Upon closing of the Acquisition, NZEC plans to reactivate an established gas lift system for six existing wells on the TWN Licences to recommence oil and gas production from the Tikorangi formation, which is estimated to have remaining Proved and Probable Reserves of 2,144,700 boe. NZEC has also determined that six wells that previously produced from the Tikorangi formation have uphole completion potential in the shallower Moki, Mt. Messenger and Urenui formations. Reactivation and uphole completion of these wells would be significantly less expensive and faster than drilling new wells, and economic discoveries could be quickly tied in to the Waihapa Production Station using existing oil and gas gathering pipelines. Both the reactivations and uphole completions could bring near-term, low-cost production and cash flow to the Company.
NZEC's technical team has also identified five high-priority Mt. Messenger targets on the Waihapa and Ngaere permits of the TWN Licences. NZEC has completed permitting for a new site to access these targets, called the Waipapa site.
Longer-term exploration plans on the TWN Licences include accessing Mt. Messenger targets from 16 existing drill pads with gathering systems in place, which offer lower-cost exploration potential and can be tied-in to the Waihapa Production Station on an expedited basis. The resource evaluation also confirmed the prospectivity of the deeper Moki and Kapuni formations on the TWN Licences. Discoveries by other companies on offsetting permits have demonstrated significant flow rates and long-term production from reservoirs in these deeper formations.
Production and Infrastructure Assets
Owning the Waihapa Production Station (Figure 2) will give NZEC strategic control over gathering, processing and sales infrastructure in the Taranaki Basin and provide NZEC with the ability to quickly bring on near-term production additions, reduce full-cycle development lead times and execute on longer-term growth plans. In addition, as the only open-access midstream facility in the Taranaki Basin, the Waihapa Production Station offers business opportunities for processing third-party gas, liquids, oil and water. The Waihapa Production Station is central to NZEC's producing wells and inventory of exploration prospects, thereby reducing transportation and processing costs for NZEC's oil and gas production.
The Waihapa Production Station and associated infrastructure includes:
-- 45 MMcf/d gas processing, gas compression and LPG extraction facility;-- 51 km 8-inch gas sales pipeline from the Waihapa Production Station to the Stratford Gas Power Generation Plant then terminating in New Plymouth;-- 59 km of oil/gas mixed product pipelines including gas lift lines;-- 25,000 bbl/d oil processing facility;-- 49 km oil sales pipeline from the Waihapa Production Station to the Omata Tank Farm, capable of transporting up to 15,500 bbl/d; and-- 18,000 bbl/d water disposal processing system.
Since initiating the Acquisition in 2012, NZEC has recruited industry professionals with expertise in operating a full-cycle production facility. When the Acquisition closes, Mike Oakes, NZEC's General Manager Upstream Operations, will assume responsibility for the Waihapa Production Station.
As part of the Acquisition, Contact and NZEC have agreed to undertake a joint study that is expected to lead to the commencement of a six-month gas looping trial in Q4-2013. NZEC intends to loop a minimum of 10 TJ/day3 through the Waihapa Production Station, shipped from the existing gas network through the Contact pipeline. A volume of 10 TJ/day will be adequate to commence operations at the Waihapa Production Station, allowing NZEC to process gas produced from its own wells. During the trial, gas will be used to reactivate the existing gas lift system on the TWN Licences to lift oil and gas from reserves in the Tikorangi formation. The trial will also determine the economics of stripping natural gas liquids ("NGLs") from the liquids-rich gas. Any NGLs that are recovered during the trial will be the property of NZEC and can be sold at market prices. NZEC will sell any additional gas produced through this process to Contact at an estimated price of NZ$4.75/mcf.