New Zealand gas pipelines: past, present and future

Top: Pohokura drilling rig departure. Image courtesy of Shell Todd Oil Services. Bottom: Reaming of the Kupe pipeline. Image courtesy of Drilltec.

Top: Pohokura drilling rig departure. Image courtesy of Shell Todd Oil Services. Bottom: Reaming of the Kupe pipeline. Image courtesy of Drilltec.

For what it lacks in length, the pipeline network of our trans-Tasman neighbour makes up in volume. In this edition of The Australian Pipeliner we review the recent history of oil and gas pipeline networks in New Zealand and look to the future to see what potential developments are on the drawing board.

A unique feature of New Zealand’s gas infrastructure arises from the divergent approaches taken by the North and South Islands. Whereas the North Island boasts an extensive gas pipeline network, the South Island’s gas needs are primarily served by tankers and bottles. In part, this is because the New Zealand gas industry and pipeline network has developed around the life of large, developed fields primarily in the 100,000 sq km Taranaki Basin on the country’s west coast.

Discovered more than 100 years ago, the Taranaki Basin holds recoverable gas reserves estimated at 5.5 Tcf through many different types of reservoirs ranging from large, deep gas targets to small, low-risk, shallow gas reserves. All of the country’s gas needs are currently produced from both offshore and onshore fields in the basin, which has been central to the development of the country’s gas pipeline network.

With more than 3,400 km of high pressure gas pipeline, New Zealand’s transmission network is comprised of five major systems, including the Maui gas pipeline and Vector’s South, Central, North and Bay of Plenty subsystems.

A look at the past:

The Maui field and pipeline system

Of the 15 fields in the Taranaki basin, the Maui field has historically dominated New Zealand’s gas production, recently producing some 57 per cent of the country’s total gas. Located 35 km off the Taranaki coastline, the Maui field comprises two production platforms and a single submarine pipeline that transports liquid and gases for initial processing before being piped onshore to the Maui production station. The field was discovered in 1969, however full production from Maui began a decade later, with 14 wells drilled from the platform in a water depth of 110 m – considered a deep water platform at the time.

The 307 km Maui gas pipeline was commissioned in 1973 by a joint venture of McConnell Dowell and Saipem as part of the field’s development. The 34 in. diameter pipeline is New Zealand’s largest capacity gas pipeline, extending from the Oaonui Production Station (south of New Plymouth) to Huntly Power Station (south of Auckland) in the North Island of New Zealand.

Before October 2005, the pipeline was reserved for carrying gas from the Maui field, in accordance with the Maui gas contract, however an open access regime now governs the operation of the pipeline, enabling gas from a number of Taranaki fields under development to be transported to market. It currently transports about 73.7 per cent of the country’s gas production, pooling gas from the Maui, Pohokura, McKee and Mangahewa fields.

Over its life, the Shell Todd Oil Services-operated field has produced some 3,008 Bcf of gas and 19.8 MMbbl of LPG. While recent efforts have focussed on proving up gas reserves, over 260 PJ over the last two years, production from the field has been declining rapidly from almost 5 Bcm in 2001 to 2.25 Bcm in 2006 indicating the economic life of the field is much shorter than previously assumed.

The Kapuni field and growth of the major subsystems

The Kapuni onshore field, which is also operated by Shell Todd Oil Services, is the country’s oldest producing gas-condensate field. Located in Taranaki, about 85 km southeast of New Plymouth, the field contributes some 17.3 per cent towards the country’s gas production, making it the country’s second-largest field.

Though discovered in 1959, gas from the Kapuni field had a carbon dioxide concentration of approximately 40 per cent, and therefore required special processing. As there was inadequate natural gas infrastructure at the time, it was not until 1967 that a gas market was established for the Kapuni gas and the field was brought onstream in May 1970 with the commissioning of the Kapuni – Huntley gas pipelines.

In 1968, the 543.5 km Kapuni – Wellington pipeline was built. In combination with the branch extending east to Palmerston North and Hastings, the pipeline comprises the 696.1 km South Subsystem.

In 1969, gas transmission pipelines were constructed by Natural Gas Corporation linking Kapuni with the northern markets, comprising two separate subsystems, the North and Central.

