There were mixed results in the July Business NZ Performance of Manufacturing Index (PMI)for the various manufacturing industry sectors. The petroleum, coal, chemical, and associated product sector (57.5) displayed the strongest result for July, while food, beverage, and tobacco manufacturing experienced a small decline in activity (48.7). 

Strong results in petroleum, coal, chemical, and associated products can be attributed to the first two shipments of crude oil from Taranaki’s Tui oil field. This crude oil was produced on July 31 and two shipments of crude oil were loaded in early August. Strong growth in this sector is forecast to continue as some form of petroleum exploration activity is expected to occur in most geological basins in New Zealand throughout 2007 and 2008. 

Oil and gas developments, such as Tui and Maari crude oil and Pohokura and Kupe gas in the Taranaki region, are providing Jed Clampett and his kin with plenty of bubbling crude. Oil production is forecast to peak at about 28 million barrels by 2008, from about seven million barrels in 2005, and New Zealand’s self-sufficiency in oil is scheduled to climb to about 60%.

New Zealand’s first stand alone offshore oil development, the Tui project in Taranaki, is loading oil onto it’s floating production, storage and off take vessel at a rate of 42,000 barrels a day. The floating production, storage and off take vessel is designed to handle up to 50,000 barrels per day, and as experience operating the facility grows, the Tui is expected to quickly reach this peak. 

The primary markets for this crude oil is the Asia Pacific region, including the refineries on the East Coast of Australia. According to preliminary testing from the production wells, the properties and quality of Tui oil are in line with pre-production expectations. This means the light Tui oil has similar properties to oil produced from the Maui Field and crude produced in Bass Strait, Australia.

The Tui, Amokura, and Pateke oil pools are estimated to hold almost 28 million barrels of recoverable oil.   However, the reserves of the individual oil accumulations are insufficient for commercial development. Co-development of the three separate accumulations, taking advantage of their proximity to one another, is expected to yield a profitable development.

While the Taranaki offshore developments are dominating the picture of oil exploration and production, exploration is also occurring in other regions notably Northland, East Coast, Canterbury, and Southland. There could be up to 33 offshore wells drilled over the next three years, and three offshore rigs operating off the New Zealand coast, an unheard of feat.   

Onshore exploration, while not as buoyant as offshore, is also in a healthy state. The $30 million development of the onshore Taranaki Cheal oil field is nearing completion. Production from this field is expected to peak at 1,400 to 1,500 barrels per day. 

While exporters keep their eye on the exchange rate, if oil prices remain high black gold may help to maintain PMI figures. This could be good news for manufacturing, where the average value of the PMI over the last five years has been 54.5.