I have put together a few words in answer to some questions from a friend. I thought that I would share this on the board in case someone might find it of interest.
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:
Quotes are from the above document.
“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 License 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;
Acquire, process and interpret 100 kilometers of two dimensional seismic acquisition and complete geoscience studies;
Conduct social mapping and social and economic impact studies;
Conduct commercial and marketing studies; and
Conduct surface and subsurface engineering studies
- Static and dynamic reservoir modeling
- Base case depletion plan
- Surface facilities
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.”
“PPL 236 consists of 53 graticular blocks covering an area of 4,502 square kilometers or 1,112,464 acres.
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;
Drill an exploration well at a location acceptable to the State; and
Complete a thorough petroleum system and basin study in PPL 236.
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;
Acquire, process and interpret new seismic data focused on selecting a drilling location; and
Complete a thorough petroleum system and basin study in PPL 237.
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
Acquire, process and interpret new seismic data focused on selecting a drilling location;
Complete a thorough petroleum system and basin study in PPL 238 and
Drill a well at a location acceptable to the State.
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.
