The National, Tuesday 31st January 2012
AUSTRALIAN independent Horizon Oil and Canadian company Talisman Energy will proceed with their Stanley field gas condensate project in Papua New Guinea after reaching a final investment decision (FID) over the weekend.
The companies each owns a 50% stake in Petroleum Retention Licence 4 in the west of the nation close to the Indonesian border.
Horizon, which will be operator of the project, said that it expected to produce about 140 million cubic feet of gas, of which 4,000 barrels per day would be recovered using a two-train refrigeration plant.
Any gas not sold would be re-injected into a reservoir and saved until required for sale, with negotiations with potential buyers currently underway, its chief financial officer Michael Sheridan said in a statement.
Front-end engineering and design on the project had been completed, with the cost of developing the entire resource estimated at about A$300 million.
Sheridan said its target of first production by the end of 2013 was “aggressive, but achievable” provided there were no delays in the approval process.
The FID approval was also contingent on Horizon receiving debt financing on satisfactory terms.
The licence, close to the border with Indonesia, has recoverable gas reserves on a contingent basis are of 361 billion cubic feet while recoverable condensate is at 11.4 million barrels.
“The certified gas resource is of a scale that has the capacity to supply domestic and large industrial consumers located in the region,” Sheridan said.
Negotiations with potential customers were in train and gas sales will take place as potential customers were contracted.
Sheridan said Horizon and Talisman would apply for a production development licence (PDL) for the project from the PNG government by the second quarter of this year, expecting to receive it by the third quarter.
If awarded, this would trigger a right held by government nominee Petromin PNG to take a 22.5% interest in the project by reimbursement of both Horizon’s and Talisman’s allowable past costs associated with that interest.
If that were to happen, the stakes of Horizon and Talisman would be reduced to 38.75% each.
State Enterprises Minister Sir Mekere Morauta announced last month that cabinet had approved a gas power plant at Stanley, proposed by PNG Energy Development Ltd, to supply Ok Tedi mine, the Frieda River mine if development proceeds and potential consumers across the border in West Papua (Irian Jaya).
Sheridan also said a key social objective of the project was to supply power through rural electrification schemes to about 50,000 people in Western province.
Condensate will be transported via a 40km long pipeline to a 60,000 barrel storage tank at Kiunga base and then loaded onto a tanker at a loading facility about 1km downstream of the existing Kiunga wharf, which is the export point for Ok Tedi mine’s copper concentrate.
A special purpose 33,000 barrel river tanker with ocean-going capability has been designed to transport the condensate to market.
Sheridan said Horizon Oil had decided to make its decision at this time for several reasons.
“Firstly, it sends a clear signal to the PNG Government authorities, Stanley landowners, potential gas customers and our financiers that this is a project the company believes is worth investing in.
“Secondly, it serves to retain the interest of suppliers and contractors to the project, increasing the chances of holding to the current project cost estimate.
“And thirdly, an early decision gives us confidence to order long lead equipment, including the tanker and to fund other “early works” prior to formal award of the PDL, in order to maintain project schedule. “