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New Zealand Oil & Gas [NZX: NZO] has started drilling in the Oi prospect in its latest play to extend the life of offshore infrastructure that is servicing the declining Tui oil field.
Situated to the north of Tui in a different geological structure, the Oi prospect has "sufficient estimated potential size to contain commercial amounts of hydrocarbons", with the main uncertainty being whether Kapuni F10 reservoir sands are present.
"NZOG considers the well has a 17 percent geological chance of success, and a 16 percent chance of commercial development."
The well follows the discovery of hydrocarbons in commercial quantities at the Pateke-4H well, drilled earlier this year, which will be tied back to the floating production platform already processing other wells in the Tui prospect.
AWE is the operator on the Oi well, with a 31.25 percent holding, Pan Pacific Petroleum holds 50 percent and NZOG is in at 18.75 percent. The three joint venture parties hold 57.5 percent, 15 percent and 27.5 percent of the petroleum mining permit that covers both Tui and Oi.
Total cost of the well is US$27 million, of which NZOG's share is US$5million, with potential to drill a sidetrack well on a full equity share basis, should encouraging signs be found in the well currently being drilled.
A pre-drill, unrisked best estimate is for a prospective resource of 11 million barrels of recoverable oil, of which NZOG's share would be 2.06 million barrels.