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Status of Licenses and Commitments - petrengr1 - 05-08-2013
The following questions were related to PRL 15:
IOC is supposed to fulfill certain criteria to maintain their license after June. Of course, this can always be extended by mutual agreement with the government.
Does the JVOA fulfill this requirement and if not, what remains to fulfill the requirement without depending on an approval of extension or variance??
My answer follows and covers more that PRL 15:
I am not an expert on this but I will give you my opinion. All of this stuff is in the hands of the Government. Here is the Oil and Gas Act of PNG.
If you search this document for “minister” you will find it mentioned 564 times. It frequently says “Minister may” or “Minister shall”. In other words almost everything is left up to the minister. As you know there are some changes currently being made in the PNG Government so maybe some of that will change.
Regarding PRL 15, the first five year term of our license does not expire until November 29, 2015 and we can have two five year extensions.
Here is IOC’s latest Annual Information Form:
“On November 30, 2010, we were granted PRL 15, covering a total of nine graticular blocks including and surrounding the Elk and Antelope fields and extracted from PPLs 237 and 238. This PRL unifies the Elk and Antelope fields into a single license and separates the fields from our exploration acreage. The PRL has a separate minimum work program and expenditure commitment and is valid for five years to November 30, 2015.”
If you look at page 23 you will see the license expiry date for all of the licenses.
“Petroleum Retention License 15
Petroleum retention licenses may be granted to licensees of PPL’s in which petroleum fields or parts of petroleum fields have been discovered to permit time for the licensee to develop the means for commercialization of the gas discoveries. In August 2009, we applied for a PRL over the declared location and on November 30, 2010, PRL 15 was granted by the State and was excised from of PPL 237 and PPL 238.”
Regarding PRL 15 and our “potential” partners, the development work can not be started until we have a PDL (Production Development License), I expect the current ongoing discussions with the Government will probably include some type of assurances from the Government that a PDL will be granted. It may be that the PDL will be granted on or before the date the sell down is announced.
On the other hand the Government may not be in any hurry to grant a PDL because after granting the PDL the Government owes IOC for their 22.5% share of the sunk costs for the development of the Elk/Antelope Fields.
Regarding the JVOA’s I am not too sure what they mean. We have a partner in PPL 237, that being PRE, and we also had Carlo Civelli’s Company (Pac LNG) added to PRL 15 for a 2.5% interest. So the JVOA’s could just be to cover existing partners. The new partner(s) may be covered by these JVOA’s but more likely they will negotiate new agreements with both IOC and the Government. That and the PDL may be part of what is holding up the sell down announcement.
We have the following commitments in PRL 15:
Petroleum retention licenses may be granted to licensees of PPLs in which petroleum fields or parts of petroleum fields have been discovered to permit time for the licensee to develop the means for commercialization of the gas discoveries. In August 2009, we applied for a PRL over the declared location and on November 30, 2010, PRL 15 was granted by the State and was excised from of PPL 237 and PPL 238.
The initial period of a petroleum retention license is for five years and further extensions of two 5-year terms may be granted at the discretion of the State.
The total financial commitment over the first five year term of PRL 15 amounts to $73.0 million. Following are the work commitments for PRL15 for the first two years of this term, ending in November 2012.
Drill 2 wells in the Elk and Antelope fields;
On June 27, 2012, we submitted an application for a variation of the PRL15 License commitment to extend the well commitments into years three and four of the License. After the successful mobilization and spudding of the Antelope-3 on September 8, 2012 we submitted a request to modify this variation to the extension of 1 well obligation into Years 3 and 4. The variation was granted by the DPE on November 27, 2012.
Petroleum Development License (“PDL&rdquo
In order to progress the proposed development and commercialization of the Elk, Antelope and Triceratops fields, we will need to apply for and obtain a PDL from the State. Assuming that a PDL is issued, it will replace PRL 15 and include the Elk and Antelope fields and additional acreage required for in-field facilities and gathering systems. We will also need to apply for and be granted a Petroleum Processing Facilities License (“PPFL&rdquo
for the LNG Project and Pipeline Licenses (“PLs&rdquo for the dry gas and condensate pipelines. We have commenced preparation of an application for a PDL.(As far as I know they have never actually submitted the application for the PDL.)
