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Exploration boom adds to PNG's optimism

With some vital LNG developments under way and a clutch of major operators busy searching for new plays, Papua New Guinea's oil and gas sector is gaining momentum 

Papua New Guinea’s upstream oil and gas sector is powering along compared to its regional neighbours, and there is a sense of more and better things to come.

The sector is now totally dominated by three operators — ExxonMobil, Oil Search and Total — which have sewn up the choicest acreage in the Highlands and Gulf Province/Forelands area, and have the financial might and motivation to explore for and develop oil and gas.

There are other operators such as Repsol and Horizon Oil who are working hard in the Western Province, but theirs is a more complicated route to commercialisation than ExxonMobil, Oil Search and Total, who will capitalise on the existing liquefied natural gas infrastructure near the capital city Port Moresby.

It is no secret that PNG is one of the lowest-cost LNG investment destinations on the globe, and that ExxonMobil, Oil Search and Total are likely to generate an even better cost structure in the next phase of LNG development from the Elk-Antelope and P’nyang condensate-rich gas fields.

P’nyang is a big field, majority-owned by ExxonMobil and Oil Search, that will be tied in to the expansion of the ExxonMobil-led PNG LNG facilities.

Elk-Antelope is a much larger field operated by Total, with ExxonMobil and Oil Search as partners, that will be the subject of a major upstream project tied back in all probability to expansion trains at PNG LNG.

Since ExxonMobil removed InterOil from the map earlier this year, the process of connecting Elk-Antelope to the PNG LNG facility became less complicated, and Total and ExxonMobil are in discussions for a concrete development plan for the Papua LNG project (Elk-Antelope).

Andrew Barry, the managing director of ExxonMobil PNG, says: “We believe our involvement in the Papua LNG project will complement the operator Total and take advantage of synergies with PNG LNG to realise time and cost reductions that will benefit the government, co-venturers, landowners and communities.”

“We have been impressed with Total’s commitment to the same values that we hold in ExxonMobil. We are fully supportive of Total’s plans and could not be more pleased with being a joint venture partner with them and Oil Search.”

Other operators in PNG are also trying to develop their gas and condensate resources.

In the Western Province, Repsol and Horizon Oil are the operators of a collection of gas discoveries with enough reserves to underpin the proposed 1.5 million tonnes per annum Western LNG project.

However, the route to monetization is complex and costly. Repsol’s intentions are unclear, and the Spanish company is said to be open to selling its PNG position if the price is right.

Still, the PNG government and national oil company Kumul Petroleum are determined to get a Western Province development under way.

Meanwhile, in PNG’s offshore play, Twinza Oil has made development plans for its Pasca gas field, Oil Search has ideas for the Uramu discovery, and Kina Petroleum is keen to see the Pandora field developed.

The search is on

Project development is important, but equally so is exploration, and in PNG there is enormous excitement about the remaining hydrocarbon potential. It is no coincidence that ExxonMobil and Oil Search are at the heart of an exploration resurgence.

Oil Search completed a PNG-wide prospectivity review in 2016, and found there is an estimated 7 billion barrels of oil equivalent yet to be found, 90% of which will be gas.

Oil Search’s study focused only on the areas in which it has plays — the Highlands, Gulf Province and the offshore Gulf of Papua.

In late 2016, a joint venture comprising Oil Search, ExxonMobil and Santos made a significant new discovery called Muruk with the same high-quality sandstone reservoirs as the nearby giant Hides field.

The Muruk gas discovery has de-risked several leads and prospects on-trend between the Hides and P’nyang fields, with combined unrisked potential mean resources of between 4 trillion and 6 trillion cubic feet of gas.

Targets will be confirmed by seismic in 2017 for drilling in 2018 and beyond, says Oil Search. The first appraisal on Muruk is due to spud early next year.

As for ExxonMobil, its acquisition of InterOil has given it significant new exploration acreage around the Elk-Antelope development that Oil Search has since farmed into.

Those licences contain the Triceratops, Bobcat and Raptor discoveries which, during InterOil’s time, were reckoned to be large enough to underpin a new LNG train.

Resource evaluations by Risc Advisory had Raptor and Bobcat containing 5.15 Tcf of gas and 147 million barrels of condensate on a best estimate contingent resource basis.

A separate study by GLJ Petroleum found Triceratops contained 380 billion cubic feet equivalent on a best estimate contingent gas resource basis.

Oil Search managing director Peter Botten says: “In addition to the existing gas discoveries, we have identified a number of additional leads and prospects on the acreage. We are delighted to be partnering with ExxonMobil in this exciting play fairway, building on our existing relationship within the PNG LNG and Papua LNG projects, and we look forward to commencing an active exploration programme.”

Finally, there is the offshore play, and once again ExxonMobil and Oil Search have made serious inroads in the deep-water play, while Total has applied for a deep-water block.

ExxonMobil’s Barry says: “We are also very excited about our entrance into offshore exploration, where we have picked up interests and operatorship across three petroleum prospecting licences. The licences are located more than 150 kilometres offshore at water depths averaging more than 1500 metres.”

“These blocks are ideally suited to ExxonMobil’s deep-water capabilities and strengths. We are continuing to analyse seismic data purchased in 2016, and our work programme includes shooting additional 3D seismic in the 2018 timeframe.”