Decision on developing NZ's last offshore gas field may pass to local consortium

Friday, 10 March 2023

OMV’s Maari oil field is back on the block, alongside its other production facilities and its Toutouwai discovery.

Austrian oil giant OMV is pressing ahead with preparations to drill a well to size-up what would likely be the country’s last major offshore oil and gas discovery, despite its decision to leave the country.

OMV announced last month that it planned to sell its oil and gas exploration and production business in New Zealand, in line with its strategy of becoming a more sustainable fuels and materials company.

But the company said in a statement that it was continuing with preparations to drill an appraisal well, Toutouwai-2, next year at a site 50 kilometres offshore from Taranaki where it discovered hydrocarbons in April 2020.

OMV said at the time of the original discovery that early indications were of a “significant discovery”, which would be the first in New Zealand for a decade, but it had to delay further investigations of the size of the find and the split between oil and gas, due to the Covid lockdown.

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“We are currently looking at opportunities in and around our existing fields to potentially combine with Toutouwai-2 in a joint campaign,”spokespersonTahliaRangiwananga said.

A ban on new offshore exploration permits introduced by the Government in 2018 means Toutouwai, if developed, would likely be the country’s last such find.

Some development of existing fields is also continuing, with Genesis announcing last month it had made the “difficult decision” to invest in an additional well to boost production from the Kupe field.

Despite lingering offshore drilling, the future of the gas industry lies with biogas and hydrogen, where there is an urgent need for investment, says Gas NZ.

OMV also owns the Maui gas field, a 74% stake in the Pohokura gas field and a 69% stake in the Maari oil field.

Janet Carson, chief executive Gas NZ, whose members include major gas distributors and retailers, said the decision on whether it made sense to drill Toutouwai would be “a finely-honed equation and a decision that will be made by people who understand the market thoroughly”.

But she made clear the future of the industry hinged on switching from natural gas to renewable sources of gas.

The bigger question for New Zealand was “how do we power the nation post Toutouwai, post-Maui, post-Kapuni, post-Pohokura?”, she said.

“Gas NZ is unequivocal on this, it means urgent investment in renewable gases, biogas and hydrogen gas, to support what will be fully renewable electricity.”

Rangiwananga said the remoteness of OMV’s New Zealand subsidiary and the fact it wasonly a little integrated into its wider business was a factor in its decision to sell its assets here.

There is speculation OMV may struggle to attract interest in its New Zealand business from overseas buyers given those factors, the ban on new offshore exploration permits, and the fact fossil fuel exploration is regarded as a sunset industry even by major oil firms.

Todd Corporation and NZX-listed New Zealand Oil and Gas have been cited as possible suitors, most likely as part of a consortium that could include overseas interests.

The sale of OMV’s assets will need to be approved by the Ministry of Business, Innovation and Employment.

Under a law passed in 2018, OMV will additionally need to retain liability for decommissioning and cleaning up its production facilities should a buyer fail to fulfill those obligations.

“Any sale would be subject to current legislation and requires approval by the Government,”Rangiwananga confimed.

OMV abandoned separate plans to sell its depleting Maari field to British company Jadestone in November amid protracted uncertainty over whether that deal would be approved and shortly after fresh concerns were raised over Jadestone’s environmental track record in Australia.