PNG’s gas takes next step forward

The selection of key infrastructure sites for Total S.A.’s proposed Papua LNG Project is a big step forward in the development and commercialisation of Papua New Guinea’s huge Elk-Antelope gas field.

Although a place called Caution Bay might sound ominous, the PRL 15 joint venture – comprising Total S.A., InterOil and Oil Search – have enough confidence in the location’s good fortune that they have unanimously agreed to develop PNG’s second LNG plant on the site.

Situated adjacent to ExxonMobil’s PNG LNG Project, the location allows for the potential to “maximise the opportunity to pursue any potential synergies”, according to Oil Search, and follows an extensive evaluation of a range of development options conducted in 2014–15.

Central processing facilities (CPF) for the Elk-Antelope gas field will be near the Purari River in PNG’s Gulf Province, approximately 360 km north-west of Port Moresby and west of Her Base, and will be connected to the LNG facility by 75 km of onshore and 265 km of offshore gas and condensate pipelines.

Pipeline routes for the separate gas and condensate pipelines have already been determined, while further geotechnical data acquisition is due to be undertaken in the second half of 2015 to further define site locations.

Government stands ready to help

Papua New Guinean Prime Minister Peter O’Neill welcomed the decision by the joint venture to proceed with the project, commenting that negotiations will now continue to ensure that gas not only derives export income, but also provides strong direct input to economic development through downstream industries and electricity production.

“The third train of LNG is the next major economic development project for our nation, and will employ ten thousand workers in the construction phase,” the Prime Minister says.

“We have to keep moving forward with the next phase of this project, as agreed with the Total and partners, so that we reach project milestones on time and the economic benefits of the project can be realised.”

Mr O’Neill says the Government stands ready to move ahead with preparatory work, including ensuring regulatory requirements are met and processed, and environment studies are undertaken.

A further boost to PNG’s GDP

Oil Search Managing Director Peter Botten says the Papua LNG Project has the potential to have a similar impact on PNG’s gross domestic product and export revenues as the PNG LNG Project.

“This would result in a significant boost to economic activity and opportunities for the people of PNG, particularly in the Gulf Province, where the wells, onshore pipeline and CPF are located,” Mr Botten says.

“Progressing this project to the earliest practicable final investment decision (FID) remains one of Oil Search’s highest priorities.”

Oil Search Investor Relations Manager Ann Diamant says the joint venture is hoping to complete the last to appraisal wells for the project by the end of 2015.

“Antelope-4, which is a sidetrack well, given the well was unable to reach total depth initially, and following on from that the Antelope-6 will be drilled on the eastern flank,” Ms Diamant says.

Also located in PRL 15, a multi-rate production test of the Antelope-5 gas appraisal well was concluded successfully in June, with preliminary interpretation consistent with a substantial resource base and good productivity in the carbonate reservoir.

Key interests

Joint venture interests in PRL 15 are Total (operator, 40.1 per cent), InterOil (36.5 per cent), Oil Search (22.8 per cent) and minorities (0.5 per cent).

Total E&P PNG was appointed operator of PRL 15 and the Papua LNG Project in August 2015.

The appointed involved a transition agreement between Total and former operator InterOil, which will see InterOil drill the Antelope-4 well, with Total to then operate Antelope-6.

Under the agreement, InterOil will continue to provide certain technical services for Total until the end of 2015.

InterOil Chief Executive Dr Michael Hession said at the time that the company looked forward to “Total bringing its global LNG experience and resources to Elk-Antelope to develop what we anticipate will be the world’s lowest cost new-build LNG project”.

Total also holds a 30 per cent equity stake in the INPEX-operated Ichthys LNG Project as well as a 27.5 per cent interest in the Santos GLNG Project, while Oil Search holds a 29 per cent interest in the PNG LNG Project.

Meanwhile, the joint venture has so far appointed a number of key advisors for the proposed project, including Credit Agricole (financial advisor), Milbank (international legal counsel), Allens (PNG legal counsel) and PricewaterhouseCoopers (PwC) (tax advisor).

Pre-FEED to FID

The selection of the final development concept is expected to take place once appraisal of the Elk-Antelope field has been completed and the resource size has been quantified, which preliminary estimates place at 5–9 Tcf of gas.

Scheduled for early 2016, this will include the sizing and capacity of the facilities, and will be followed by front-end engineering and design (FEED).

With early works scheduled to begin no later than 2016, the Papua LNG Project is an exciting prospect for the region, especially given the success of the PNG LNG Project, and one that looks set to progress at an impressive pace.

 

Want to find out more about gas in Papua New Guinea? Keep an eye out for Gas Today’s upcoming PNG gas map in the Summer edition.

Source: Gas Today