July 18, 2008

Momoho Field Failure Costs Explorers $50m

By WEIR, James

THE Momoho offshore Taranaki exploration well is being abandoned, having cost partners including New Zealand Oil and Gas and state- owned Genesis the thick end of $50 million.

NZOG, one of the few sharemarket darlings left, barely skipped a beat, its shares falling five cents to $1.66. NZOG shares are up from $1 early this year because of high world oil prices and the Tui field proving bigger and better than expected.

The partners had estimated Momoho could contain 100 billion to 200 billion cubic feet of gas.

Momoho is six kilometres southeast of the offshore Kupe gasfield.

The original budget for the well was about $50 million, but because drilling took less time than expected the final figure may be less than that. The drilling rig will be released next week and will move on to the Todd Energy and OMV Maari field.

NZOG has a 15 per cent share in Momoho, putting its costs for the well at about $8 million, and Genesis has 31 per cent. The well operator is Origin Energy, which has a 50 per cent stake.

The Momoho well found "a small gas condensate pool" but it was too little to develop, despite earlier reports of good gas indications at the top of the main target reservoir.

There were some positive signs from Momoho but "not as positive as we would have liked," NZOG spokesman Chris Roberts said.

NZOG hoped that its share price would not jump around so much in future, given the big production from the Tui oilfield and planned production at Kupe gasfield, which is due to start next year. NZOG is a partner in both fields.

In May, Origin Energy made an internal estimate that Momoho might hold 100 billion cubic feet of gas and NZOG said later its estimate was 200 billion cubic feet. Share analysts had assumed that would translate to about 120 petajoules of gas, eight million barrels of oil and 500,000 tonnes of lpg.

A Hamilton Hindin Greene report last month suggested Momoho could be worth roughly US$120 million (NZ$160 million).

NZOG said that, given the presence of gas condensate at Momoho, and gas at nearby Kupe South 4 and oil at Kupe South 5, both of which were drilled in the 1990s, it was possible there was oil or gas trapped to the northeast. That area has not been drilled yet.

It is still possible that the areas could be developed together commercially.

Tui is still producing 40,000 barrels a day, when it had been expected to tail off to about 15,000 barrels a day by now. The partners in Tui hope to enlarge the field, but they cannot get a drilling rig to do that till 2010, and even that has not been confirmed.


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