Eric Watkins
Oil Diplomacy Editor
LOS ANGELES, Jan. 20 -- Nippon Oil Corp. subsidiary Nippon Oil Exploration Ltd. has acquired from Oil Search Ltd. (OSL) percentages in four exploration licenses for potential natural gas and oil fields in Papua New Guinea.
The Nippon unit, which will hold a 10% or 20% interest in each of the four licenses, hopes to begin joint exploration with OSL in 2009-11. It believes production at some of the fields could begin as early as 2010.
The farm-out agreements with OSL relate to the four exploration licenses: 20% of PPL219 and PPL 239, both onshore; 20% of PPL234, offshore; and 10% of PPL244, offshore.
Analyst Global Insight said the farmouts will help OSL "monetize some of its assets and reduce its expenditure commitments in the fields, allowing the company to direct more capital towards a planned exploratory drilling program due to commence in late 2009."
Nippon's purchase is its second investment in Papua New Guinea since December when its affiliate, Merlin Petroleum Co., paid $800 million to AGL Energy Ltd. to triple its interest in a proposed $10 billion LNG project, led by ExxonMobil Corp., to 5.4% from 1.8% (OGJ Online, Dec. 20, 2008).
The fields to be explored by Nippon Oil Exploration and OSL could help generate feedstock for the proposed LNG facility, which is to be constructed near Port Moresby.
The facility, the first for Papua New Guinea, is expected to export 6.3 million tonnes/year of LNG starting in third-quarter 2013 (OGJ Online, Dec. 18, 2008). Sales negotiations with Japanese utilities are said to be under way.
The December agreement with AGL Energy also increased Nippon Oil's interest in two central PNG producing oil fields, increasing the Japanese firm's share of output to 8,000 b/d from its earlier 2,000 b/d.
Late last year, parent Nippon Oil and Nippon Mining Holdings Inc., faced with sluggish demand for gasoline in Japan, announced plans to merge their operations under a single holding company to be established in October 2009 (OGJ Online, Dec. 5, 2008).
Contact Eric Watkins at [email protected].