new guinea energy moves ahead with maiden well

Oilbarrel.com
July 13, 2010
New Guinea Energy Moves Ahead With Maiden Well In PNG


These are exciting times for investors in New Guinea Energy Limited, which is currently drilling ahead with its first well in Papua New Guinea. This is a go-it-alone venture for the ASX-listed company, which holds 100 per cent of PPL 267 in the South Foreland area of the island, compared to two of its licences in the Western Province Foldbelt where it has bagged Canadian independent Talisman Energy as partner.
Talisman is chasing major gas resources in PPL 268 and 269 but PPL 267 is home to a different play type, with NGE hoping to strike oil. The well is being drilled into the Panakawa structure, a possible 200 million barrel prospect, which seeps around five barrels of oil to the surface per day. The exciting thing here is not the confirmation of an active oil system but the fact that the oil is 35-degree API, different from the 55-degree API found in the Highlands region and therefore pointing to a possible new oil play. An oil seep, however, doesnt guarantee an oil strike; there are still many unknowns about the viability of the prospect.

More will be known in the coming weeks as the Panakawa-1 well descends to its planned depth of 1,600 metres. Last week the well was at 717 metres, having encountered intermittent zones of unconsolidated boulders within the cavernous upper Darai Limestone. A series of cement plugs were set to stabilize the hole, while it targeting sandstone reservoirs in the primary Toro Formation and secondary reservoirs in the Alene and Iagifu member sandstones as well as the Koi Iange Formation.

There is further upside, with a new lead delineated just 10 km from the Panakawa drill site. Whats more, the lead is in an easily accessible location via existing logging tracks, making it a candidate for a reasonably quick and cost-effective follow-up by PNG standards (some wells in these jungle frontiers are only accessible by helicopter, making for hefty drilling costs).

This is why the Talisman deal was so important for New Guinea Energy. First, the farm-in will accelerate seismic and drilling activities on licences PPL 268 and 269 as the Canadian company has committed to spent over US$100 million over the next two years. Second, it provides third-party endorsement of NGEs acreage from a player that has been at the forefront of 2009s land grab in the country: Calgary-headquartered Talisman has stitched together a serious acreage position in the western province of Papua New Guinea over the course of the last year through a series of acquisitions, corporate deals and farm-ins.

Under the farm-in agreement, Talisman will spend up to US$11 million on seismic and a possible US$90 million on a six well programme to earn up to 70 per cent of PPL 268 and PPL 269. There is certainly enough scope on these licences to keep the Canadian company interested with PPL 269 home to five mapped prospects and 34 identified leads, with both oil and wet gas potential, and the under-explored PPL 268 block on trend with Rift Oils (and, after a US$188 million takeover in 2009, now Talismans) Puk Puk and Douglas gas discoveries. The first Talisman wells under the farm-in agreement are expected to spud in Q4 2010.

The Canadian company has also agreed to co-operate with New Guinea Energy on some of its other licences, most recently by extending the seismic programme over its PPL261 licence into the north-east section of NGEs PPL 266. The seismic programme was completed in early April and results are due in Q3.

It all adds up to a busy timetable for the remainder of the year, with some near-term newsflow due in the coming months from Panakawa to keep investors interested until the big wells with Talisman start spudding in Q4.