Stanley Project Approval Continues PNG Growth

Growth in Papua New Guinea’s oil and gas industry is set to continue following execution of a project agreement between the developers of the Stanley gas condensate project in the country’s Western Province and the Independent State of PNG.

The Asia-Pacific nation has been targeted by several of the world’s energy giants in the past decade, headlined by the Exxon Mobil Corp.-led development of the PNG LNG project near the country’s capital, Port Moresby.

ExxonMobil announced in April that production at the $19 billion project had started ahead of schedule and first cargo of LNG would be exported to Asia by mid-2014.

In Western Province, another wave of growth is emerging, which may eventually lead to proposals for development of another LNG project in the region.

The prospect of this moved a step closer in April with the PNG Government’s execution of the Stanley project agreement, paving the way for formal approval of the Stanley project; a joint venture between Canada’s Talisman Energy Inc. (40 percent), Australia’s Horizon Oil Ltd. (30 percent), and Japan’s Osaka Gas (20 percent) and Mitsubishi Corp. (10 percent).

Kelvin Bramley, Horizon’s Chief Company Representative in PNG, told Rigzone the construction phase at Stanley would now “start in earnest” and was expected to span about two years before production commenced in mid-2016.

The $300 million project has a forecast life of 20 to 25 years, and will start life as a condensate recovery operation with forecast output of 140 million cubic square feet of gas a day from two production wells to yield about 4,000 barrels of condensate.

For Horizon, the government’s approval represents a key step in the sale of a 40 percent stake in certain of its PNG assets to Osaka Gas and triggering the transfer of $77 million to its accounts. These proceeds are earmarked to fund construction of the Stanley project.

Potential Gas Sales

The next milestone for the Stanley joint venture is to secure a gas sales agreement. Preferably this will be in the domestic market, with a joint venture already in discussions with Ok Tedi Mining Ltd. about utilizing Stanley gas fired power to offset its reliance on diesel fired electricity.

“We intend to initially reinject the gas until we have concluded a gas sales agreement, which will hopefully be in the domestic market in Western Province,” Bramley explained.

He added that export opportunities for condensate would also be explored, with the east coast of Australia as an obvious target. However, the potential to export gas from Western Province will depend on the development of other resources in the province.

“Ultimately we are looking to reach a stage where there are sufficient reserves to support a mid-scale LNG plant, ideally focused or located in Western Province,” Bramley said.

“Such a scenario would very much suit the agenda of the provincial government, which has been keen to see production, as well as refinement and export capacity, remain in Western Province.”

Growth Opportunities

Horizon, with its joint venture partners, recently submitted an application for another petroleum development license (PDL), which would allow it to advance the Elevala/Ketu condensate recovery project in the forelands of Western Province.

At three times the size of the Stanley project, the remotely located Elevala/Ketu project could be in production by mid-2017, depending on regulatory approvals.

Through projects such as Stanley and Elevala/Ketu, Bramley believes the oil and gas industry in PNG is well positioned to continue its recent expansion, especially as the likes of ExxonMobil, Total, Santos Ltd. and InterOil Corp. increase their presence in the market.

“I think it will continue to grow at pace. Our experience is that PNG is a good place to invest, the Government is supportive and keen to see the industry develop, we’ll certainly see momentum continue to build in the LNG space,” Bramley said.

In a busy period for Horizon, the company announced an agreement to merge with Australian company Roc Oil Company Ltd. in April to create a company with exploration and production assets across PNG, China, Malaysia, Myanmar, Australia and New Zealand.