was taken offline from September to December 2013 to refurbish the facility for the expansion. The Maari Growth project is expected to be fully complete by the end of 2014.
Over 2014, NZEC completed drilling 6 wells at its onshore Taranaki Tikorangi well site, including the installation of a gas lift project at Toko-2. Oil production commenced in March and NZEC expects to add 750b/d of new production from well reactivation. A similar development is also being undertaken at the Mt. Messenger site; wells are being reactivated and expected to come online in November. NZEC is hoping its Tikorangi and Mt. Messenger projects will provide the company with additional production of around 1,780b/d by the end of 2014, while new leads in the Waihapa complex could increase this further in 2015.
TAG Oil has also brought new wells online from its Cheal drilling programme in the onshore Taranaki, adding a few hundred barrels of oil supply a day. New supply from as many as 15 Cheal wells is being incrementally added over H2 of 2014, while two new wells are also planned for Q2 2015. Further upside could come from TAG Oil and NZOG's offshore Kaheru prospect. The 42.5mn barrel prospect is being targeted for drilling in the 2015 season, with Q3 or Q4 the most likely spud date.
However, despite the boost expected over the next two years, further production growth will be limited with the legacy oil fields in strong decline. We forecast oil output to drop below 2014 levels as soon as 2018.
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