Total signs Papua New Guinea LNG deal
PNG is emerging as a strong LNG player following big discoveries in the area
French major Total has made its first foray into Papua New Guinea (PNG) after signing a deal that will see it join Oil Search’s Gulf of Papua exploration venture.
Following several big discoveries in the nation, Total is entering one of the hottest plays in the region as PNG fast emerges as a major Asia Pacific liquefied natural gas (LNG) player.
Australian firm Oil Search is farming down equal stakes in five licenses to Total in the onshore and offshore Gulf of Papua region. As part of the deal the pair will drill at least two exploration wells starting in the first quarter 2013 with an option for two more.
Total’s entry is relatively low-commitment, paying for back-costs and carry on two wells initially, but it does bring further credibility to Oil Search’s exploration campaign in the Gulf.
The Gulf is largely unexplored but known to have an active petroleum system. A three-dimensional seismic sweep found over 30 prospects in the basin and will test a new submarine fan play type.
The partners aim to prove up enough additional reserves that could underpin an LNG export project, which would be in addition to the two-train 6.6 million tonne per year (t/y) PNG LNG development being built by ExxonMobil, Oil Search and Santos in the remote Hela province in the PNG Highlands.
Oil Search has recently put more emphasis on the Gulf’s potential to underpin a new standalone LNG development. But drilling of the highly prospective new petroleum system in the Gulf could also provide the resource base for train four and potentially train five at the PNG LNG project. The successful appraisal of the P’nyang structure earlier this year, which confirmed 3 trillion cubic feet (cf) of gas, puts the PNG LNG partners on track to approving train three.
PNG-focused Oil Search said Total will develop and operate downstream facilities as a result of any successful exploration that leads to an LNG project. In recent years Total has been significantly expanding its presence in the Australasian region, taking stakes in both Santos’s Gladstone LNG venture and Inpex’s Ichthys LNG project in Australia.
Further to exploring and developing the Gulf area, the pair has also agreed to form a strategic partnership for further cooperation. While the focus of the agreement is to explore and develop prospective areas off Papua and the eastern forelands, both firms have agreed to look at other licences in PNG, excluding the Highlands.
Various explorers are continuing to drill outside of the major LNG project areas. But exploration costs remain high and for the sector to grow there is an increasing likelihood that bigger players will enter to finance extended drilling programmes.
A host of international firms, both big and small, have been keenly eyeing PNG. Opportunities exist in terms of established projects and known fields, but the country also holds vast swathes of unexplored acreage, which has good hydrocarbon potential.
Matt Howell, Australasian upstream analyst at Wood Mackenzie, a consultancy, says that three of the biggest discoveries, Hides, P'nyang and Elk-Antelope, lie in three different areas of PNG, indicating there is definitely the prospect for further multi-trillion cf discoveries elsewhere in the country.
Wood Mackenzie estimates that PNG holds natural gas reserves of 25.6 trillion cubic feet, with another 5 trillion to 7 trillion cf of potential.
The consultancy estimates the nation’s oil reserves at 730m barrels with a further potential of 460m barrels.
In a major vote of confidence, Anglo-Dutch supermajor Shell last year signed a long-term strategic alliance deal and a joint technical study agreement with PNG national oil company Petromin as part of its plan to build an upstream business in the nation.
In another high-profile move earlier this year, Talisman Energy reached a $280m deal with Mitsubishi that will see the Japanese firm enter nine of the Canadian firm’s onshore permits in PNG’s gas-rich Western province. The pair will aggregate the gas and could potentially export about 3m t/y.