Big boost for PNG LNG
A REVIEW of the fields supporting the PNG LNG project has delivered a significant windfall, 2.3 trillion cubic feet of additional gas, enough supply for a full train for a decade.
Haydn Black
17 February 2017 09:34 News
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Big boost for PNG LNGPNG LNG tanker.
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Lng Australasia ProductionPNG Golar LNG ExxonMobil
Operator ExxonMobil announced the results of the independent review by respected consultancy Netherland Sewell Associates, conducted a few years into the life of the export project, and the results not only delivered the increase to the resource base, but a 25% in the technically recoverable resources to 11.5Tcf (2C).
It was the first review of the fields since 2009.
"The independent review highlights the exceptional quality of the PNG LNG project resources and the significant increase in resource provides the potential for additional mid or long-term sales," ExxonMobil PNG managing director Andrew Barry said, verifying the numbers flagged by Oil Search last month.
He again pledged that the US supermajor would work with the government and people of PNG, some of whom have expressed concerns about the lack of promised benefits flowing from the development, over the decades.
A significant contributor to the increase was the Hides field, due to completion of development drilling including previously undrilled areas of the field, completion of optimised long term depletion plans and production performance since start up in 2014.
In 2016, PNG LNG produced 7.9 million tonnes, an increase of 14% from the original design specification.
Oil Search said that based on its own corporate assumptions, its 1P share of PNG LNG reserves had increased by 50% to 2.137 billion cubic feet, while 2P reserves had risen 12% to 2.4Tcf.
Around one quarter of the company's 1P increase and 41% of 2P reserves were in the Associated Gas fields, in particular Kutubu, Agogo and Moran.
At December 31, Oil Search's 2P reserves and 2C contingent resources were 124 million barrels and its 2P and 2C gas was 6.134Bcf.
That includes a boost of 254cf and 13MMbbl associated with the Total-operated Elk-Antelope fields in PRL 15, although Oil Search's estimate is for a total volume of 6.5Tcf, more than NSAI's 6.1Tcf estimate but below Gaffney, Cline & Associates' 6.9Tcf.
Together with P'nyang and other discovered undeveloped resources in PNG, that takes Oil Search's total 2C contingent gas resources to 3.7Bcf and 2C oil and condensate to 48MMbbl, a substantial part of which has a high probability of being developed.
Based on 2016 production of 30.24MMboe, Oil Search has a 1P reserves life of 16 years, a 2P reserves life of 18 years and a 2P reserves and 2C resources life of 44 years.
Oil Search managing director Peter Botten said the uplift in reserves and resources, even after record production of almost 106Bcf, was significant, as only the 1P reserves are contracted.
"At present, 6.6MMtpa of LNG is sold under long term contract, while the project is operating sustainably at rates above 8MMTPA, he said.
"The increase in 1P reserves, which equates to 2.8Tcf on a gross basis, will provide the co-venture the potential to explore market opportunities to contract this material additional production, which is currently being sold on the spot market."
Botten said it was clear that there was more than enough gas on the books to underpin at least a two train LNG expansion, and that does not take into account the recent potential gas discovery at Muruk-1, where a fast-tracked appraisal program is ongoing.
"Indications to date suggest no reasons why our pre-drill estimate, that Muruk could contain potential resources of 1-3Tcf, should be changed," he said.
Botten favours a tie-up between PNG LNG and the proposed Papua LNG, which he says could save up to $3 billion off development costs, and there has been some qualified support from the PNG government.
Perth-based RISC says the savings could be up to $5 billion.
Earlier this week InterOil shareholders backed a takeover of their company by ExxonMobil, which should streamline any development decisions, even though Total is the operator of PRL 15.
Edit: This article has been edited to properly reflect RISC's savings.
Any comments and analysis wrt negatives and positives
HZN Price at posting:
6.3¢ Sentiment: Buy Disclosure: Held
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