Vancouver-based driller Tag Oil Ltd says it has completed its first "fracture stimulation" -- cracking rock deep underground to allow oil and gas to flow faster -- at Taranaki's Cheal field.Tag used hydraulic fracturing, also known as "frac
Vancouver-based driller Tag Oil Ltd says it has completed its first "fracture stimulation" -- cracking rock deep underground to allow oil and gas to flow faster -- at Taranaki's Cheal field.
Tag used hydraulic fracturing, also known as "fracking", to break up rock deep in the Mt Messenger Formation at the A7 well.
It boosted boost daily production rates by 365 percent, from 80 barrels of oil equivalent (BOE) to 292 barrels a day, by opening paths through the rock using hydraulic pressure from water and sand pumped down the well.
It told the Toronto stock exchange the Cheal field's high-quality oil sells at a premium to West Texas Intermediate, mainly to Australian, Korean and Japanese refineries, and the A7 well had been tied into TAG's nearby Cheal production station.
Tag Oil chief executive Garth Johnson said the "encouraging results" showed how the company could deliver value by applying North American technology to under-developed New Zealand oil fields.
"Tag is proud to be the first mover in New Zealand by taking advantage of proven technologies that are commonplace in North America and applying them to our developing Taranaki oil fields," Mr. Johnson said.
In addition to the increased cash flow, the results should also increase overall recovery potential of the field, as well as contribute to lower production and finding costs.
Tag owns 100 percent of the Cheal production licence, which it said was only lightly explored, and last year took over Vancouver-based exploration company Trans-Orient which is drilling a series of test wells in the Waitangi Hill area to the north of Gisborne.
Tag also holds interests in oil and gas exploration permits in the Taranaki Basin.
The company told the stock exchange it had identified other Cheal production wells that were fracture stimulation candidates, and also planned to start a Taranaki drilling campaign with horizontal drilling with multi-stage fracturing, combined with down-hole heating and advanced recovery technologies.
Horizontal drilling allows producers to drill multiple wells from one well pad.
Various types of hydraulic fracturing have been used for 60 years in more than one million wells in the United States, particularly in drilling for gas trapped in oil shales.
Last year US-based drillers reported a slowdown in use of the technology because of concerns there about its impact on water quality.
They said shale gas development could be slowed by fears that drilling techniques used to fracture the gas-bearing rock with a mixture of water, chemicals and sand would contaminate local drinking water.
The chemicals are only a small part of the fracking fluid mix, but some are considered toxic or are known causes of cancer.
The US Environmental Protection Agency recently found chemical contaminants in some drinking water wells in Wyoming that may have been caused by gas drilling in the area.