The 363.1 km Central Subsystem comprises the 14 in. diameter Kapuni – Huntly pipeline, which was built by McConnell Dowell along a similar route as the Maui pipeline. Currently the pipeline is the only access to northern gas markets for non-Maui gas and is therefore well utilised, although its capacity is less than one tenth of that of the Maui pipeline
(11 PJ/a compared with Maui’s 125 PJ/a).

The growth of gas and major expansions of the North Island system

In the early 1980s, gas consumption trebled from about 32.9 PJ in 1980 to 105.1 PJ in 1984. In order to meet increasing demand, a number of major pipelines and extensions were built.

In 1984, the Huntly – Gisborne pipeline was built, which served demand on the west coast of the North Island from four large consumers (the Hospital, Watties, Gisborne Refrigeration and Advanced Meats). The pipeline and its laterals to Taupo, Tauranga and Rotorua comprise the Bay of Plenty subsystem and extends for 608.3 km.

In 1986, the 373.7 km Kapuni – Huntly pipeline was lengthened to transport gas to Auckland and eventually Whangarei and Kauri in the far north of the North Island. The 14 in. diameter pipeline was aptly-named by pipeline owner Natural Gas Corporation as the North Subsystem.

The Frankley Road pipeline is owned by NGC and runs from the Maui pipeline at Frankley Road to the Kapuni treatment statement, a distance of 47 km. The 20 in. pipeline carries specification gas and is able to carry Maui gas to the South Subsystem. In September 2005, upgrades to the pipeline have added bidirectional capacity, allowing it to carry gas from the southern Taranaki fields like Kapuni, Rimu and Kauri to the Maui pipeline.

The Pohokura gas field

The decline of the Maui field has prompted a flurry of exploration, but few successful discoveries. The major exception is the Pohokura Basin, which is located in the Taranaki Basin. The Pohokura Basin is the country’s third-largest gas producing field, producing some 8.6 per cent of the country’s gas production and has estimated recoverable reserves of about 700 Bcf.

Development of the field has involved the drilling of three wells from a land-based site at Motunui and six from an offshore platform located 8 km off the coast. First commercial gas flowed in September 2006 from three onshore extended reach drilling wells in the southern part of the field tied to the unmanned platform, a 12 in. diameter 8 km subsea gas pipeline.

The other parts of the project include an onshore processing plant at Motunui, a gas export pipeline that ties in to the Maui line at Bertrand Road, and a 34 km condensate pipeline to the Westgate Port at New Plymouth for export of liquids. The 7 km onshore pipeline has been installed by New Zealand engineering firm BTW, which connects the existing Todd pipeline network to the Pohokura production station.

In March last year, gas and condensate flowed from the first of six planned offshore wells. Natural gas from the Pohokura field is fed into the North Island gas network, and the condensate is piped to storage tanks at Omata near New Plymouth for shipping to refineries.

Present

While the Pohokura field is likely to fuel New Zealand’s gas requirements in the near term, there are a number of other developments that have spurred pipeline development, as in the case of the Kupe field, or have the potential in the future.

The Kupe gas field

The Kupe gas field is one of New Zealand’s largest undeveloped gas fields and is located 30 km off the New Zealand coast, south of Taranaki Basin. The field, which is being developed by a joint venture between Origin Energy, New Zealand Oil and Gas, Genesis Power and Mitsui E & P, contains proved and probable (2P) reserves of over 230 PJ of sales gas plus considerable condensate and LPG, with additional reserves potential.

The development involves an unmanned offshore platform constructed above the Kupe field production wells and a 30 km, 12 in. subsea pipeline that will deliver the raw natural gas, LPG and condensate to the onshore production station near Hawera. The offshore gas pipeline was recently installed by Technip’s Apache vessel, a single-reel pipelayer which is a first in New Zealand.

The development’s focus has recently shifted to its onshore components, with construction progressing on the onshore production station. The erection of the condensate storage tanks has also commenced along with the installation of sales gas pipeline between the Kupe Production Station and the Kapuni Gas Treatment Plant. The project is progressing on schedule to be completed by mid-2009.

