You are on page 1of 2

TAG acquires Cardiff gas play

Thursday, 16 September 2010 Neil Ritchie, New Zealand

NEW Zealand-focused Canadian junior TAG Oil has taken over the problematic onshore Taranaki Cardiff deep gas discovery from former partner Genesis Energy and from the receivers of bankrupt former operator Austral Pacific Energy.
The move, which industry commentators expected a while ago, gives TAG complete control over all petroleum contained in that part of onshore Taranaki from the shallow oil and gas of the Cheal field to the deeper hydrocarbons of Cardiff. When TAG acquired Australs 69.5% stake in Cheal during June 2009, which gave the Vancouver-headquartered company complete control of mining licence PMP 38156-S, the move excluded the deeper lease PMP 38156-D, the problematic Cardiff discovery held by Austral (44.9%) and integrated energy company Genesis Energy (55.1%). However, TAGs purchase of Cardiff, for an undisclosed price, means all of Australs petroleum assets have now been disposed of and Genesis has disposed of all upstream assets apart from a 31% stake in the offshore Taranaki Kupe gas-condensate field. TAG chief operating officer Drew Cadenhead told this morning that his company was enthusiastic about Cardiff and its potential. We have several Cardiff wells drilled, all of which encountered proven gas shows, and there are multiple zones of interest, its a proven resource, he said. Several years ago commentators doubted if Cardiff would ever be developed as sub-economic flows from the tight, low permeability sands frustrated Australs efforts to prove commerciality. However, Cadenhead said today that recent North American advances in oil field practices, particularly horizontal drilling and horizontal fracturing of tight gas zones, meant TAG was confident about the future of Cardiff. Technology is coming to Cardiff, thats the big difference now. TAG said the Cardiff structure was a large anticlinal trap, about 12 kilometres long and 3km wide, with a number of potential pay zones within the Eocene-aged Kapuni sands formation. The Cardiff gas-condensate discovery has the potential to become a substantial onshore resource, situated on-trend and among several sizable deep gas-condensate discoveries in the Taranaki Basin, including the nearby Kapuni field and the prolific Mangahewa and Pohokura gas fields, the company said. Condensate-rich gas had been discovered at Cardiff within the upper Kapuni zone, with 12m of net pay encountered and flow rates of more than 3 million cubic feet per day, with about 100 barrels of condensate, achieved during long-term testing. TAG said this zone could be identified on 3D seismic as a prospective target across the span of the Cardiff structure. The company also said greater potential existed in the deeper K1A and K3E zones, where strong gas shows had been encountered over a gross 600m interval. This would be a primary target for future Cardiff wells. The company further said access to market for Cardiff gas was relatively straightforward, with Cardiff situated just 3km from a tie-in to Cheal field infrastructure that provided a link to a nearby high-capacity pipeline. This acquisition comes at a time of strong demand, tightening supply and record-high contract gas prices in

New Zealand, providing a number of commercial opportunities for developing Cardiff gas, TAG said. Porosities and permeabilities found within the multiple Kapuni sands encountered in the Cardiff-1, 2 and 2A wells were analogous to prolific tight sand formations found in the North Sea and numerous basins in the United States and Canada. Cadenhead said Cardiff was not a priority for TAG this year as it concentrated on its continuing Cheal field optimisation program and the drilling of the Sidewinder-1 exploration well in the nearby lease PEP 38748. However, 2011 would see TAG start work on Cardiff, where it also saw some shallow oil potential within the Miocene-aged Mount Messenger and Urenui formations, the producing and prospective zones at Cheal. "This acquisition not only positions TAG with a prime onshore gas and condensate development opportunity in close proximity to our own infrastructure, it secures total control over title to the PMP 38156 production licence, TAG chief executive Garth Johnson added. TAG is building its near-term cash flow through development of the shallow discoveries, and can now apply our highly efficient business model to exploiting the extensive multiple-zone hydrocarbon potential within this Taranaki Basin permit."