AWE Ltd

AWE's offshore footprint extends from its Australian home base to New Zealand, Yemen, and Indonesia, and the company is accomplished at evaluating investment opportunities across countries. It has been actively participating in exploration activities in New Zealand since 1997 and has operatorship of the Tui Field, located 50 kilometers off the Taranaki Coast, where it has overseen development and subsequent production operations.

AWE was initially attracted by the geological prospectivity of the Tui area, which now comprises four producing oil wells. The decision to develop proved a favorable one: the pre-drill reserve estimate for Tui was 26 million barrels, but it has since been revised to nearly twice that amount at just over 50 million barrels.

AWE's Taranki based Chief Operating Officer Dennis Washer says while the prospectivity was attractive, the company had a number of challenges to consider ahead of its investment.

"To undertake offshore activities in New Zealand is relatively more expensive compared to other producing basins. That's just a function of our lack of scale in the oil and gas industry and our distance to larger markets where these equipment and resources are located," he says.

Similarly, AWE Managing Director Bruce Wood says discoveries in New Zealand are historically smaller by world standards. But, he says the New Zealand Government's tax take is attractive compared with other areas in the world, and helped make the company's investment viable. Under the Accounting Profits Royalty (APR) the New Zealand Government's take is 20 percent compared with Australia's 40 percent Petroleum Resource Rent Tax (PRRT).

"New Zealand APR is a lot more attractive than Australia's PRRT. That 20 percent is obviously set to take account of the fact that there are some very significant natural disadvantages that run against oil and exploration in New Zealand - the APR advantage helps makes up for that," says Wood.

Since establishing production in New Zealand, AWE has been able to share company resources between its Taranaki based operations and Australia, and runs its Western Australia operations out of New Zealand. It is an easy business arrangement partly owed to the geographic proximity between the two countries and their similar business environments.

Wood says the company has also been impressed by its straightforward dealings with the New Zealand Government's Ministry of Economic Development, which manages the oil and gas industry via Crown Minerals.

"It's very user friendly. The Ministry of Economic Development is by far the best regulator we deal with anywhere. They are very helpful, they're very easy to deal with, which is not always the way in the places we go," he says.

The Tui oil field, though now in natural decline, continues to produce around 10,000 barrels per day and makes up 40-45 percent of the company's revenues from oil and gas assets, most of which are held in Australia.

Wood says AWE's next step in New Zealand is currently under review following unsuccessful prospecting in and around the Tui Field, but he says the company continues to see potential in New Zealand based on both its geology and ease of doing business.

"All that package works well so that's why we'll be seeing what we can do to expand business in New Zealand."