By
BRIAN GOMEZ*
Oil and gas explorers in Papua New Guinea have never
had it so good despite the unprecedented political turmoil in the past nine
months.
The US$15.7 billion PNG LNG Project looks certain to
commit to construction of a third LNG train at its gleaming new 2-train plant
under construction just outside Port Moresby.
With that commitment overall export capacity by the
ExxonMobil-led consortium, which includes Oil Search and Santos, will rise from
6.6 million tonnes to around 10 million tonnes annually.
LNG exports are set to commence in 2014 to utilities
in China, Japan and Taiwan.
The projected expansion would greatly increase
profitability of the nation’s first LNG export facility. The current support
infrastructure, including a 740km pipeline, will be able to supply the third
LNG train.
“This outcome has virtually been assured with the
better than anticipated result at the P’nyang South-1 and sidetrack that is
presently being completed,” commented an industry source.
The field’s estimated 1.5 trillion cubic feet proven
and probable (2P) resource has been doubled to around 3 tcf in view of
P’nyang’s impressive 650m gas column.
With 9 tcf committed from the current LNG area, the
additional 3 tcf will go a long way towards satisfying a third train.
Development and appraisal drilling will commence
around June on the big Hides gas field, the mainstay of the LNG venture, where
the gas-water contact has yet to be determined.
The proven or P1 resource at Hides amounts to 3 tcf
with the new drilling aimed at upgrading the additional 9.5 tcf in the probable
and possible resource categories.
“If all this becomes available the project will have
more than it needs for a third train and on the way to considering a fourth
train,” said an industry participant, noting that at least 0.5 tcf has recently
been added in PNG’s producing oilfields.
News about the success of P’nyang South-1, and
speculation about early approval for a third LNG train, saw Oil Search shares
rise to an all-time high of A$7.52 on April 26 before easing back.
The evolving P’nyang and Hides story seems just the
tip of an iceberg that is forcing global energy players to take note of PNG
after the virtual collapse of hydrocarbon exploration activity in the previous
10 to 15 years.
Still somewhat on the sidelines is the New York
listed InterOil, which for more than five years had been suggesting it may
enter export markets even before ExxonMobil’s PNG LNG Project.
It obtained PNG government development approval in
late 2009 at about the same time as ExxonMobil, but kept changing its goalposts
to the annoyance of PNG’s Petroleum & Energy Minister William Duma.
InterOil anticipates that a final investment
decision could be forthcoming by the year end.
The market was nevertheless taken by surprise when
InterOil announced a few days ago that it had farmed out a 10% stake in PPL 237
(Petroleum Prospecting Licence) and its planned Triceratops well for staged
cash payments of US$116 million and additional project and resource payments with
a combined value of US$345 million.
The PNG newcomer in this deal is Pacific Rubiales
Energy, a Toronto-listed company with crude oil production in Colombia of over
250,000 barrels a day.
The potential of PPL237 is not known, but InterOil
boasts 8.6 tcf of natural gas and 128.9 million barrels of condensate at its
nearby Elk and Antelope fields, which are the subject of government approval.
Minister Duma has been reported to favour the entry
of Shell and has insisted that InterOil partners with a reputable global
producer, a process that is currently underway.
“This sale (to Pacific Rubiales) is not associated
with the planned sale of an interest in the Elk and Antelope fields and related
LNG equity partnering process targeted for the second quarter of 2012,”
commented InterOil’s chief executive, Phil Mulacek.
Canada’s Talisman Energy, was a reluctant starter in
PNG’s LNG stakes some three years ago when it tried to sell off its interest in
the offshore Pandora gas field.
It changed tack because of pathetic responses and
embarked on a gas aggregation strategy in the then neglected Western Province.
In the next couple of years it will commence condensate exports and it aims to
prove up enough gas for a three million tonnes a year LNG operation.
These prospects received a major fillip in late
February when the Japanese trading giant, Mitsubishi, invested US$280 million
for a 20% stake in nine leases that Talisman held with a number of
Australian-listed oil juniors, including New Guinea Energy, Kina Petroleum and
Horizon Oil.
Despite a difficult story when it first listed at
20c on Dec 19 last year, Kina has since enjoyed a Cinderalla performance with
its shares hitting a record 40c on May 1, a 100% rise in just over four months.
Oil Search, historically the single biggest player
with a PNG history dating back to 1929, is meantime stepping up plans to
discover enough reserves in the Gulf of Papua region for a separate standalone
LNG operation.
*Brian
Gomez, a former resources editor with The
Australian, has spent the past decade working
in Papua New Guinea
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