It took a little political intervention, apparently. The prime minister helped. This company is going from strength to strength..
InterOil Elk-4 breaks record with help from Somare
Thursday, 4 September 2008
INTEROIL’s Elk-4 well in Papua New Guinea flowed 105 million cubic feet per day during a test yesterday, exceeding Elk-1’s flow of 102MMcfd.
The test was launched by PNG Prime Minister Sir Michael Somare, who opened the valves, and is believed to be the highest vertical well flow recorded in the southern hemisphere.
Witnessed by third parties SGS, Focal and Halliburton along with a government entourage including Department of Petroleum and Energy Minister William Duma, DPE chief petroleum engineer Peter Koql said countrywide numbers would have to be revised from the level of 40 trillion cubic feet 2P reserves.
“We just burned more gas than what all mothers in Port Moresby use for cooking gas in probably three months,” he said of the latest standardised gas flow test.
The success of Elk-4 comes not from the Elk structure – which it missed – but from hitting heavy hydrocarbons from the edge of the underlying Antelope structures.
The Elk and Antelope structures are confirmed as separate and InterOil is now expecting its upcoming Antelope-1 well to hit the middle of the Antelope reef target.
Seismic indicates the well will exceed the record results of Elk-4 in the west of PNG’s Gulf Province.
Equipment from Elk-4 is being transported to the site of Antelope-1 via helicopter, and the well will be spudded shortly.
“It’s very likely the pay will almost triple what we tested today,” InterOil chief executive Phil Mulacek told PetroleumNews.net’s sister publication PNGIndustryNews.net.
He said Elk-4 hit the ratty edge of the antelope formation where it transitions from a shallower marine to a reef environment.
Of the Antelope reef structure, Mulacek said he was hoping to add reserves of about 6-9 trillion cubic feet and 1-1.5 billion barrels of oil equivalent.
He added the 2-3Tcf of the 8-12Tcf range of the Elk and Antelope fields will underpin the first train of a liquefication plant planned near Port Moresby, through InterOil’s one-third owned Liquid Niugini Gas joint venture.
Originally planned to produce liquefied natural gas from 2012, the $US5-7 billion project has shifted to a late 2013, early 2014 deadline, and the JV would ideally like a two-train plant capable of producing up to 9 million tonnes of gas per annum.
In a further boost to Liquid Niugini, Somare told PNGIndustryNews.net the joint venture could get a gas agreement with the government by the end of the year.
“The way discussions we’re going on, it could be the end of the year,” Somare said of Liquid Niugini’s gas agreement.
Back in May the PNG Government entered its first-ever gas agreement involving LNG, with the rival ExxonMobil-led $US11 billion PNG LNG project.
Mulacek said the condensate produced at Elk-4 was extreme premium as it had no sulphates (H2S), only 3-6% carbon dioxide and a grade of about 48 degrees API.
Elk-4 is currently producing about 18 barrels of condensate per MMcf. “It has got a high middle distillate cut, meaning it has got a high concentration of kerosene and some good diesel yields.”
As the operator of PNG’s sole oil refinery, InterOil is well placed to make easy cash from the condensate which has so far undergone primitive separation techniques.
Before the record test gas flow Mulacek told the assembled crowd of government and corporate officials and local media it would review its business models on the back of options provided by the quality condensate.
The condensate can be barged downriver to the Napa Napa refinery near Port Moresby, with the site of InterOil’s refinery also featuring a unique natural harbour.
“This will provide two positive outcomes, firstly it will improve the refinery’s efficiency and secondly domestic supply will enhance cash flow and profitability for InterOil in advance construction of the LNG project.”
Mule-Deer and other structures
In a PNGIndustryNews.net exclusive, InterOil has announced a third structure “Mule-Deer”, which will be targeted after work is complete at the Antelope reef structure.
Lying adjacently to the west of Elk but east of the Puri oil discovery, which had about 1640 barrels per day, Mulacek said Mule-Deer has a good probability of holding oil.
Up to 40 structures have been found in the company’s petroleum prospecting licence 237, with seismic highlighting a good handful.
InterOil expects to shortlist the structures for further exploration and most of them appear to be unnamed at this stage.
Liquid Niugini is also one-third owned by Merrill Lynch and long-time backer Clarion Finanz, which holds its interest through subsidiary Pacific LNG.