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Bloomberg: Shell Studies Options to Raise Output of N.Z.’s Kapuni Field

By Gavin Evans

Feb. 28 (Bloomberg) — Royal Dutch Shell Plc, the world’s second-biggest oil company by market value, is studying alternative technology to extend the life of New Zealand’s oldest gas field.

Kapuni, discovered in 1959, has pumped more than three times its original reserves estimate and Shell plans to keep it flowing by loosening “tight” rock formations, said Gaurdie Banister, Shell’s technical vice president for exploration in Southeast Asia. Shell and Todd Energy Ltd. each own half of the field, supplier of a fifth of the nation’s gas.

“The tight gas opportunity at Kapuni, we think is something that deserves better understanding,” Banister said in an interview yesterday. “We hope it’s possible to unlock more gas at Kapuni.”

Oil companies are developing new drilling techniques to meet rising energy demand by extracting oil and gas from reservoirs previously considered too deep or too complicated. Shell is the biggest gas producer in New Zealand, where rising energy demand risks exhausting fields as soon as 2015.

Shell’s $600 million Changbei project in China is the country’s first to use horizontal bores drilled off main wells to open up tight rock formations, Banister said while attending the National Power conference in Auckland, New Zealand.

The Changbei field straddles Shaanxi and Inner Mongolia provinces and is shared by Shell and PetroChina Co., the country’s biggest oil company. Production began last year and will rise to 3 billion cubic feet annually by 2008.

In New Zealand, the company will study development options for Kapuni, an onshore field, during the next couple of years, Banister said. Shell may use the rock fracturing and rig management experience gained at the Pinedale field in the U.S. state of Wyoming, he said.

Pinedale Field

Estimated to hold enough gas to heat 10 million homes for 30 years, Pinedale was barely developed for more than 60 years because of its low flow rates, Shell said in a publication on new technologies. Acquired in 2001, the field is now delivering gas from as many as 65 wells per square mile, compared with one or two wells per square mile at a conventional gas field.

The company started deliveries from its Pohokura field last year and added another 200 billion cubic feet to reserves at the Maui field by drilling two new wells from an existing offshore platform. Demand on the international market for drilling rigs makes further drilling at Maui unlikely in the short-term, he said.

Pohokura is meeting the company’s expectations, Banister said. Wells from the offshore portion of the field will be producing soon and the company should know by year-end the scope for further gas sales, he said.

Close Bidding

New Zealand’s government will next month close bidding for exploration proposals in the Great South basin off the southern coast of the country’s South Island. Fields within the region may hold as much as 7 trillion cubic feet of gas.

Banister wouldn’t say whether Shell will participate in the bid. Still, the company does have the scale and technology necessary to deliver a large-scale, deepwater project in what is a “pretty harsh environment”.

“Great South in a way represents something that plays to Shell’s strengths,” he said. “It’s not for the faint of heart.”

To contact the reporter on this story: Gavin Evans in Wellington at [email protected] .

Last Updated: February 27, 2007 15:00 EST

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