11-27-2014, 04:33 AM
According to below report page 3 Ant4 is phasing technical issues with the blow out preventer.
24 November 2014
Oil Search
(OSH.AX / OSH AU) 3
The reason we still need further clarification is that P'Nyang is the most expensive of the
fields to develop given its location in mountainous terrain, 120km West of Hides. It may
bypass Hides entirely by constructing a separate gas conditioning plant and a pipeline
directly down to Kutubu. This raises some question on whether infrastructure must be
duplicated, with an early conditioning plant expansion and Hides and then a new one at
P'Nyang in 10-15 years' time. The resource would have to be large for that to be worth it,
with OSH talking up 3-4Tcf vs. the currently booked 2.5Tcf.
P'Nyang is needed to get sufficient reserve coverage for a third train from the highlands.
But phasing is likely, similar to development at PNG LNG where Angore won't be
developed for 4-5 years (drilling now because rig was nearby) and Juha for another 10
years. But they are unitised in the same way as earlier fields, meaning OSH will benefit
immediately from its 38.5% share (Exxon has 49% so is not likely to be opposed, if the
economics and reserves stack up).
Elk-Antelope, timelines and co-operation uncertain
The confirmed new news here was incrementally negative as the Antelope 4 well has not
been drilling for weeks following issues with the blowout preventer. Interoil expects a
replacement to arrive this week. Delays increase drilling costs but the downside is limited
beyond that as Antelope 5 (and possibly 6) will be needed to fully determine the size of the
resource. Antelope 5 is to be spudded shortly, as the Raptor rig moves over later this
month. Certification is still on track for 2H15.
Oil Search's base case remains around 5tcf with substantial exploration upside. In their
view, the current Antelope 4 well is testing the downside case – a dry well could mean the
resource is only 3tcf. To test the upside case of 10Tcf, Oil Search believes Antelope 6 may
be necessary.
Antelope Deep is a high-risk exploration prospect, where the major concern is porosity. In
their view, this is also the reason why Raptor may not record high flow rates – Interoil will
be testing that well further this week but noted it has problem with high levels of mud and
sediments contaminating the exploration well (and therefore flow rates). Oil Search does
not have a stake in Raptor, letting the options to acquire PacLNG's share expire as there
was no clarity on resource size. Both sides are happy to await further information before
re-commencing talks. All these exploration prospect (incl. Wahoo and Bobcat) are longer
term developments.
On unitisation and arbitration...
There was certainly an indication at the meetings that Interoil is increasingly looking to
work closely with Oil Search (Interoil CEO Michael Hession presented at Antelope 3).
Whether that is to lean on Oil Search's technical experience, an indication of outcome of
the arbitration case or just good corporate citizenship is not known. But there was a lot of
praise of OSH management.
The benefits to integration are obvious, if difficult to quantify. Peter Botton spoke of NPV
savings of $6-700m which would line up well with earlier comments on $3bn gross savings
on expansion projects. Apart from the cost savings, the key benefit is a simpler and clearer
development plan if unitised into PNG LNG and optimised use of the common-user
infrastructure (PNG LNG has first right but must make excess capacity available – access
post expansion would have to be negotiated).
24 November 2014
Oil Search
(OSH.AX / OSH AU) 3
The reason we still need further clarification is that P'Nyang is the most expensive of the
fields to develop given its location in mountainous terrain, 120km West of Hides. It may
bypass Hides entirely by constructing a separate gas conditioning plant and a pipeline
directly down to Kutubu. This raises some question on whether infrastructure must be
duplicated, with an early conditioning plant expansion and Hides and then a new one at
P'Nyang in 10-15 years' time. The resource would have to be large for that to be worth it,
with OSH talking up 3-4Tcf vs. the currently booked 2.5Tcf.
P'Nyang is needed to get sufficient reserve coverage for a third train from the highlands.
But phasing is likely, similar to development at PNG LNG where Angore won't be
developed for 4-5 years (drilling now because rig was nearby) and Juha for another 10
years. But they are unitised in the same way as earlier fields, meaning OSH will benefit
immediately from its 38.5% share (Exxon has 49% so is not likely to be opposed, if the
economics and reserves stack up).
Elk-Antelope, timelines and co-operation uncertain
The confirmed new news here was incrementally negative as the Antelope 4 well has not
been drilling for weeks following issues with the blowout preventer. Interoil expects a
replacement to arrive this week. Delays increase drilling costs but the downside is limited
beyond that as Antelope 5 (and possibly 6) will be needed to fully determine the size of the
resource. Antelope 5 is to be spudded shortly, as the Raptor rig moves over later this
month. Certification is still on track for 2H15.
Oil Search's base case remains around 5tcf with substantial exploration upside. In their
view, the current Antelope 4 well is testing the downside case – a dry well could mean the
resource is only 3tcf. To test the upside case of 10Tcf, Oil Search believes Antelope 6 may
be necessary.
Antelope Deep is a high-risk exploration prospect, where the major concern is porosity. In
their view, this is also the reason why Raptor may not record high flow rates – Interoil will
be testing that well further this week but noted it has problem with high levels of mud and
sediments contaminating the exploration well (and therefore flow rates). Oil Search does
not have a stake in Raptor, letting the options to acquire PacLNG's share expire as there
was no clarity on resource size. Both sides are happy to await further information before
re-commencing talks. All these exploration prospect (incl. Wahoo and Bobcat) are longer
term developments.
On unitisation and arbitration...
There was certainly an indication at the meetings that Interoil is increasingly looking to
work closely with Oil Search (Interoil CEO Michael Hession presented at Antelope 3).
Whether that is to lean on Oil Search's technical experience, an indication of outcome of
the arbitration case or just good corporate citizenship is not known. But there was a lot of
praise of OSH management.
The benefits to integration are obvious, if difficult to quantify. Peter Botton spoke of NPV
savings of $6-700m which would line up well with earlier comments on $3bn gross savings
on expansion projects. Apart from the cost savings, the key benefit is a simpler and clearer
development plan if unitised into PNG LNG and optimised use of the common-user
infrastructure (PNG LNG has first right but must make excess capacity available – access
post expansion would have to be negotiated).