Oil Search: PNG LNG Project 80 Pct Complete

Oil Search of Papua New Guinea announced Activities results for the quarter ended 31 March 2013.

Highlights:

• At the end of the first quarter of 2013, the PNG LNG Project was over 80% complete and on track for first LNG sales in 2014.
• The PRL 3 Joint Venture made progress in its studies to determine the preferred development concept for the potential development of the P’nyang gas field.
• Production in the first quarter of 2013 was 1.56 million barrels of oil equivalent (mmboe), compared to 1.46 mmboe in the previous corresponding period and 1.79 mmboe in the fourth quarter of 2012.
• Total operating revenue for the quarter was US$176.0 million, based on an average realised oil price of US$113.92 per barrel.
• The Company’s major drilling programme stepped-up, with the spudding of the Flinders 1 exploration well, in PPL 244, offshore Gulf of Papua on 31 March.
• Drilling continued at the Taza 1 well in Kurdistan. Subsequent to the reporting period, the well has flowed oil from the second primary objective, the Euphrates Formation.
• Oil Search remains well funded, with cash of US$438.6 million at the end of March 2013. The new US$500 million corporate facility remains undrawn.

Commenting on the 2013 first quarter activities, Managing Director, Peter Botten, said:

“A solid production performance was achieved in the first quarter by our core PNG oil fields. Meanwhile good progress continued to be made on all fronts of the PNG LNG Project and on our major drilling programme, designed to evaluate the upside of our assets for both gas, to underpin LNG expansion, and for material oil.

“At the PNG LNG plant, engineering and procurement are substantially complete and preparations for commissioning various components of the process trains and utilities have commenced. The construction of the LNG storage tanks, the jetty and the offshore pipeline has been completed. 258 kilometres of the onshore pipeline has been welded and progress has also been made with construction activities at the Hides Gas Conditioning Plant (HGCP), with most of the structural steel for the pipeline compressors erected. First cargo flights into the Komo Airfield, bringing in key items of equipment for the HGCP, are expected to commence in May and the operator, Esso Highlands Limited, has confirmed the target for first LNG sales in 2014 remains unchanged. Oil Search will soon be able to supply commissioning gas to the LNG Plant.

“During the quarter, the PRL 3 Joint Venture continued to progress studies for the potential development of the P’nyang gas field, narrowing the range of options under review. Subject to the outcome of these studies, a preferred development plan is expected to be selected and a decision made on whether to progress into FEED. Use of the gas as a foundation resource for a potential third PNG LNG train remains the primary focus. Our Gulf of Papua gas strategy also advanced, with the transactions associated with the Total SA farm-in receiving Government approval and the commencement of the offshore drilling programme, with the Flinders 1 well in PPL 244 spudded in March. This well will be followed by Hagana 1, also in PPL 244.

“Drilling continued at the Taza well in Kurdistan, with the well reaching its total depth shortly after the end of the quarter. Hydrocarbon shows were observed throughout the second primary objective, the Euphrates Formation. The well is now being tested and has flowed oil. The well test will continue to gain information on the fluid properties and reservoir potential.

“Following the completion of testing, we expect to suspend the well. Contracting for a rig for a follow-up drilling programme is well advanced, with drilling planned to commence in late 2013, to appraise the hydrocarbons seen in Taza 1 and penetrate a number of deeper objectives that have been identified on seismic.

“Other activities during the quarter included development drilling at Kutubu and Moran and well site preparations and rig mobilisation for the Mananda 6 appraisal well, which has recently commenced drilling. Drilling also took place at Semda in Tunisia and on Hides, as part of the PNG LNG Project activities.”

PNG LNG Project Activities:

At the end of the first quarter, the PNG LNG Project was over 80% complete. The operator, Esso Highlands Limited, achieved the following during the quarter:

• By the end of March 2013, the Project labour force had completed over 123 million cumulative work hours.
• At the LNG Plant site, engineering and procurement are substantially complete and preparations are underway to ready the plant for the receipt of commissioning gas.
• The onshore feed gas pipeline tie-in has been completed and preparations are being made to purge the pipeline, in preparation for the start of commissioning later this year using gas from the oil fields.
• Pneumatic testing of all large bore piping at the jetty and marine terminal has been completed.
• Hydro-testing and soil stability testing of the North and South LNG tanks has been completed, while hydro-testing for all miscellaneous tanks has also taken place.
• 258 kilometres of the onshore pipeline have been welded and 197 kilometres have been hydro-tested.
• At the Hides Gas Conditioning Plant, the erection of structural steel for pipeline compressors 1 and 2 is substantially complete.
• Drilling is continuing at well pad B with Rig 702, on the Hides B1 and B2 wells. Drilling operations at well pad C, where two wells, Hides C1 and C2 will be drilled, have recently commenced using Rig 703. Installation of well pad facilities at well pad D has also commenced.
• At the Komo airfield, the aircraft parking apron (non-cargo), north turning node and installation of high intensity approach lights have all been completed. The laying of the remaining asphalt on the runway has commenced and is almost complete. The operator has advised that air operations are expected to commence in May.
• The construction activities for the Associated Gas and PL 2 Life Extension Projects by Oil Search are close to completion and preparations are underway to commence supplying commissioning gas to the LNG Project.

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LNG World News Staff, April 23, 2013; Image: Oil Search