Business

Risk of power price rise with third Pohokura production cut

Electricity prices could be under pressure again next month as production from the offshore Pohokura gas field is to be cut for the third time in a year.

Pohokura's new operator OMV plans a range of interventions in the field’s offshore wells to optimise their production. OMV, an Austrian-based oil and gas producer took over Pohokura last month from Shell.

The work means that for safety reasons production from the five offshore wells will be stopped for about 30 days – 12 days in February and a further 18 days after that.

However, Gabriel Selischi, OMV’s senior vice-president for Australasia, said only the offshore wells will be affected.

“We anticipate that the onshore wells will be available to flow during this campaign, with no impact on onshore production levels.”

Pohokura, now owned by OMV and Todd Energy, is the country’s biggest gas producer. The field, off the coast of Waitara, typically delivers more than 70 petajoules of gas annually from five offshore and three onshore wells.

In recent years Pohokura has met about a third of the country’s gas demand.

The latest shutdown is likely to be bad news for power prices, which soared in October when repair work at the field coincided with declining South Island lake levels and other generation outages.

Despite reduced demand, wholesale electricity prices have remained high so far this year due to a combination of low wind generation, planned maintenance shutdowns, declining snowpack on the South Island, and concerns about gas supplies.

Snow storage in Meridian Energy’s Waitaki catchment was about 49 percent below average, the company estimated on January 12. Snowpack is important because it becomes water for hydro-electric generation when it melts.

Early last year production from Pohokura’s offshore wells was halted while Shell investigated leaks in the field’s pipeline to shore. Production was again halted in September when the main shut-off valve on the offshore production platform wasn’t working as it should.

Wholesale electricity cost an average $157.57/MWh in Auckland in the seven days ended Friday, according to Energy Link data.

OMV has booked China Oilfield Services’ Boss rig for the work. The 10-year-old jack-up rig, capable of operating in 120 metres of water, is in transit from Singapore on the heavy-lift vessel Red Zed 1 and should arrive in Admiralty Bay in the first week of February.

Once at the Pohokura platform, the rig will be used to perforate new production zones in the existing wells and shut off parts of them that have watered-out over time, OMV said.

Selischi said the exact duration and timing of the offshore shutdown periods will be subject to operational requirements and the weather.

He says OMV has provided customers and stakesholders, including Transpower, the Gas Industry Company and the MBIE, with the work schedule and the anticipated impact on gas availability .

OMV acquired Shell’s 48 percent stake in Pohokura, and its 83.8 percent interest in the Maui field, as part of a US$578 million purchase announced last March and finalised over the Christmas-New Year break.

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