Rick Wilkinson
OGJ correspondent
MELBOURNE, Feb. 2 -- Oil Search Ltd., Sydney, has approved the $82 million development—based on a major pipeline gorge crossing—of South East Mananda oil field in the highlands of Papua New Guinea.
Although containing only an estimated 10 million bbl of reserves, the development is significant as the first new oil field development in Papua New Guinea in a decade. It also is the first new field development to be operated by Oil Search, which took over the reins in the highlands when it purchased the assets of Chevron Niugini in October 2003 (OGJ Online, July 22, 2003).
In addition, a more favorable tax regime and innovative engineering will make development of South East Mananda feasible.
Chevron discovered the field in 1991 but considered it noncommercial because of its small size and because it lies on the wrong side of a 500-m deep, 470-m wide chasm known as the Hegigio Gorge. The discoverers could not justify the expense of a gorge crossing to connect with Agogo field facilities on the other side, which feed into the Kutubu central production hub and the head of the oil pipeline that takes highlands oil down to a shipping terminal in the Gulf of Papua.
Today the economics and incentives have changed.
Papua New Guinea, which has been increasingly concerned by the decline in the country's oil production—now down to 43,000 b/d from highs of 140,000 b/d in the early 1990s—established a new tax regime in its 2003 annual budget. It changed the income tax for new petroleum operations to 30% of taxable income, down from 45% for projects established after 2001 and 50% prior to 2001.
The new rate is available for petroleum development licenses granted before the end of 2017 as an incentive to stimulate exploration ventures. Oil Search's request that the 30% tax rate also be applied to old undeveloped marginal fields was granted in January.
Engineers also devised a plan to construct a pipeline suspension bridge from lip to lip of Hegigio Gorge to carry the pipeline to Agogo from SE Mananda. The first cables will be flown across the gap by helicopter to form a 'hanger' for a gondola to be built beneath. The pipeline will then be laid along the deck. The construction contract has been awarded to Perth-based engineering firm Clough Ltd.
At the field, Oil Search will reenter one of the two original wells to use as a producer and then will drill two more wells to ramp up production to 10,000 b/d sustained over a 6-year period. First oil is scheduled for delivery to Kutubu in third quarter 2005.
The company also is encouraged by recent seismic work in the region that indicates a possible extension of the field from the PDL2 production license into adjoining exploration permit PPL219. In addition, there are two large undrilled prospects in PPL219 called Mananda Attic and Mananda Footwall. Oil Search plans to drill one of these prospects this year.
The new SE Mananda pipeline will enhance the viability of discoveries in this previously isolated side of the gorge.
