Expiry dates are looming in Papua New Guinea for certain onshore petroleum permits at a time when exploration drilling is in the doldrums, writes Russell Searancke.
An upswing in exploration drilling had been anticipated but has not materialised, partly because of political changes that have slowed PNG's liquefied natural gas expansion plans.
So far this year, there have been no exploration wells in PNG. Only the Muruk-2 appraisal well has been drilled.
The drilling company High Arctic Energy Services said in its latest financial results that this year's change of government in PNG had "provided a reason for operators to pause" their drilling plans.
Fortunately, the new government has indicated it will accept the Papua LNG Gas Agreement and given assurances about maintaining the timelines for the expansion of the PNG LNG facility, added High Arctic.
"Based on exploration licence commitments and the increased optimism ahead for the LNG expansion, we expect drilling activity to be on pace for a ramp up in 2020," said the company's chief executive Cameron Bailey.
High Arctic, which is the leading drilling contractor in PNG, said its onshore units Rig 103 and Rig 104 operated continually through the first half of 2019.
Rig 104 was deployed on the Muruk-2 well while Rig 103 is understood to have been doing development drilling at PNG's oilfields.
Two more drilling units — Rig 115 and Rig 116 — are being actively maintained in Port Moresby in preparation for potential new work "on immediate notice", said High Arctic.
The company added "looming lease expiries" mean that it is possible operators will commit to drilling wells in order to retain their acreage. PNG officials approached by Upstream were unable to clarify how many petroleum licences are approaching their expiry date.
However, sources said it is likely that a number of exploration permits and possibly one or two retention leases are reaching end of tenure.
At the end of 2016, there were 61 active exploration permits and 10 retention leases. But there were 88 applications for new exploration blocks and four applications for retention leases.
Of the 61 active exploration titles, a significant number are owned by unknown private companies.
By contrast, the retention leases are held by established players in PNG including ExxonMobil, Total, Oil Search, Repsol and Horizon Oil — all of which except for Repsol have ambitions to develop their gas through the planned LNG expansion.
High Arctic said it was starting to see the potential for a "ramp-up" in drilling activity in 2020.
Rig 103 is expected to stay occupied through the year, while Rig 104 is being preserved in a short period of storage amid uncertainty about work opportunities in the last quarter of 2019.
"We do see some comfort and confidence that we are starting to see the ramp-up of activity in 2020 as we see the contractors really hunkering down for their planning activity of that drilling activity," said Bailey.
"The change of government did not help that exercise. I mean, it basically put a moment of pause into the activity. But I think that is for the most part, been cleared away, and it's back to business," Bailey added.
