Controversial Canadian oil and gas explorer TAG Oil has announced a $C66 million investment in new drilling and production facilities in New Zealand, including reopening the search for so-called "tight'' oil and gas in the Cardiff prospect in southern Taranaki.
Cardiff showed promise when previously explored in the mid-2000s, using the hydraulic fracturing process, known colloquially as fracking, long before it became a target for environmentalists concerned by the potential release of massive new supplies of oil and gas in the face of mounting threats from climate change created by growing global use of fossil fuels.
TAG bought Cardiff, the adjacent Cheal oil and gas prospect, and production facilities in southern Taranaki from former operator Austral Pacific Energy, which ran out of cash in 2009 and went into receivership. Genesis Energy paid for the costs of drilling in Cardiff in 2007, with reports at the time saying fracking was used to explore the area.
On its website, TAG says "development of Cardiff targeting the various gas/condensate zones will include rapidly advancing drilling technologies developed specifically for tight-sand gas reservoirs.''
Kapuni Sands formations discovered in previous wells at Cardiff were "analogous to prolific tight-sand formations found in Germany, Holland, the North Sea and numerous basins in the US and Canada, where these technologies have been successful in achieving dramatic increases to flow rates and overall reserve recovery,'' TAG's website says.
Calls to the company for comment were not returned. The Taranaki Regional Council and the Crown-owned geological science institute, GNS, have both issued reports giving a clean bill of health to fracking in New Zealand to date.
The Green Party has mounted a national petition opposing the use of fracking, which faces bans in some parts of the world because of fears chemicals used in the process can contaminate groundwater and the explosions used to release tight gas can cause small earthquakes.
Supporters of the process say good regulation can prevent contamination issues, while the seismic impact of fracking is minimal and incapable of causing destructive earthquakes.
The company said in a statement to the Toronto Stock Exchange overnight that Cardiff was one of two "deep liquids-rich gas plays with undiscovered resource potential of approximately 500 billion cubic feet of gas and approximately 20 million barrels of associated condensates.''
"TAG intends to re-enter the Cardiff-2A well, where gas and condensates were previously flow tested from a vertical well for an extended period,'' the TSX statement said. The new drilling would use the top section of the old well to drill a horizontal well providing "hundreds of metres of potential pay zone penetration versus the approximately 20 metres of vertical gas and condensate pay in the original well.''
The other proposed deep drilling exploration will occur in the second half of this year, at the Hellfire prospect, inside TAG's Sidewinder field, where TAG has established production facilities which will be significantly expanded in the latest capital expenditure programme.
TAG says it will spend the C$66 million to target shallow oil-prone zones around 2000 metres deep and deeper drilling at around 4000 metres targeting "large liquids-rich gas prospects and various workover operations to existing wells.''
It will also expand its production infrastructure to allow additional production from a string of 14 consecutive successful onshore exploration wells. The company announced yesterday it was producing around 4,000 barrels of oil daily plus natural gas, and that an additional 3500 barrels a day was possible once production bottlenecks were removed.
The company will fund the 13 exploration wells and production expansion programme on another seven wells in the Cheal and Sidewinder prospects from working capital and production revenues over the next 12 months.
The infrastructure programme will triple oil lifting and gas compression capacity from the Cheal field, and includes an LPG and liquid hydrocarbons stripping plant, will tie new Cheal finds into its network of pipelines, and will add six kilometres of pipe to take Cheal gas to the Maui open access gas pipeline.
TAG will also formally establish itself as a third-party gas processor in Taranaki.
"Our excellent drilling success has surpassed our infrastructure capabilities and the investment into expanding our infrastructure will allow us to bring all of our current production on stream, as well as provide commercialisation of all future discoveries without delay,'' said TAG's chief executive, Garth Johnson.
- By Pattrick Smellie of BusinessDesk
