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New Zealand Energy System, New Zealand Oil and Gas

#5 New Zealand Oil – Imports, Exports and Other Basics

New Zealand produced about 114 Peta Joules (PJ) of “oil” in 2010 and as shown on the red line in the graph below, nearly all of that (107 PJ) was exported.  At the same time we imported 289 PJ of “oil” – this blog entry discusses why this is the case and where does the oil that we produced go?  Why don’t we just send all our oil up to the Marsden Point Refinery for national consumption?

A lot of the data that this Blog uses comes from the amazing information made publicly available by the New Zealand Ministry of Economic Development (MED) [ref], including the image left which shows the trends and breakdown of our national oil production.  While there is some excellent explanation on the MED website, it does not answer the question I put forward above and I can not seem to find a definitve answer anywhere on the net, so lets have a quick look at each of the main oil producing fields in NZ one by one for the answers:

Starting at the bottom of the graph and working our way up:

YELLOW: the Maui Field no longer produces Oil, as in real Crude Oil (although it did from 1996 to 2006) but still registers in the national energy statistics as Oil Production because these figures include: “Crude Oil, Condensate, and Naphtha Production”.  Naphtha is basically just a component of Natural Gas Condensate.

Maui gas is piped onshore at Oaonui from the Maui A and B platforms where processing and treatment occurs to bring it to pipeline specifications. Condensate is also treated and split into enhanced condensate and naphtha. LPG is removed and sold as either LPG mix for domestic consumption or butane for export. Processed condensate and associated products are piped and stored in New Plymouth before shipping overseas or to the refinery at Marsden Point.  Maui will be discussed elsewhere on this Blogsite, but suffice as to say it was the original and only “Monster” fossils fuels field that has been found in New Zealand to date and it is well on the way out, peak production was reached in 1997, over 15 years ago   [ref].

BROWN: Pohokura, like Maui is a gas and condensate field that does not produce “Crude Oil” so to speak, it is located 4 km offshore in approximately 30m of water. The field was discovered in 2000 by Fletcher Challenge and has total estimated reserves of 996 Bcf (1167 PJ) of gas and 59.4 mmbbls of condensate.  The field has 6 offshore and 3 onshore wells, with the production station located on shore, adjacent to the Motunui methanol plant.  Finished product is delivered to “the market” (i.e. New Plymouth) from the production station by way of two sets of pipelines for both gas and condensate

LIGHT BLUE: The very interesting Tui Oil Fields are located in the offshore Taranaki basin, approximately 50km off the coast in water depth of about 120m. Production began on 30 July 2007. Tui is New Zealand’s first stand-alone offshore oil development. Three separate oil accumulations have been developed as shown on the graphic left – Tui, Amokura and Pateke. The development comprises four horizontally drilled and subsea completed wells, each tied back to a leased Floating Production Storage and Offtake (FPSO) vessel, the “Umuroa” (shown right). The extended horizontal production sections in the oil reservoirs range from 819m to 1850m.  The field produces about 7,500 Barrels of Oil daily (that is 2.7Million BBL/year), approx $750,000 per day and current $100 prices.   Tui oil is a light, sweet crude that is typically sold, with freight and quality differentials, into refineries on the east coast of Australia or in south-east Asia. [ref]   The following article from stuff.co.nz in 2009 sheds a lot of light on the whys and wherefores of where the Tui oil ends up:

High-quality New Zealand oil is being refined at Marsden Point giving Kiwi motorists a chance to try a “sweet” Tui brew.  The Tui oilfields, offshore from Taranaki, have so far produced 20 million barrels of oil which has been sent overseas for processing.  But for the first time, a trial shipment of about 300,000 barrels has been sent to the New Zealand Refining Company at Marsden Point. A spokesman for the refining company says the oil is being processed and will be blended with other oil qualities. The refinery usually gets half its crude oil from the Middle East, a lower quality crude with high levels of sulphur which needs more refining. The Middle East oil is normally cheaper than other types of oil, he says, and is more economical for the refinery to blend. The rest of the crude is sourced from the Asia Pacific area, including Australia, Malaysia and Indonesia. The refinery processes about 38 million barrels of oil a year from a mixture of crude oil, producing petrol, diesel, jet fuel and fuel oil, which is used in large ships.  Almost all of the refined product is used in New Zealand.  The spokesman says Tui oil is known as “sweet” oil because it is a better quality with less sulphur content.  During the processing trial, the oil companies will decide if it is worth continuing to refine Tui oil. Dennis Washer, the New Zealand general manager of Tui fields operator Australian Worldwide Exploration, hopes the sales will continue.  If the Tui oil blends well with other crude oils and the price is right, hopefully the Tui consortium could look forward to further sales to Marsden Point, he says. Oil from Tui has not gone to Marsden Point before because of its waxy nature, he says. The Tui oil fields include three producing reservoirs – Tui, Amokura and Pateke, 50km off the Taranaki coast. Oil is produced from four wells through a floating production, storage and off-loading vessel, the Umuroa. The fields are estimated to have about 30 million barrels of oil reserves.  The oil is usually shipped by tanker to refineries in Australia and southeast Asia, plus several shipments to Hawaii. The Tui field is jointly-owned by Australian Worldwide Exploration, Mitsui, New Zealand Oil and Gas and Pan Pacific Petroleum [ref].

