VANCOUVER, April 4, 2013 /PRNewswire/ - TAG Oil Ltd. (TSX: TAO) and (OTCQX: TAOIF), is pleased to report that the Company's Cheal infrastructure expansion project in the Taranaki region of New Zealand has been completed. Together with TAG's existing production infrastructure and pipeline network, the Company now has the capacity to fully commercialize the successes (past and future) of its onshore Taranaki Basin assets.
This major expansion establishes TAG Oil as a completely independent processor, transporter, and marketer of the gas the Company discovers, extracts and produces, opening significant new opportunities to supply the thriving Taranaki natural gas market.
Shut-in wells now being placed into long-term production
With this completed infrastructure expansion, previously shut-in wells from TAG's successful 2012 shallow drilling program are now being placed into long term production. The Company will continue to identify areas of the new infrastructure that requires optimization, as final commissioning work continues in the coming weeks. TAG's total production capability from tested shallow wells and the new liquids potential of the expanded gas plant is in excess of 5000 barrels of oil equivalent per day.TAG Oil CEO, Garth Johnson commented, "I congratulate our entire team who have worked tirelessly to finish this project on time and on budget and they've done so to the highest safety and environmental standards. Even more impressive is the fact that during this complex infrastructure project, the team continued our unprecedented rate of successful new well drilling in Taranaki. With control of this critical infrastructure, TAG Oil is poised to grow even stronger, including new opportunities to leverage our natural gas assets." New Zealand market drives value of TAG's oil up to 30% and gas up to 100% higher than Q1 2013 North American prices. One component of the Company's strategic focus on New Zealand - and a driver of the Cheal infrastructure expansion - is the high relative value of the oil and gas TAG produces. In addition to enjoying oil prices which, in February 2013, averaged CDN$30/bbl higher than West Texas Intermediate, TAG's contracted gas price (NZ$5.40/mcf) is more than double the 2012 Canadian gas price average. In contrast to the oversupply of natural gas in North America, the Taranaki region of New Zealand is undersupplied, with further imbalance between gas supply and demand ( http://www.tagoil.com/production.asp#) forecasted for the long term. March 27 th, 2013 was a milestone day for TAG Oil as the valve connecting the newly expanded Cheal Processing Facility to New Zealand's primary natural gas transmission pipeline was opened for the first time, providing the Company the ability to market and sell Cheal gas to interested parties looking for a long-term supply of gas. TAG's $100 million state-of-the-art infrastructure expands processing capacity with a focus on safely producing oil and gas for years to come. The original Cheal facility, which was constructed at a cost of approximately $25 million by the previous operator, now has expanded oil processing capability, gas-liquids' extraction capabilities, and a new 11km pipeline to New Zealand's primary gas transmission pipeline, all at an additional cost of ~$30 million. Including the Sidewinder Production Facility, TAG now controls approximately $100 million in critical infrastructure, which positions TAG as a prominent New Zealand producer with a strong competitive edge to pursue the attractive opportunities identified within the Company's Taranaki portfolio. This expansion ensures future wells - including high deliverability gas condensate wells - can be quickly commercialized. In addition, it delivers:
- Increased oil lifting capacity;
- Increased gas compression capacity;
- Increased electricity generation capability;
- A new gas plant capable of stripping liquid hydrocarbons for sales and creating New Zealand spec gas from solution gas;
- Maximized marketability of TAG's gas production via new pipelines tying the Cheal-C site to the Cheal-A site, and a new 11km pipeline from Cheal to New Zealand's open-access gas transmission line.
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