Horizon Oil Ltd., Sydney, said its board approved the final investment decision to develop a condensate recovery project at Stanley field in western Papua New Guinea subject to receiving debt financing on satisfactory terms.
As a result of the decision, 11.4 million bbl of condensate will move to the reserves category. Stanley’s certified mean contingent gas resource is 361 bcf of gas. The hydrocarbons are in the Cretaceous Elevala sandstone at 3,060 m subsea.
The gas is of a scale to supply domestic and large industrial consumers for power generation. Negotiations with potential customers are in train and, as sales contracts are confirmed, the associated gas resources will also be classified as reserves, Horizon said. As condensate is recovered, gas will be sold as customers are contracted.
PNG’s Minister for State Enterprises, Sir Mekere Morauta, announced in January 2012 that the cabinet had approved a gas power plant at Stanley, proposed by PNG Energy Development Ltd., to supply the Ok Tedi mine, the Frieda River mine if development proceeds, and potential consumers across the border in West Papua, Indonesia.
In addition, a key social objective of the project is to supply power through rural electrification schemes to about 50,000 people in Western Province.
The development concept involves producing 140 MMcfd of wet gas from which initially 4,000 b/d of condensate will be recovered in a two-train refrigeration plant at the field. Dry gas not sold will be reinjected until needed for sale.
The condensate will be shipped via a 40-km, 6-in. pipeline to a 60,000 bbl storage tank at Kiunga base and then loaded onto a tanker at a facility 1 km downstream of the existing Kiunga wharf, the export point for Ok Tedi mine’s copper concentrate. A special purpose 33,000-bbl river tanker with ocean going capability has been designed to transport the condensate to market.
Front-end engineering and design for the project is complete, with an all-in capital cost estimate of $300 million, including contingency. This is the cost to develop the entire resource, about 70 million bbl of oil equivalent.
Horizon Oil, as operator, believes a target for production start at end-2013, although aggressive, is achievable if regulatory delays can be averted.
Horizon has a 50% interest in the PRL 4 license that contains Stanley field with equal partner Talisman Niugini Pty Ltd. State Petromin PNG Holdings Ltd. is entitled to acquire up to a 22.5% interest in the project when a production development license is awarded by reimbursing Horizon and Talisman’s allowable past costs associated with that interest and funding ongoing project costs.
At that time, anticipated to be in the 2012 third quarter, Horizon Oil and Talisman’s interests will fall to 38.75% each.