Kupe, New Zealand

The Kupe project is situated within the Kupe Central Field Area (CFA), about 30km offshore southwest of Hawera, in the Taranaki Basin off New Zealand’s North Island, in about 35m of water. It is in exploration permit PML 38146, in the same general area as the giant Maui gas field, which supplies most of New Zealand’s needs.

The Kupe Oil and Gas Field

Australian company Origin Energy is developing the field on behalf of the joint venture participants Origin Energy Resources (Kupe) Ltd (50% interest), Genesis Power Ltd (31%), New Zealand Oil and Gas Ltd (15%) and Mitsui E&P (New Zealand) Ltd (4%).

The discovery well, Kupe South-1 (KS-1), was drilled in 1986 and gave 2,000 bpd of oil and 5.4 mmscfpd of gas. This was followed by the drilling of KS-2 in 1987, and the Kupe South-3 wells and 3a sidetrack (KS-3) in 1988.

KS-2 and the KS-3 both encountered a stratified hydrocarbon reservoir with a significant oil column underlying a thick natural gas column. These three wells formed the basis for the CFA development.

However, the development remained sub-economic because oil prices were low and New Zealand gas prices were very low as a result of the existing arrangements for the sale of gas from the Maui field.

This situation changed as the Maui field entered into decline and international oil prices rose. The final investment decision for the development project was made in June 2006, based on an initial budget estimate of NZ$980m (about $666m), which was raised in July 2007 by about 10%.

By June 2008 the drilling and testing of the three wells had been successfully completed and have been suspended pending the completion of the onshore production station.

The project is expected to be online in mid-2009 and is likely to produce about 20 Petajoules (PJ) per annum of sales gas, with condensate and LPG production starting at 1.7m barrels per annum and 90,000t per annum respectively. The project’s lifespan is estimated at 19 years.

Geology

The primary reservoir of the central field area is the paleocene farewell formation. The reservoir sandstones of the formation are predominantly medium to coarse-grained quartz and feldspar, with good porosities and permeabilities, rising to more than 1 darcy permeability in places.

The sandstone members are compositionally immature and feldspar-rich, making them an arkosic to subarkosic sandstone reservoir.

The hydrocarbons in the field were derived from Late Cretaceous to Paleocene, organic-rich, sedimentary source rocks that were thermally cooked in the basin kitchen areas after deep burial, and then migrated updip into the shallower sandstone units within the structural traps.

Reserves

Recoverable proven and probable reserves for the project are estimated at 254PJ of sales gas, 14.7m barrels of light oil / condensate and 1.1Mt of LPG.

Development

The project includes an unmanned offshore platform built above the field production wells and supporting up to six wellheads, a 12in multiphase subsea pipeline to bring the raw gas and liquids to shore, three 50mm subsea utility lines to carry chemicals and so on to the platform, a horizontal directional drilled (HDD) shore crossing to link the offshore and onshore components, an onshore production station, an onshore raw gas pipeline from the HDD site to the production station, and a sales gas pipeline from the production station to the Kapuni gas treatment plant, where natural gas will be injected into the existing transmission network.

The platform consists of a topside deck supported by four legs driven into the seabed. The topside deck contains four levels, including a helideck

The HDD technique was chosen to avoid damage or disturbance to the characteristic cliffs of the Taranaki coastline. It takes the gas pipeline and utility lines underground from 500m inland, under the beach and cliffs and out 1.5km offshore, where they connect to the subsea pipeline and utility lines.

The production station will process the raw gas and light oil from the field to meet sale specifications. A low-pressure flare system will be located at ground level for operational control and an elevated flare will be installed for use in emergencies.

A series of wetlands is also being built to provide a natural cleaning system for stormwater from the site.

The onshore pipeline network will involve the installation of a combination of new pipelines and the utilisation of the existing network. New pipelines will be required to transfer raw gas the short distance from the HDD shore crossing to the production station (about 300m); and to transfer sales gas from the production station to the Kapuni Gas Treatment Plant (along Inaha and Palmer Road reserves).

A light oil (condensate) pipeline is not a definite component of the project, although it is the preferred method to export the light oil to an existing facility capable of treating it.

In September 2006, Origin awarded the $200m contract for the construction of both the onshore and offshore components of the project to Technip Oceana Pty Ltd. By June 2008, the installation of the offshore platform had been completed and construction of the onshore production station was said to be progressing.