Talisman brings in partner

PAPUA New Guinea may look like a one-trick pony in global gas markets, with only the ExxonMobil-led PNG LNG project under construction.
But Talisman Energy’s move to bring in a partner on its acreage in the country is a reminder that there are other games in town.
Talisman has appointed Sydney-based advisory firm RFC Corp Finance to find an investor for four licences in the forelands of western and Gulf provinces, which contained a mix of gas discoveries and exploration targets.
The company reckoned it can aggregate between two trillion and four trillion cubic feet of gas in PNG – enough to underpin a single unit producing liquefied natural gas, or LNG, for export.
“Our intent was always to seek a strategic partner in what is a very large license interest position, once sufficient resources have been aggregated,” Dave Mann, a spokesman for Calgary-based Talisman, said.
“RFC represents a formal process to execute on this.”
Once a frontier region for exploration, PNG had been transformed into a playground for the ener­gy industry’s big beasts seeking gas reserves that can be developed and shipped to Asia’s booming economies.
Talisman drove that process in the forelands area in 2009 and last year, completing deals such as the US$177 million acquisition of Rift Oil and taking stakes in gas discoveries owned by ASX-listed Horizon Oil.
According to a BP study, PNG had 15.6 trillion cubic feet of proven reserves of natural gas at the end of last year.
That figure likely underestimated the true resource as PNG has been lightly explored up to now.
Talisman was offering to sell a 50% interest in the PPL 235 and PPL 261 licences, which it wholly owned, and 10% stakes in the PRL 4 (Stanley) and PRL 21 (Elevala/Ketu) blocks.
RFC was calling for binding bids to be submitted by the end of next month.
PPL 235 contained the Puk Puk, Douglas and Langia discoveries that contain a combined 2.4 trillion cubic feet of gas in place. Three exploration wells had been drilled so far in PPL 235, which it acquired through the Rift Oil takeover, and all have discovered natural gas.
“The exploration activity in these blocks has matured a series of drillable prospects with exciting prospective resource potential, and we are looking for a partner with a similar vision to Talisman for aggregation of gas resources in the PNG Foreland,” Mann said.
PRL 4 and PRL 21 also contain discovered resources, but the near-term focus was on developing reserves of condensate there with a view to bringing the gas to market later.
For now, Talisman was keeping its options open on a route to market for the gas.
It could pipe gas to the US$15.7 billion PNG LNG project to support an expansion there.
In its first phase, PNG LNG will have a annual production capacity of 6.6 million tonnes of LNG, with shipments to customers in Japan, Taiwan and China due to begin in 2014.
Piping the gas to PNG LNG was attractive because it would likely be cheaper than building and operating an onshore plant, or locating a floating LNG vessel in the Gulf of Papua.
But to strengthen its hand in any negotiations with Exxon and joint venture partners like Santos and Oil Search, Talisman likely needed an alternative route to market.
If it succeeded in attracting a strategic partner with deep pockets, such as from China or Japan, then it opened doors for potential financing of a standalone LNG development.