Rotowaro – Auckland gas pipeline

In 2005, Vector secured approval from government authorities for a new loop pipeline from the Rotowaro compressor station near Huntly to East Tamaki in southern Auckland. The 89 km pipeline is being built in order to meet anticipated future load in Auckland, which has recorded the fastest growing energy consumption rate in New Zealand. Construction has not yet commenced on the pipeline.

Auckland – Southdown Power Station pipeline

The only other major pipeline on the drawing board for Vector is a 1.6 km connection between Westfield Delivery Point in Auckland to the Southdown Power Station Delivery Point also in Auckland. Approval for the pipeline is currently being sought.

Through the looking glass: New Zealand’s pipeline future

As New Zealand’s history has shown, the development of pipelines has been primarily driven by exploration and major gas finds.

In this regard, the Taranaki Basin not only reflects the history of New Zealand’s gas production, but also holds promise to continue supplying the country’s gas needs. Analysts have suggested that the basin is likely to house many significant sized resources and it is considered under-explored in comparative terms. A number of other gas opportunities are currently being assessed onshore in Taranaki, but these are generally smaller fields, with incremental volumes only. Offshore Taranaki has the potential for larger discoveries, but is currently not being extensively explored, with little drilling being undertaken.

New Zealand Oil and Gas (NZOG) Chief Executive Officer David Salisbury believes this is because the geographical isolation of the country and limited infrastructure for the oil and gas industry meant that ‘big industry players’ tend to overlook New Zealand. He also believes that New Zealand has excellent prospects for further exploration in a safe and secure location and that further resources potential exists in the Taranaki Basin as well as bigger potential in frontier basins.

Frontier basins and new gas pipelines

One such frontier basin is the Upper Wairoa field, which is located in the upper east coast. In July last year, US-based company Westech Energy started a promising further appraisal to revisit the Wairoa reserves.

If these reserves are proved to be commercially viable, they will require construction of a new gas pipeline to Hastings, since the field is not located near the existing gas pipeline system.

The other major frontier field is Wairarapa, located about 20 km south of the North Island. Drilling has only recently started, but if the field is demonstrated to be commercially viable, it will require construction of new gas pipelines. If it is connected to the existing system near Wellington, it is likely to require construction of looping capacity or an additional pipeline may need to be built that transports gas to Wanganui.

CSG for the South Island?

While the North Island has seen and is likely to continue to see a considerable amount of exploration and development, the South Island has become an attractive focus for Wellington-based coal seam gas (CSG) company Macdonald Investments.

In September last year, the company was awarded the first New Zealand mining permit for CSG, for an area near Greymouth on the west coast of the South Island. The permit, PMP 50100, covers a 170 sq km onshore area both north and south of the Grey River.

Project Manager for Macdonald’s Westgas CSG project, Alberto Kamenar, said that Macdonald did not have access to a pipeline infrastructure in the South Island to deliver natural gas to the markets, and there were a number of different options for getting gas to consumers.

Conventional gas exploration in the South Island has also been receiving attention with Widespread Energy awarded PEP 50439, located in the West Coast Basin.

The offshore exploration license has been granted to Widespread for a period of five years and covers an area of 3,269 sq km.

Late last year, L&M Petroleum finalised arrangements to farmin in the onshore area of the Westland Basin and planned to focus on two mapped prospects, Fireball Creek and Pounamu, as well as several gas leads.

Prospects for future

Over the last two years, a number of major changes have affected New Zealand’s gas market, which have impacted and are likely to continue to assert an impact on gas exploration and pipeline development.

While exploration activity has increased over the last decade, the focus has generally been on small onshore prospects. Consequently, the wholesale gas market in New Zealand has moved from a stable supply of gas from the Maui and Kapuni fields under long-term contracts, to supply from many more fields, under short-term contractual arrangements involving much smaller parcels of gas.

Exploration remains a high risk activity in New Zealand, in part because the country’s geographic location, coupled with low exploration activity, makes the cost of rig mobilisation high, particularly for offshore drilling. However analysts believe that larger prospects are likely to exist because prior exploration activity has been limited and because explorers are reluctant to explore outside Taranaki, where there is an absence of established infrastructure.