So it is obviously technically possible to blend the Tui Oil at Marsden Point refinery (New Zealand’s only oil refinery) with other types of imported oils but seemingly it is not currently economic given transportation, storage and opertunity cost considerations.  As shown in the MED graph there was a dip in exports in 2009 (probably due to refinery trial mentioned above in the stuff.co.nz article above), but in 2010 just about everything was exported again

GREEN:  Maari Oil Field, this is similar type of field in it operation and development to Tui. It is located in the Taranaki Basin 80 kms offshore from South Taranaki and just south of Maui, it contains of two producing fields. The Maari field is located beneath the Maari FPSO (Floating Production Storage and Offtake) and wellhead platform, and the Manaia field is targeted by a extended reach well 7 km south west of the Wellhead Plaform.  It has an interesting development history that has been detailed nicely by Energy NZ magazineThe Maari Field consists of five production and three water injection wells, and an unmanned Wellhead Platform TiroTiro Moana. The Raroa FPSO is permanently moored 1.3 kms from the Wellhead Platform and is operated by Tanker Pacific.  Power, water injection and processing facilities are all located on the FPSO. Subsea flowlines for oil production and injection water link the FPSO and Wellhead Platform.  I have not been able to find out exactly where this oil goes, but it would seem probable that it ends up at the same refineries as the Tui oil in Southeast Asia.

Orange: Kupe is primarily a natural gas project but also produces LPG and a small amount of condensate (only the figures for condensate are included in the Oil figures from the MED graph above).  According to the Origin website, “LPG is for national distribution, and condensate for export to refineries in Australasia and the South Pacific.  Kupe is made up of an offshore platform with three production wells, a 30km raw gas pipeline running from the platform to the shore, an onshore production station near Hawera, and light crude storage and export facilities near Port Taranaki in New Plymouth…  At peak, the gas produced from the Kupe field will meet 10 to 15 per cent of New Zealand’s annual gas demand and 50 per cent of New Zealand’s LPG demand.  Production is forecast to continue for the next 15 to 20 years. Over the life of the field, it will provide 273 petajoules of natural gas, 1114 kilotonnes of LPG and 17.6 million barrels of light oil.” [ref] 

Some Notes: Regarding Light Crude Oil V’s Condensate – even the Origin website seemingly uses these terms interchangeably when trying to describe the Kupe liquid fuels situation – I found an interesting discussion on the subtleties between crude oils, and condensates [here].  In any case for the purpose of our discussions in this blog it seems that most all the product from Kupe ends up being exported from New Zealand after it arrives in the holding tanks at New Plymouth with the exception of LPG. LPG from Kupe or Maui is apparently not included in the MED figures (according to the website) as oil even although it is still a liquid fuel, LPG is bottled in Taranaki or transported in road tankers and used for water heating, BBQ’s and car fuel.  You can read more about LPG [here]

Crude Oil Imports

The New Zealand Energy Data book [ref] figure D.1d, left shows the wide range of places that crude oil comes from into New Zealand at Marsden Point  This could be due to various factors such long term supply contracts, the type of crude required, the type of outputs required, storage capacities at the refinery and the technical capabilities of the refinery itself.  In addition to receiving crude oils, finished or intermediate products are also imported.  Suffice to say, the refining and blending of petroleum products in New Zealand is very complex and very global in nature so we should not be surprised that oil from Tui and Maari is dealt with offshore given the absolute global nature of the trade currently.

CONCLUSIONS:

FreeNGR4NZ has been formed on the base assumption that world oil prices and markets are going to head north of $300 / bbl by 2020 or therabouts.   This is going to send international markets of all kinds into turmoil and will likely disrupt the large number of supply options that are available today.

Regardless of the complexities involved, New Zealand imports more oil than we export and although it must be slightly commercially cheaper to export all our oil offshore for refining, the Tui experiment shows that our oil can technically be refined here for our consumption without too much problem.

The whole NZ Crude Oil extraction process is managed by private companies, with only a small amount of proceeds, relatively speaking, returning to the government and New Zealander’s the form of tax on accounting profits and royalties (more about this in a later blog) but private ownership leaves the government virtually no say in a strategic way forward or the long term planning of the industry.   Would we not be all better off if the resources under our contential shelf were controlled by our own government (at least partially)?.

State Intervention and a Strategy

A very interesting piece on “a case for state intervention” in the oil and gas sector by the New Zealand Contractors Federation should be read as it contains reference to the “Think Big” days and Motanui Synfuel plant (that is the facility to convert Maui natural gas to petrol that was developed in response to the oil crisis of the early 70’s) that, had the government retained ownership of, would have been producing windfall profits and energy independence for New Zealand.  Instead, a poor decision was made to get rid of this plant that cost New Zealand dearly (again to be explored in a future blog) during the low oil prices of the 90’s and led to a decision to use gas for making electricty which is an inherintly wastefull use – and is now a problem that we should address.  That is, we should not really be buring gas to make power in New Zealand given that we could very easily be doing it with renewables.

The government is aware that the long term global situation with Crude Oil is not good – freeNRG4NZ believes that as a country we should be moving towards more government control of our resources, it is negligent and lazy to leave strategic decisions to private companies that are driven by short term thinking – companies that send our oil wherever it might save a few dollars for processing, and close down gas to liquids plants just because it suits them regardless of the National Interest.

With the recent talk of even more oil resources possible here (see “NZ likely Texas of the South“) government could be and should be setting a goal of complete Crude Oil Energy Independence for New Zealand – there is an Oil Crisis coming.

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Discussion

2 thoughts on “#5 New Zealand Oil – Imports, Exports and Other Basics

  1. Hello.
    Would you mind if I share your blog with my facebook group?
    There’s a lot of people that I think would really enjoy your content. Please let me know. Many thanks

    Posted by Valentin | March 23, 2013, 1:16 am

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