Laying down tracks for new trains
By Russell Searancke Wellington
Papua New Guinea producer Oil Search is set on playing a key role in paving the way for the construction of at least two new liquefied natural gas trains in the country between 2019 and 2022.
The company believes one expansion train can be built at the ExxonMobil-led PNG LNG location near Port Moresby, and up to two trains can be delivered based on gas from the Elk-Antelope resource.
For an expansion of PNG LNG, the feedstock gas would most likely come from the P’nyang field operated by ExxonMobil, while the Elk-Antelope fields operated by InterOil would be the foundation of the Gulf LNG hub.
The exact size of the trains is not yet determined, and it is also too early to say whether Elk-Antelope will support a greenfield or brownfield development, said Oil Search.
These decisions will be made during 2015 when the results of appraisal drilling at various field locations, including Elk-Antelope and Hides, is known. The results of the arbitration between Oil Search, InterOil and Total regarding Elk-Antelope should be known in the first quarter of 2015, and that outcome will have a big influence on where the Elk-Antelope trains will be located, their construction timing and size, added Oil Search.
However, the Sydney-based company is in no doubt about the 11 trillion cubic feet of discovered undeveloped gas resources in PNG, and the importance of having a co-ordinated approach to the development of the different fields, which have a variety of joint venture owners.
There are essentially three separate plays in PNG, and each has a dominant operator. In the jungles of the Highlands, ExxonMobil and Oil Search are the dominant operators of undeveloped gas discoveries. Closer to shore, in the Gulf area, is where InterOil has been the trailblazer with Elk-Antelope, while in the Forelands area in the west, Talisman and Horizon Oil have built up a large gas resource.
Oil Search is desperate for a co-ordinated development to take place rather than separate standalone projects, as in Queensland in Australia, which it does not want PNG to emulate.
However, the company stopped short of saying its preference would be for the PNG LNG site to be the location for all the new trains.
It is understood the PNG LNG site, which currently hosts two trains, has been cleared to build two more, but has the potential to host eight trains in total.
Managing director Peter Botten said: “Oil Search is uniquely positioned over the next 12 months to drive an optimal LNG development plan in PNG through promoting a co-operation agenda.” “Approximately US$3 billion of potential capital cost savings and about two years production acceleration could be achieved through co-ordinated development,” he added.
A pivotal year ahead of resource definition, concept and design work could lead to final investment decisions on new trains by the end of 2016, with progressive delivery of additional trains from 2019 to 2022.
The idea would be to build the LNG trains in succession so as to enjoy the benefits of using the same contractor crews.
The PNG government is understood to be highly supportive of new trains getting under way as soon as possible.
This is no surprise, given Oil Search’s estimation that three additional LNG trains have the potential to provide about US$40 billion of taxes and levies to the government and landowners.
•• The outcome of the arbitration between Oil Search and InterOil regarding the Elk-Antelope resource will dictate the type of development that materialises, according to one of the protagonists.Oil Search took legal action against InterOil, disputing the validity of the sale by InterOil of an interest in Block PRL 15 to French supermajor Total.
The PNG company believes it has pre-emptive rights to the interest that InterOil sold.
The case is proceeding toward a hearing in London next month, and a decision from the arbitration is expected in the first quarter of 2015, according to Oil Search.
The outcome will have a big influence on the type of development, particularly where the Elk-Antelope liquefied natural gas trains will be located, their construction timing and size.
Oil Search added that the economics of the Elk-Antelope opportunity are attractive, and that the development costs should be less than the Highlands project that underpins the PNG LNG scheme.
Meanwhile, the partners are busy with the drilling of two Antelope appraisal wells, while InterOil has an active exploration programme in adjoining blocks.