“The application for a PDL is made to the DPE and must be accompanied by detailed proposals for the financing, construction, establishment and operation of all facilities and services for and incidental to the recovery, processing, storage and transportation of gas from the PDL area. Collectively these will constitute the Development Plan. In addition, certain agreements and approvals from the State will need to be in place prior to the grant of the PDL including a gas agreement defining the fiscal regime applicable to the development and providing for the State’s equity participation in the fields. Environmental approvals will be necessary and we will also be obliged to submit comprehensive social mapping and landowner identifications studies of those customary landowners within the PDL area. Ministerial recognition of landowner groups is customarily based on such reports.
Upon application, the State will undertake a comprehensive review of the Development Plan and any other incidental agreement or approval required before granting the PDL application. Following its review, the State shall take steps to conduct a ‘forum’ as set out under the Oil & Gas Act. The forum requires that the State co-ordinate a meeting for all affected stakeholders including the provincial, local level governments and customary landowners with a view towards establishing a regime for the distribution of royalties and other benefits that will arise from the commercialization of the fields.
Once all formalities are completed and the State is satisfied, the State may grant the PDL, the PPFL and the PLs. Should the licenses be issued, the acreage would be held subject to; (i) periodic review provided for in PNG’s Oil & Gas Act, and (ii) the license holders continuing to meet commitments associated with the license grant.”
“Wells in both PPL 236 and PPL 238 are required to be drilled by March 2013 in order to meet our license commitments. During November 2012, we lodged an application for variation to extend the term of our Licenses and to defer our drilling commitments with the DPE. As at February 27, 2013 no decision had been advised with respect to our applications for variation.”
The following are the work commitments for PPL 236 for the remaining two-year term of the PPL, ending in March 2013:
A minimum expenditure of $ 9.85 million;
As at February 27, 2013, we have submitted to the DPE a request for a variation of the drilling commitment under PPL 236 by deferring it into year five of the second term. As required under the Oil & Gas Act, we submitted a work program and expenditure proposal for year five. We are still awaiting confirmation of the approval of the variations from the DPE.”
“PPL 237 consists of 34 graticular blocks covering an area of 3,238 square kilometers or 715,648 acres. On November 30, 2010, a total of four graticular blocks were excised from PPL 237 and incorporated into PRL 15.
The following are the work commitments for PPL 237 for the remaining two-year term of the PPL ending in March 2013:
Minimum expenditure of $10.0 million;
We intend to apply for a PRL over an area of PPL 237 surrounding the Triceratops gas and condensate discovery totaling 9 graticular blocks.
As at February 27 2013, we have submitted a work program and expenditure proposal for year five of PPL237. We are still awaiting confirmation of the approval of the variations from the DPE.”
“The following are the work commitments for PPL 238 for the remaining two-year term of the PPL ending in March 2013:
Minimum expenditure of $ 10.0 million
On December 5, 2012, we submitted a request for a variation of the drilling commitment to be replaced by the Airborne Gravity and Magnetics and Seismic that had been acquired in 2011 and 2012. We also submitted a work program and expenditure proposal for year five.”
So, while this was not your question, we did not meet our drilling commitments for PPL 236 and PPL 238 by the end of March 2013. We have applied for a variance to allow us to move these drilling commitments (or use other prior expenditures in the case of PPL 238) into the last year of the 5 year license which will expire in March 2014. They have also applied for an extension of the licenses (at least for PPL 236 and PPL 238) as shown above.
As far as I know the Government has not yet approved the extension of the licenses or the moving of the drilling commitments for PPL 236 and PPL 238 from year four to year five. They did approve the extension of the drilling commitment for PRL 15 which covers Elk 3.
RE: Status of Licenses and Commitments - sageo - 05-09-2013
Pet - Thanks for your fine research concerning our leases. I know it wasn't your intent, but I will not sleep very well tonight as I ponder all the....."ifs,ands,maybes etc" and " we are waiting ,we are hoping ,we are watching ect", "but and the howevers" . Had to read twice ,but still didn't feel very relaxed after that. Maybe some of our lawyers on the board might have the time to comment about al the leagaleze . Just a thought. Thanks again.
RE: Status of Licenses and Commitments - Getitrt2 - 05-09-2013
sageo, I think all this is something to be aware of as time passes, but, if it helps any, I am not losing any sleep over it now because the Company does not see any of it as issues of concern at this point. IOC and the government have agreed to give all priority now to E/A and Triceratops, with planned drilling there in excess of mimimums. Extensions have been submitted and are expected on PPLs 236 and 238, with wells likely in those by March 2014, all within the terms of the laws for allowable extensions, etc. It is also worthy of note that although no wells have yet been spudded in PPLs 236 and 238, significant expenditures have been made for seismic and other work, including drilling site preparations, as called for in the leases, which I understand from the Company carries a great deal of weight with the government.
