The cost of the US$27 million exploratory oil and gas Oi well offshore Taranaki has risen to US$40 million, largely as a result of the drilling partners being forced to plug and abandon the first well, which encountered technical difficulties at a depth of 1,507 metres.
The Oi-1 well is a partnership between operator AWE (31.25 percent), Pan Pacific Petroleum (50 percent) and New Zealand Oil & Gas [NZX: NZO], (18.75 percent), with costs of the re-drill to be borne by the partners in proportion to their shareholdings in the prospect, which is testing a structure similar to the nearby producing fields at Tui, Amokura, and Pateke.
"Oi-1 had drilled a 17.5 inch hole to a depth of 1,507 metres when operational difficulties were encountered setting casing. Attempts to install cement plugs and sidetrack the well were also unsuccessful," said NZOG in a statement to the NZX.
The Kan Tan IV drilling rig is now settling over a new well site, Oi-2, 150 metres from the original drill site, targeting a total depth of 3,881 metres.
"To improve conditions in Oi-2, 13 3/8 inch casing will be set at 550 metres rather than 1,500 metres planned in Oi-1," NZOG said. "This will enable a drilling fluids system to be established at a shallow depth and improve management of conditions in the well bore. Then a 12.5 hole will be drilled to 1,500 metres before 9 5/8 inch casing is set. An 8.5 inch hole will then be drilled to the target depth."
NZOG shares fell 1.8 percent to 80 cents in sharemarket trading this morning.
Oi is about 37 kilometres off the coast of Taranaki in about 120 metres of water.