In order to stimulate more exploration, the New Zealand Government has reduced gas royalties from 5 to 1 per cent. This is likely to spur the re-examination of a number of offshore prospective basins by major gas explorers for the first time in over 20 years, which may breathe new life into the industry.

The New Zealand gas and pipeline industry has been characterised as being cyclical around the life of large developed fields. The New Zealand Ministry of Economic Development notes that Maui captured a dominant market share, but also underpinned the exploration activity and assessment of other fields. It also provided the scale of activity that enabled construction of the necessary supporting infrastructure like pipelines. Another large field could again change the market dynamics significantly, especially given the recent growth in gas consumption.

In 2007, these trends have culminated in gas production increasing by almost 20 per cent to 160 PJ/a. This is expected to continue with the Pohokura field ramping up production and the development of the Kupe Basin. Despite having a long history, the Taranaki Basin continues to have a bright future with construction of new gas pipelines, sustained exploration in offshore prospects and development of frontier basins.

Smaller Pipelines

New Zealand is also host to a number of smaller transmission pipelines:

  • LTS pipeline (Vector Transmission) — used to supply non-specification, high CO2 gas from Vector’s Kapuni gas treatment plant to Methanex’s Waitara Valley methanol plant.
  • Kapuni – Hawera pipeline (Todd and Shell) — running from the Kapuni production station to the Kiwi co-generation station at Hawera. Use of the pipeline was expanded when Shell and Todd entered into an agreement to supply untreated Kapuni gas to Taranaki By-products which is also in Hawera. This 22 km pipeline runs parallel to the NGC South pipeline.
  • TAW pipeline (Swift Energy) — running from the Waihapa production station through to Stratford and on to New Plymouth. The pipeline runs parallel to the Frankley Road pipeline for a significant part of its route.
  • Rimu to South subsystem pipeline (Swift Energy) — running between Rimu production station to a tie in point on the VT system. The pipeline is approximately 600 m long with a nominal diameter of 150 mm. The pipeline is used almost exclusively for the purpose of transmitting gas produced from the Rimu field and test production from the Kauri wells that has been processed in the Rimu production station, to Vector’s network.
  • McKee production station to Faull Road pipeline (Todd) — this comprises two pipelines that are dedicated to transporting gas from Todd’s McKee and Mangahewa gas fields to the Faull Road mixing station. Both lines are 6 in. diameter and are approximately 10 km in length. The second line was added to debottleneck the system to accommodate extra production from the Mangahewa field.
  • Surrey Road pipeline (Westech Energy) — carrying non-specification gas from the Surrey gas field to Vector’s LTS pipeline, a distance of around 1.2 km.

Pohokura twin gas and condensate pipelines

Auckland-based mechanical engineering firm Robt Stone was contracted by Todd Energy to install a 7.5 km steel twin 400 NB gas and 100 NB condensate underground pipeline. The pipeline crossed State Highway 3, going under seven gas/hydrocarbon trunk lines and across two streams.

The Robt Stone contract for the Pokohura pipeline project in New Plymouth started in October 2005 and was completed in September 2006.

Together with the installation works, Robt Stone provided the following related services:
 

  • Close liaison with the local community;
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  • Above ground gas and condensate processing connections at both ends; and
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  • Provision of significant traffic management as the pipeline followed the contours of the local road system.

In October 2007, Robt Stone was acquired by Tenix Alliance, one of Australia’s leading infrastructure service providers offering design, fabrication, construction, operations, maintenance, SCADA and project management services in electricity, gas, rail, water and industrial markets.

NZ LNG? Or is it a pipe dream?

Late last year, Contact Energy said it would continue to develop the option of importing LNG to secure New Zealand’s energy security when production from the Maui field further declines.

Genesis Energy and Contact Energy have selected Port Taranaki in New Plymouth as the preferred site for a proposed LNG import terminal that would pipe LNG from a purpose-built berth at the port to the New Plymouth power station.

The proposed terminal would involve the construction of a new berth at the end of the main breakwater inside the Port of Taranaki, with the LNG being piped adjacent to the breakwater and stored in a new tank in Contact’s New Plymouth power station. The LNG would be regasified and transported through the Maui pipeline where the purchaser could access it.

Access and land agreements have already been reached between Port Taranaki and the power station.

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