RE: Status of Licenses and Commitments - sageo - 05-09-2013
'Getitrt2' pid='22096' datel Wrote:sageo, I think all this is something to be aware of as time passes, but, if it helps any, I am not losing any sleep over it now because the Company does not see any of it as issues of concern at this point. IOC and the government have agreed to give all priority now to E/A and Triceratops, with planned drilling there in excess of mimimums. Extensions have been submitted and are expected on PPLs 236 and 238, with wells likely in those by March 2014, all within the terms of the laws for allowable extensions, etc. It is also worthy of note that although no wells have yet been spudded in PPLs 236 and 238, significant expenditures have been made for seismic and other work, including drilling site preparations, as called for in the leases, which I understand from the Company carries a great deal of weight with the government.
Getitrt2 - Thanks for your response . Appreciate the comments .
RE: Status of Licenses and Commitments - Tree - 05-11-2013
Pet attempted to provide a status update on PDL and licenses in his post:
http://shareholdersunite.com/mybb/showthread.php?tid=3568
I appreciate all effort to keep the record straight. I disagree with many of the assumptions in this post which are incorrect IMO and may fuel undue frustration in some investors.
Facts are friendly unless you are banned from SHU.
It is key to understand the specific Legal Nature of operating in O&G in PNG. PNG has the most advantaged framework for IOC to operate within that we could hope . We needn't to borrow trouble and IOC needs only to perform as they re mandated and license extensions and approvals will be earned.
My thoughts are as follow.
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If you search this document for “minister” you will find it mentioned 564 times. It frequently says “Minister may” or “Minister shall”. In other words almost everything is left up to the minister. As you know there are some changes currently being made in the PNG Government so maybe some of that will change.
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The 'Minister' serves at the will and pleasure of the PM of PNG. The Minister is obligated to operate within the confines of the O&G Act and all other subsequent agreements based upon the terms within. Nothing is 'left up to the minister' as if he has free reign. The Minister's last name is not Castro or Chavez and never will be in a Commonwealth Nation. The word 'May' is not a scary word in the legas context the Minister must operate within. 'May' is synonymous with 'Able'. As the developer meets their obligtions, the Minister may (is able) to meet his. An example is if IOC meets PDL requirements only then is Minister ABLE to grant PDL. More on tht later. The question is always 'Is IOC doing what it needs to satisfy their contractual obligations in PNG?' Answer - YES.
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If you look at page 23 you will see the license expiry date for all of the licenses.
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Expiry dates of licenses are most likely a non-issue. At issue - 'Is IOC doing what is needed of them to qualify for the Gov't to grant legas extensions?' Example - is IOC operating in good faith by investing in seismic, dril pad prep, road construction, etc. while in the midst of a transaction which will fatten the PNG Treasury for decades? Answer - YES.
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Regarding PRL 15 and our “potential” partners, the development work can not be started until we have a PDL (Production Development License), I expect the current ongoing discussions with the Government will probably include some type of assurances from the Government that a PDL will be granted. It may be that the PDL will be granted on or before the date the sell down is announced.
On the other hand the Government may not be in any hurry to grant a PDL because after granting the PDL the Government owes IOC for their 22.5% share of the sunk costs for the development of the Elk/Antelope Fields. |
A PRL is almost as wide ranging as a PDL in PNG. In fact, there is PNG precedent for the sale of Oil while under only a PRL in Moran.
"...As noted, the legislation gives sufficient scope and rights, in exclusivity, to the holder of an exploration licence to explore 
for 
, produce and sell or dispose of petroleum produced within the exploration acreage. The scope of a PPL is therefore as wide as a PDL . The case on point is the Moran Petroleum Project.[51] In September 1996, oil was discovered in Moran IX sidetrack well in PDL 2.[52] In early 1997, the State approved the PDL "...
LNG pre-investment hasn't been hampered by the lack of a PDL nor should it and it is ongoing. No bidders need assurnces of a PDL being granted and a lck of a PDL will not hamper a transaction in any manner. By definition of acquiring a PDL, the Gov't the Minister 'may' not legally issue a PDL currently More on that later. So there is no possibility of the Gov't avoiding sunk costs by not hurrying to grant a PDL. This is not a chick/egg situation.
