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The health of our upstream petroleum sector is an order of magnitude better than it was five years ago, says McDouall Stuart Securities research head John Kidd. By Neil Ritchie.
There have also been some recent exploration successes, such as the offshore Taranaki Manaia extended reach appraisal well and the onshore Taranaki Turangi and Kowhai gas-condensate discoveries. However, there was the “relatively bitter after-taste” of the recent disappointing Kan Tan IV semi-submersible rig offshore Taranaki Basin campaign – the unsuccessful Hoki, Tui Southwest, Kahu and Tuatara wells. The E&P sector had gone from having few, if any, independently positive net present value (NPV) projects to at least five, Pohokura, Kupe, Tui and Maari, plus the small onshore Turangi-Kowhai finds. An increasing number of high quality players, most of which are cashed-up and actively re-investing in the industry, are joining, deepening the sector’s “gene pools”. In terms of explorers, there are now more fledgling firms such as L&M Energy and Kea Petroleum, juniors such as Australia’s Roc Oil, Mosaic and Octanex, US major Anadarko and Brazil’s Petrobras, and supermajor Exxon Mobil. The producer gene pool has also broadened, with Canadian junior TAG Oil, mid-sized operators such as AWE and majors Origin Energy and OMV joining more established players such as private companies Todd Energy and Greymouth Petroleum, and supermajor Shell. Key performance indicators confirmed the industry activity uplift. Kidd says it is astonishing that one field, Tui, had contributed about 0.2 percent, or almost half of the total of GDP growth for the September 2007 quarter. This was immediately after the field came onstream in July of that year, producing up to 50,000 barrels per day at a time crude oil was fetching over US$100 per barrel. Kidd also says it was good to see exploration diversifying, “there is a positive swing away from Taranaki”, he told delegates. While levels of offshore exploration had improved markedly in recent years, it was good to now see onshore activity “strengthening”. He says the country’s petroleum endowment was almost certainly the country’s single most valuable tangible asset and the Crown, as the asset owner, needed to take a professional, strategic and growth-focused approach to managing its petroleum estate, in conjunction with the private sector. Government policy should shift towards economic development, which should drive stronger upstream-downstream integration and serve to encourage marginal players. Kidd was also one of several speakers to welcome the government’s move, announced by Brownlee at the conference, that it was significantly expanding and strengthening the role of the MED’s Crown Minerals Group. The expansion of Crown Minerals came after an independent review found a significant increase in the government’s capability is required to deliver on the objectives of the Petroleum Action Plan, as well as the government’s objectives for the development of other mineral resources. Crown Minerals currently operates on about 40 fulltime equivalent positions, yet it is responsible for managing the asset base that drives New Zealand’s fourth largest export earning industry. Staff numbers should increase to about 70. Kidd says that upgrade will certainly lessen the frustration players felt with various delays caused by inadequate numbers of Crown Minerals staff, some of whom lacked much industry experience and expertise. However, he cautioned that there remained much more for the government and industry to do. “The global petroleum sector is fiercely competitive, with country risk and fiscal terms a core component of competitiveness. We should not risk hard won momentum being lost.”
Energy NZ Vol.4 No.6 November-December 2010 |
John Kidd (pictured) told Petroleum Conference delegates the years 2006-2010 had been “impressive” and that the exploration and production (E&P) sector was now in “much better shape” than before the big $3.7 billion offshore Taranaki quartet of developments – Pohokura and Kupe gas, and Tui and Maari oil projects – started.