Todd Energy has enjoyed massive growth in the upstream energy sector over the past decade, thanks to projects such as the Mangahewa field expansion. ALAN TITCHALL visited the site as Todd’s newly imported rig was about to drill its first well.
WHEN DUTCH-BORN Winfred Boeren joined Todd Energy in 2002, he tripled the staffing level to three.
Today the Todd office accommodates 120 employees as the company heavily invests in upstream energy and Winfred is general manager of development.
We are standing on the roadside high above the Mangahewa D gas-condensate field and the adjacent McKee oil field about 20 kilometres south east of New Plymouth. Both fields are 100 percent owned and operated by Todd Energy.
Way in the distance, the company’s brand new, $40 million, 450 tonne Bentec drilling rig was in the final throes of being assembled by crews from overseas. Most of it has been painted battleship grey, as requested by the local rural community, but the top with its bright ‘aviation’ warning colours stand proud.
It is surrounded by a series of low-level construction facilities, telescopic cranes and production equipment and pipes that send the gas to the McKee-Mangahewa Production Station. Specification gas is then exported to the Todd/Nova Energy McKee Peaker Plant (100MW) and Methanex’s methanol producing facilities 10 kilometres away. All oil and condensate is exported to Port Taranaki, while LPG is evacuated by road tankers for delivery to customers all over the country.
This expansion project, which is expected to cost in excess of $800 million, and which targets to mature 450 PJ of contingent gas resources, will eventually be made up of 25 appraisal and development wells, a gas processing facility expansion of 25 PJ/a, installation of an additional gas export pipeline, and additional gathering lines and wellsite facilities.
The current operation is made up of eight wells with associated facilities, connected via multiple gathering lines to the McKee- Mangahewa Production Station.
Within a few weeks of my visit to the Mangahewa-D site to review the new drilling rig, the Mangahewa 16 well (pictured below) had been spudded.
The new drill, nicknamed Big Ben, will reduce well costs and drill deeper wells, reducing the number of wellsites otherwise needed (see page 36 for technical details).
“This is a great milestone for us,” says Winfred with some pride. “Todd has been in the oil industry since the mid 1950s and has been, essentially, a venture capitalist and a shareholder in the likes of Maui, but we had no upstream operations until we took over the Mangahewa and McKee assets in 2006.”
In 2005, the company commissioned an internal study on its ability to run its own production station.
“If I look back since then we have gone through a massive change from an office with only a couple of people to a number of staff over two office floors, plus field staff, as Mangahewa goes from strength to strength.
“We were very proud at the end of 2006, just six months after taking over operations, to have the first well spudded [the very start of drilling on a new well].” It also created a lot of media attention with its huge flares on the site before the gas was piped to power generation projects including a 2MW co-generation project in 2008.
“That was a first for us and a big, $75 million project. For a company that had not done anything bigger than a $15 million well, this was a big step up.”
Through subsidiary Nova Energy, the Todd Group is now the largest owner of co-generation plants in the country. Co-generation assets include the McKee co-generation project (2009) where waste gas is being used to generate 2MW of electricity exported to the local grid.
In a separate project, a further three 3MW GE Jenbacher high efficiency gas engines were installed in a brown field area in the McKee Production Station. The plant is managed by Todd subsidiary BOPE and generates 9MW of electricity using gas sourced from the Mangahewa field. In 2009 Todd also built an LPG extraction plant at McKee.
Winfred explains why the natural gas used at these co-gen and LPG plants is not all from the Mangahewa field.
“We are also importing gas from Pohokura through the Maui pipeline to produce LPG, as the yield is higher.”
About an eighth of the gas from the STOS-owned Pohokura operation is being treated as such, he adds.
“If we treated the entire Pohokura gas Todd share we would flood the market and seriously depress the price.”
Very shortly after the LPG project commissioning Todd made the decision to go with the Mangahewa expansion project, backed by a 10-year gas supply agreement with Methanex (see page 16).
“With our costs and what Methanex spent on their plant upgrades, it is getting close to a $1 billion investment.
“And that is a big bite when you think other big projects in the region are usually done as a joint venture.”
The deal with Methanex took a very novel approach, he says, as Todd is both developing its Mangahewa field while appraising it at the same time.
“We have an expectation of where we hope to end up, but it’s not 100 percent, and I can’t tell you at this stage yet where we will drill our wells, although I’ve got a fair idea and we are using new data as it comes on-stream.
“Which is a bit unconventional in the sense that normally you do the appraisal before the development.”
The downside, he says, is that you do end up with some inefficiencies.
“You don’t get the absolute lowest costs because you can’t tender everything – because there’s not enough certainty.
“However, the benefit is that you start production and get your economics a lot earlier.”
This approach also makes supply contracts a challenge, as it is difficult to sell gas if you haven’t booked the reserves.
However, Todd did estimate enough reserves to convince Methanex to restart its Motunui methanol plant.
“We have a very innovative deal with Methanex where they accepted they didn’t get their full certainty of supply. We gave them a minimum to make it worthwhile for them to restart one of the [three] methanol production trains, and we have the right to fill a second unit with Pohokura gas if we want to.”
Although the contract allows Methanex to buy gas from other sources, Winfred say that, in hindsight, it proved good timing and Todd got the jump on other suppliers.
The portfolio supply contract with Methanex involves Todd notifying it annually of how much gas it thinks it can sell over the following year.
“A novel concept but it works for both parties,” he iterates.
Getting on with neighbours
The Mangahewa-D site sits on leased land in the middle of a working farm. The lease is a standard Federated Farmers agreement.
The biggest challenge comes via the neighbours and, with the expansion of onshore oil and gas exploration in Taranaki over the past five years, there have been a lot of well-publicised tensions between exploration companies and rural residents concerned with noise, light pollution and heavy traffic.
Winfred says Todd put a lot of work into traffic management to the site and working with the local community. The four kilometre private road leading to the site was sealed to cut out dust.
The arrival of the new drilling rig also coincided with the setting up of Todd Energy’s new rig camp facility, which not only blends into the environment and provides improved accommodation for drill teams, but allows staff to live on-site during work rotations to minimise traffic movement in the area.
The rig has the ability to ‘walk’ from one well site to another, and doesn’t have to be disassembled, which will also reduce noise and road traffic around the site.
“The rig also costs so much a day to run, the shorter the time to move it – the better the performance,” adds Winfred.
Although Todd’s decision to buy its own drilling rig was based on economics, its choice of model [Bentec from Germany] has greatly improved operational noise as its onshore features are designed for both the Europe market for drilling in densely populated areas and the weather-beaten Arctic region, and, with its ‘wind walls’ surrounding the working areas, is quite a few decibels quieter than other onshore rigs used in New Zealand.
And once the wells have been drilled, the production facility will be automated, and needing only a once-a-day maintenance visit.