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Regarding the JVOA’s I am not too sure what they mean. We have a partner in PPL 237, that being PRE, and we also had Carlo Civelli’s Company (Pac LNG) added to PRL 15 for a 2.5% interest. So the JVOA’s could just be to cover existing partners. The new partner(s) may be covered by these JVOA’s but more likely they will negotiate new agreements with both IOC and the Government. That and the PDL may be part of what is holding up the sell down announcement.
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My thoughts on statutory approval of JVOA's have evolved. My bet is the 'Gas Agrement' with PNG has been reached and now PNG and landowners have been added to the PRL 15 JVOA with existing partners IOC, PAC LNG, IPI Investors. The Gov't cannot be named on JVOA without Gas Agreement and almost surely they are now listed on the tenements. Who else could be at this time? That clears the way for a bidder chosen and named on the JVOA. Major obstabcle crossed. Fuel for the bidding war which is real.
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“The application for a PDL is made to the DPE and must be accompanied by detailed proposals for the financing, construction, establishment and operation of all facilities and services for and incidental to the recovery, processing, storage and transportation of gas from the PDL area. Collectively these will constitute the Development Plan. In addition, certain agreements and approvals from the State will need to be in place prior to the grant of the PDL including a gas agreement defining the fiscal regime applicable to the development and providing for the State’s equity participation in the fields. Environmental approvals will be necessary and we will also be obliged to submit comprehensive social mapping and landowner identifications studies of those customary landowners within the PDL area. Ministerial recognition of landowner groups is customarily based on such reports."
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Nothing at all scary or gray with this section of O&G Act. I do not understand why it is highlighted. The question should be - "Is IOC performing the requirements to earn a PDL?" Answer -YES. A PDL cannot be earned until post transaction with a FID ready project as the names and details required for PDL also apply to prudent commercial requirements to reach FID. It should be obvious to all that it is only known contractual obligations unyet known preventing IOC from a PDL.
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Once all formalities are completed and the State is satisfied, the State may (will be legally able to) grant the PDL, the PPFL and the PLs. Should the licenses be issued, the acreage would be held subject to; (i) periodic review provided for in PNG’s Oil & Gas Act, and (ii) the license holders continuing to meet commitments associated with the license grant.” |
Again, 'May' = 'Able'. Should = Developer and State both performed their obligations which leads to approvals
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As far as I know the Government has not yet approved the extension of the licenses or the moving of the drilling commitments for PPL 236 and PPL 238 from year four to year five. They did approve the extension of the drilling commitment for PRL 15 which covers Elk 3.
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Key here is recent history. Gov't is working with extensions as IOC is working within the PRL's and PPL's in good faith. If IOC was doing nothing, the licenses would be removed and sold to a developer that would explore and commercialize. Nothing to worry about here either IMO.
Bottom line is as IOC continues to perform, there is nothing to fear regarding Minister or Gov't doing their mandated jobs
RE: Status of Licenses and Commitments - sltibbs - 05-14-2013
Press release today says, "On March 28, 2013 , the Minister for Petroleum & Energy approved and the DPE registered the deferral of the well commitments for PPL 236 and PPL 238."
That helps.
Best,
Sam
RE: Status of Licenses and Commitments - sageo - 05-14-2013
'sltibbs' pid='22311' datel Wrote:Press release today says, "On March 28, 2013 , the Minister for Petroleum & Energy approved and the DPE registered the deferral of the well commitments for PPL 236 and PPL 238." That helps. Best, Sam
Sam- Thanks! It most certainly does help.
RE: Status of Licenses and Commitments - ArtM72 - 05-14-2013
Sam -
While some here think the OSH cooperation in 3tops is the best news of the release I believe the approval of the drilling deferral in 236 and 238 is the best. Just what will rigs 2 and 3 be doing 3 months from now? Hmmm. I have to think it may have to do with a decision either to rapidly develop E/A for production or quantify extent of 3tops to determine just how big an LNG plant will be built. I can imagine different bidders have different ideas about what to do, with the government all about moving to production ASAP (hence the drilling commitment deferral).
Looking good with multiple SMs and one NOC still in the horse race :-)
RE: Status of Licenses and Commitments - TxPm - 05-14-2013
Speaking of who is still in the race it'll be interesting to see if the company says anything tomorrow about JKM. Good news is all we need is one partner and it appears we still have more than one interested party which does wonders for driving the bids up
RE: Status of Licenses and Commitments - Spartina - 05-14-2013
After market seems to like it up $1.57 - At least it was 3 minutes ago...