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The National,Thursday August 13th, 2015

 Eastern Papua Basin/Gulf hub

The  Elk/Antelope field  has  been the  source of considerable  speculation since  it  was  discovered  by  InterOil  several  years  ago.  

The  size  of  the resource is contentious, but recent drilling indicates a resource of 7-9 tcf is likely. With the recent introduction of Total into the permits, development is now more likely.

Total has announced a proposal to construct an LNG plant, Papua LNG (PNLG), at Caution Bay near Port Moresby, next to the current PNG LNG facility. 

As experienced global LNG players, Total and ExxonMobil each want to operate an LNG project that monetises their equity gas. 

However it is hoped that the close proximity of the Total plant will allow infrastructure sharing/savings between the two projects.

Upstream processing would be done at Purari River close to the existing Elk/Antelope Herd supply base. 

Gas would be piped 75km from the Eastern Highlands processing plant to the coast near the Purari River Delta and then gas and condensate piped via a 265km offshore pipeline to Caution Bay.

The selection of the final development concept, including the size and capacity of the facilities, will likely take place in H2 2016 after appraisal of the Elk-Antelope field has been completed and the volume of reserves has been quantified. 

The development concept will provide the basis for the front-end engineering and design phase. Total is aiming to make the FID in 2017,   but   2018   seems   more   likely.   

The   delay   is   primarily   due   to uncertainties regarding the LNG market and the definition of the upstream resource and commissioning is unlikely before 2021-22. 

The participants in the project are Total (40.1 per cent), InterOil (35.5per cent), Oil Search (22.8per cent), and minor local holdings of 1.6 per cent. 

The equity interests of the participants   will   be   scaled   down   when   the   PNG   Government   and landowners exercise their rights to 22.5 per cent participation under the PNG Oil and Gas Act.

Nearby permits have high exploration potential. 

InterOil has drilled several prospects at Raptor, Triceratops and Bobcat, with additional drilling planned for Wahoo and the extensions of the Antelope field. 

Drilling has encountered gas in large, faulted reservoirs. InterOil assessed that the permits contain 17 tcf of resource potential (including the 9 tcf for Elk/Antelope).

Western Province hub

The Stanley project is the smallest of the developments proposed. It is located in Western Province on the Fly River, close to the West Papua border. 

Estimated recoverable reserves are 400 bcf (0.4 tcf) of gas and 13 million barrels of condensate/oil. 

Indicative production could be approximately 150 mmcf/d, but could be constrained to lower levels based on the current recoverable resource estimate of 0.4 tcf. 

The project would fuel domestic power generation that could be developed nearby. The Elevala/Tingu/Ketu accumulations in the nearby PRL 21 permit are assessed to have contingent reserves of 0.8-0.9 tcf of gas, 40-50 million barrels of condensate and 30 mmboe of LPG. 

The total nearby gas resource is 1.4 tcf of gas plus a significant liquids resource.   

This makes the area a potential PNG LNG gas supply source if the PNG LNG project partners’ appraisal/exploration efforts do not prove up enough additional gas supply.

Plans are already in place for condensate delivery via barge down the Fly River,  but  larger  development  for  small-sized  LNG  (maybe  1-2  mmtpa) would probably involve a pipeline from Stanley via Elevala/Tingu to Daru on the coast.

Ownership of the Stanley project is Horizon 30 per cent, Talisman 40 per cent, Osaka Gas 20 per cent,  and  Diamond  Gas  (a  Mitsubishi  affiliate)  10 per cent.  

Ownership  of  the permit containing Elevala/Tingu is Horizon 27 per cent, Talisman 32.5 per cent, Osaka Gas 18 per cent, Diamond Gas 7.5 per cent, and Kina Petroleum 15 per cent.

Commercialisation of these prospects could be hampered by the size and experience  of the participants.  

None of  the owners  have experience in development in large projects in PNG. 

Horizon is a small Australian-listed company whose value has fallen sharply in recent months due to its poor financial position, and may be targeted for acquisition.   

Repsol recently acquired Talisman. A project of this size and location may or may not be attractive to Repsol at this stage, but access to pipeline infrastructure will be a serious issue for them. 

Without a larger financially secure and/or more experienced operator, the development is likely to languish.


Gulf of Papua

The offshore basin south of PNG has long been considered prospective for gas discoveries. 

Several companies, most notably Oil Search and Santos have an active exploration programme in the Gulf of Papua. 

Mid-sized discoveries were made at Pandora and Pasca many years ago, but recent discoveries have been small. 

Potential exists for FLNG developments, but they are likely to be small as discovery sizes are likely to be 1 tcf or less. 

An active appraisal and exploration programme is starting in the Gulf of Papua to assess reserves, in fields, including Kimu, Barikewa Uramu, to support potential gas supply opportunities over next 12 months.

Domestic developments are likely to be attractive to the Government. 

Most of the economic benefit that accrues is in the form of increased government revenue  rather  than regional and national development.

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