WELLINGTON, New Zealand, Jan. 15 /PRNewswire-FirstCall/ -- Austral Pacific Energy Ltd. (OTC Bulletin Board: APXYF; TSXV and NZSX: APX) (formerly Indo-Pacific Energy Ltd.) today announced that final agreements have been executed for the sale of gas from the Kahili gas-condensate field in the onshore Taranaki Basin, New Zealand. The Kahili gas is expected to be available to the market by mid 2004.

Natural Gas Corporation (NGC) will buy all gas produced from the field, for which initial reserve estimates are in the 4 billion cubic feet range. Kahili was discovered in November 2002; and is operated by Austral Pacific Energy, which holds a total 45% interest in the permit.

Austral Pacific CEO Dr. Dave Bennett said: "We are pleased to have achieved this further development, which will add value for shareholders in the company. The partnership with NGC is a good one and the synergies between us are excellent."

The field will be produced initially from the Kahili-1A/B well; which is expected to commence flow at 3-4 million cubic foot of gas and 120-150 barrels of condensate (light oil) a day.

The reserve estimates are likely to change either up or down after pressure tests following some months of production. At that time, consideration will also be given to drilling a second well and/or 'fraccing' Kahili-1A/B, to enhance production and revenues. 'Fraccing' is a process of hydraulically fracturing a reservoir formation to enhance flow rate of oil or gas from the well.

NGC will construct, own and operate a separation plant to process the raw well stream and install 12 km of pipelines to connect Kahili gas to the existing NGC pipeline infrastructure. Subject to receipt of the necessary planning consents construction of the facilities, at a cost of approximately NZ$8 million to NGC, will commence in February 2004.

"Finalizing this agreement with NGC is an excellent start to Austral Pacific's upcoming drilling and production schedule," Dr Bennett said. "The deal proves that small onshore gas fields in Taranaki can be a commercially viable proposition for all parties involved and we look forward to the field commencing production."

In other news, additional downhole pressure data from Cheal-1 was obtained in early January, following the extended production test late last year during which Cheal-1 production averaged 50 barrels of oil per day and 500,000 cubic feet of gas per day.

"Analysis indicates that this well is only accessing limited gas reserves from within a few hundred metres of the wellbore. Oil reserves cannot be estimated, despite steady oil production during the test. A means of selling or disposing the gas will now be sought in order to enable long term oil production to continue."

The Cheal structure is mapped as covering an area of up to eight km2 (2,000 acres) at this pay level, and Austral has decided to drill a third well from the Cheal wellsite, deviating to the north some 500m in order to test whether oil and gas pay extends across the structure.

"This well will also test the deeper Mt Messenger reservoir, in which oil was encountered in thin reservoir in Cheal-1, while a good Mt Messenger reservoir was encountered in Cheal-2. We are planning on drilling the Cheal-3 well in February," Dr Bennett said.