Winners and losers: The Maari saga

The 40-year development of our largest crude oilfield is flowing from all five production wells on the Maari field, writes Lindsay Clark, with losers and winners along the way. And the final chapter can’t be written yet, as Maari could be the just beginning of a larger oil complex sitting in the south Taranaki seas.

The spring issue of Energy NZ coincided with the powerful Ensco 107 jack-up rig, standing alongside the Maari platform, drilling one of the most ambitious wells drilled in New Zealand.

If successful,  this ‘extended reach’ well Manaia-1 will be a record length for New Zealand (approximately 7.5 kilometres long), and was expected to take about 45 days to drill. It will complete something of a ‘virtuous circle’ by drilling into the very Kapuni sands oil reservoir in the Manaia structure where offshore crude was first discovered in July 1970 by the Maui-4 well.

The Maari oilfield lies about 80 kilometres offshore (and well over the horizon) from the south Taranaki coast. The field is operated by OMV New Zealand, a subsidiary of the Austrian-based OMV Aktiengesellschaft – a central European oil and gas group with its headquarters in Vienna. OMV says that once Maari is fully flowing it will produce more oil liquids here than Shell – the country’s current number one producer.

The main Maari field is scheduled to produce a total of at least 50 million barrels of waxy crude oil at 35,000 barrels a day, or some 12 million barrels a year. However, one of the Maari partners, Horizon Oil, expects oil output to probably beat this figure by 10 percent.

Maari is likely to push up the country’s total oil and condensate production next year to close to 30 million barrels of oil, well above the previous record in 1997 of 21.5 million barrels (2008 oil output was a whisker behind at 21.3 million barrels). One year of Maari oil production at US$60 a barrel would be worth over $1 billion at current exchange rates and around $7 billion over the field’s life.

Larger volumes in the future

The Maari joint venture’s recent decision to drill the two extra wells, Manaia-1 and another layer of oil-bearing sands 50 metres above the main reservoir, could see many million barrels of reserves added to the original 50 million.

Additional smaller reservoirs such as the Kapuni sands below the main Maari reservoir and the Moki sands above the main Manaia reservoir may also later be tapped.

Another of Maari partners, Todd Energy, which is New Zealand’s largest oil and gas business, also believes there is much more oil to be found in the Maari region.

Todd, which operates the exploration permit immediately south of Maari and Manaia, says it has found a Maari “look-alike” prospect that it has named Matariki. Todd estimates Matariki, about 25 kilometres south of Maari, has a mean Moki sands oil resource of about 100 million barrels with a possibility of more oil in the higher risk Kapuni sands deeper at Matariki.

Todd says the oil in the Maari region originates from the mature Cretaceous oil source kitchens in the East Maui area and migrated southwards along the Tasman Ridge. Todd’s view is that the Maari structure has filled to spill point and the oil has flowed further south on the fairway along the ridge until it reached the shallower (1000 metre-deep) Matariki anticline trap.

A tough haul

With Maari now finally in production it is hard to believe that it took almost four decades to develop the field. And how did OMV come to be in control while Shell gave up its rights to the number one oil title? The answer lies in the incredible commercial twists and turns the Maari prospect was put through in the first three decades since its discovery, and with the inherent difficulty of developing a small-scale oilfield.

When, almost four decades ago, Shell-BP-Todd Oil Services produced 600 barrels of “very waxy oil” from its Maui-4 well, the Evening Post newspaper greeted the news with the headline “Maui IV a likely flop”.

The paper reported the company as saying; “In view of the substantial distance from shore and the considerable water depth this part of the Maui accumulation was most unlikely to be of commercial significance.”

After Shell-BP-Todd gave up the licence covering the Maui-4 area to concentrate on the Maui gas field development in 1975, it was another five years before another company took up a licence for the area.

In 1984, British company Tricentrol (with North Sea experience) drilled the Moki-1 well over the Maari structure and flowed 660 barrels a day from the Miocene–aged Moki Formation. This was the first well into what is today’s main Maari reservoir.

Tricentrol’s follow-up well Moki-2A found only a disappointing four metre oil column in the Moki sands. Tricentrol, now largely forgotten, lost interest in the area and was gobbled up in the late 1980s by US company Atlantic Richfield (ARCO), which in turn was swallowed by a bigger fish – and one of the Manaia discoverers – BP.

By 1987 the permit was held by Petrocorp, the national oil company that had been previously set up by the Muldoon government and his energy minister Bill Birch and had been sold to Fletcher Challenge by the post 1984 Labour Government. Petrocorp focussed on a different area than Maari-Manaia but had no luck. After drilling two dry holes Petrocorp exited the permit.

The next permit operator was Cultus Petroleum, a Sydney-based explorer whose controlling shareholders were Auckland merchant bankers Fay Richwhite.

Victor Dauzacher, the Brazilian exploration manager for Cultus in a paper to the 1996 New Zealand Petroleum Conference, made a strong case for developing the oil exploration potential of Maari and Manaia. The case was good enough to attract two new partners to the Cultus permit – Shell and Todd, who took a respective 49 percent and 21 percent interest with Shell Todd Oil Services the operator. Further exploration in 1998 involved drilling test vertical Maari-1 and horizontal well Maari-1A through the Moki sands. The horizontal well test flowed at a rate of 4370 barrels per day. Brett Rogers, Shell Todd’s petroleum technologist, says this was enough “to lift the field out of the uneconomic category”. He was also confident higher flow rates than these could be achieved.

Maari development now seemed possible, but two more important commercial events were yet to be played out in this long saga. 

OMV steps in

Out of the blue in 1999 Cultus was subject to a takeover offer by OMV, Austria’s largest oil and gas producer, which wanted to expand beyond its refining and retailing business in southeast Europe and to gain beachheads in oil and gas exploration around the world.

In Australia, OMV happened to target Cultus as a vehicle for expansion, collecting its stake in Maari in the process.

Then in 2002, when world oil prices were still low at around US$20-30 a barrel, Shell sold its 49 percent share in Maari to OMV to “focus on its more material gas interests”, while Todd stuck with OMV in Maari to eventually share the oil fruits.

At the time of OMV’s purchase announcement the explorer said it would drill another Maari appraisal well Maari-2 – the fourth exploratory well into the structure – early in 2003, and expected to begin oil production by late 2005.

Now, four years later, after a series of small delays to the complex project, Maari oil is flowing, but what is four years when the overall development has taken four decades?

And it has been an expensive development for all parties. Steve Hounsell, the previous head of OMV in Wellington, says his company spent more money in New Zealand than any of the other 20 countries it has explored in.

And now the winners enjoy the rewards.