PNG partners continue the push for integrated 3-train LNG development
ExxonMobil and Total, respectively the operators of P’nyang and the Papua LNG projects in Papua New Guinea, have indicated their continued support for the existing proposal of a 3-train integrated LNG development.
This comes despite the PNG Government breaking off negotiations with ExxonMobil in January for a gas agreement for development of P’nyang gas field in the country’s Western Province as a 1-train extension of the existing PNG LNG project.
The Total group’s 2-train Papua LNG project signed a gas agreement with the government in 2019.
Commenting on the situation in joint venture partner Oil Search Ltd.’s 2019 full-year results Feb. 25, outgoing OSL managing director Peter Botten said the integrated development proponents, including Oil Search, strongly believe that the optimal way of developing both P’nyang field and the Papua LNG project (Elk/Antelope fields) is through integrated development, which creates substantial value for all stakeholders.
Botten said Oil Search was supportive of ongoing dialogue with the PNG Government, aimed at reaching a P’nyang gas agreement that is balanced and fair for the State and Provincial governments, landowners, and the people of PNG, while still allowing the developers to earn an appropriate return on investment.
“Oil Search is working closely with its partners and the PNG Government to help facilitate re-engagement on the P’nyang Gas Agreement and ensure that the integrated 3-train development proceeds into FEED in a timely manner,” Botten said.
“The lower capital and operating costs of an integrated 3-train LNG expansion provides efficiencies and synergies for the benefit of all stakeholders. Consequently Oil Search is focused on exploring options to reach a mutually acceptable agreement before giving serious consideration to other development alternatives. Joint venture meetings are planned over the next month to discuss ways forward,” he added.
Botten’s written comments on the subject were endorsed by new Oil Search MD Keiran Wulff during an earnings call to discuss the Oil Search 2019 results and the company’s outlook for 2020 and beyond.
Wulff said the company’s ongoing exploration program in Alaska has had some early encouraging results, including the discovery of oil in the Mitquq-1 wildcat about 9 km east of the planned Pikka Unit oil processing facility. A side-track from the wellbore has been completed and a flow test will begin in the next few weeks.
A second exploration well, Stirrup-1, in the Horseshore area 32 km southwest of the Pikka Unit has also found oil indications in the target Nanushuk reservoir. Flow test preparations are underway, the results of which will help determine if there are sufficient resources for a stand-alone processing facility or whether it would be better to develop them as a satellite to the proposed Pikka facilities.
Wulff said the discovery of this resource potential close to the Pikka facilities, along with other optimization work, has prompted a modification of the Alaskan development program. The early production system to produce 30,000 b/d is still planned to come on stream in late 2022, but full field development of 135,000 b/d has been pushed back to the first half of 2025 to enable time for fuller evaluation of the area surrounding the Mitquq and Stirrup finds.
In the meantime, Oil Search has received substantial interest in its move to divest up to 15% of its existing 51% interest in the Pikka Unit and adjacent exploration leases and is expecting to finalize the sell-down soon after the middle of this year. Oil Search will retain operatorship of all areas.
Wulff went on to say the company has begun a wide-ranging strategic review designed to re-evaluate Oil Search’s long-term vision, including its trajectory in PNG and Alaska, its position in the overall global energy business, and its response to changes in technology. The results of the review will be delivered in September.