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Kupe Gas Project gets green light to proceed

www.originenergy.com.au
ASX / Media Release
Thursday, 29 June 2006

Kupe Gas Project gets green light to proceed

The Joint Venture parties in the Kupe Gas Project in New Zealand today announced that the project will proceed to construction following a final investment commitment made by the Joint Venture.

Origin Energy Resources (Kupe) Ltd (“Origin”) as Operator of the Kupe Gas Project, said the final development was expected to be on-line by mid-2009 and will produce around 20 PJ per annum of sales gas – approximately 15% of New Zealand’s current annual demand. The project will also produce LPG commencing at 90,000 tonnes per annum and condensate commencing at 1.7 million barrels per annum, declining over the life of the field.

“A tremendous amount of technical, design, consultation and assessment work has been undertaken to get the project to this point. We are delighted now to see the fruition of this work in a decision by the Joint Venturers to proceed,” said Origin Managing Director and CEO, Grant King.

That work has included:
- design of a new onshore production station to process gas from offshore;
- extensive community consultation resulting in the obtaining of resource consents for the project;
- project reserves being increased by around 15% to 389 petajoules equivalent (PJe);
- an Alliance project delivery strategy; and
- a renegotiated gas supply contract to accommodate the higher capital costs resulting from the booming oil & gas construction market.

“The high level of associated liquids production means that the project also stands to benefit if the significant increase in oil prices, seen over the last two years to around US$70 per barrel today, is sustained into the future,” Mr King said.

In announcing the project’s approval, Origin confirmed an increase in the overall cost of the development to an estimated NZ$980 million, including appropriate project contingencies.

“We announced in October 2005 that estimated project costs were higher than originally anticipated, as a result of higher commodity prices and the unprecedented level of activity in the oil and gas market around the world. These trends have continued,” said Mr King.

“However, the renegotiated gas supply agreement, coupled with higher expected condensate and LPG prices and increased reserves announced last year, have

assisted in offsetting project cost increases and have provided the Joint Venture with the confidence to proceed."

“We’ve also taken a progressive approach to the construction management of the project through an Alliance contracting arrangement with the major contractor, Technip. Having one owner/contractor Alliance team managing all the major activities other than drilling will lead to more effective and efficient execution of the project,” Mr King said.

Speaking on behalf of the major customer for Kupe gas, Genesis Energy Chief Executive Murray Jackson said, “The decision to develop Kupe assures Genesis Energy of long term gas supplies for our new e3p power generation project. Both Kupe and e3p are critical assets which will help underpin New Zealand’s energy future and stripping out LPG will preserve New Zealand’s ability to meet the bottled gas market."

The Kupe Gas Project will comprise:
- An unmanned offshore platform at the Kupe Field supporting up to six wellheads;
- A new onshore production station;
- A shore crossing, bored under the coastline cliffs, connecting the offshore pipelines from the platform to the production station; and
- A network of onshore pipelines.

Construction is expected to commence in Taranaki in September 2006.

Commenting on the Kupe Gas Project Joint Venture parties’ decision to commit to the project, Deputy Prime Minister, the Hon. Dr Michael Cullen said, “Oil and gas have a vital role to play in the future energy mix of New Zealand. The development of the Kupe Gas Project now sees it become an important part of that mix. The importance of gas and projects such as Kupe are recognised by both central and local government,” he said.

Mayor of the South Taranaki District Council, Mary Bourke welcomed the decision. “Today’s decision demonstrates great confidence in the Taranaki oil and gas industry and solidifies Taranaki’s reputation as New Zealand’s Energy Region."

A media conference will be held today at 12.30pm at Parliament House in the theatrette, Wellington, New Zealand.

Present will be Deputy Prime Minister, the Hon. Dr Michael Cullen; Origin Energy Managing Director and CEO Grant King; Origin Energy Executive General Manager, Major Development Projects, Andrew Stock; Kupe Gas Project Director Peter Ashford; Genesis Energy CEO Murray Jackson; Managing Director of New Zealand Oil & Gas, Gordon Ward; and from Mitsui E&P New Zealand General Manager Yasuchika Maruyama; as well as other representatives from each of the Joint Venture companies.

Participants in the Kupe Joint Venture are:

Origin Energy through:
- Origin Energy Resources (Kupe) Ltd Operator 32.1875%
- Kupe Mining (No 1) Ltd 17.8125%

Genesis Energy through:
- Kupe Holdings Limited 20%
- GP No 2 Ltd 11%

New Zealand Oil & Gas Limited through:
- National Petroleum Limited, Nephrite Enterprises Limited
and Petroleum Equities Limited 15%

Mitsui E&P New Zealand Limited 4%

ENDS

Kupe Project Description

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