PNG seeks to renegotiate Papua LNG

The PNG Minister for Petroleum issues the below release on re-opening the Papua LNG terms for negotiation.


PRESS RELEASE


STATE TEAM HEADING OUT TO RE-NEGOTIATE WITH TOTAL


The National Executive Council has authorized a State Negotiating Team (SNT) lead by the Minister for Petroleum, Kerenga Kua, to head off to Singapore to seek to re-negotiate the terms of the Papua LNG Gas Agreement previously signed on 19 April 2019. The SNT left today 15 August for Singapore.


The Papua Gas Agreement was signed by the previous O'Neill led Government inside the period when serious moves were afoot to remove and replace that Government.
The Marape led Government on taking office on 30 May 2019, took the firm view that the Papua Gas Agreement was disadvantageous to the State and the people in certain respects and resolved to seek a renegotiation.


Mr Kua cautions that considering what's at stake, the peoples expectations must be guarded during this period. The negotiations could work out well or even disastrously, but either way, the people must be ready to accept whatever the outcome. As a Nation we have reserved all our rights in law as we move down this path.


Success in the discussions could lead to an early progress of the project. By the same token failure could have very serious ramifications. But failure must not be ruled out and must remain within our contemplation. This is a risk we take as we try to move in the direction of taking PNG back and making it wealthy. The final outcomes will be briefed to the Prime Minister James Marape and the National Executive Council, and the final decision will be taken by the National Executive Council.


Considering our Nations economic circumstances short and long term, no stone must be left unturned at such important junctures. Mr Kua said, it would be futile and worthless to say in the future we should have done this deal differently. That question must be asked and answered now. This is the only diligent approach given how we find ourselves in this spot. The SNT expects to return early next week and report back to the National Executive Council. But Mr Kua says the Prime Minister will be kept informed daily as the negotiations progressed.

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Petsec increases interest in Block 7 offshore Yemen to 100%

Petsec has acquired Oil Search's 40% interest in Block 7.

Full announcement below.

Petsec Energy has completed the transaction with Oil Search to acquire all of the shares of its subsidiary Oil Search (ROY) Limited which holds a 40% working interest (34% participating interest) in the Al Barqa (Block 7) licence and operatorship, in the Republic of Yemen.

Completion of the Oil Search agreement follows the 2016 transaction with KUFPEC (25% working interest) to acquire their interests in Block 7, and the transactions with AWE (25% working interest) and Mitsui E&P Middle East (10% working interest) completed and approved by the Yemen Ministry of Oil and Minerals in 2014. The acquisition of Oil Search (ROY) Limited increases Petsec’s potential working interest in Block 7 to 100% and operatorship of the block.

Block 7 is an onshore exploration permit covering an area of 5,000 sq kms (1,235,527 acres) located approx. 340 kms East of Sana’a, 80 kms North East of the Company’s Damis (Block S-1) Production Licence, and 14 kms East of OMV’s Al Uqlah (Habban) Oilfield. The block contains the Al Meashar oil discovery made by Oil Search in 2010 as well as an inventory of nine prospects and leads defined by 2D and 3D seismic surveys, with target sizes ranging from 2 to 900 MMbbl oil gross.

The Al Meashar Oilfield, with a target resource of 11 MMbbl to 50 MMbbl, contains two suspended discovery wells that intersected over an 800 metre oil column which in 2010-11 delivered flow rates ranging from 200 to 1,000 bopd in short-term testing of the wells. The oil column extends over the same reservoir sequence as that of the Habban Oilfield in the adjacent Al Uqlah (Block S-2).

Petsec Energy has secured a 100% interest in two production and exploration licenses in the highly productive Shabwah Basin in Central Yemen, Blocks S-1 and 7, which contain six oil & gas fields – one developed and five yet to be developed, with cumulative target resources between 45 and 84 million barrels of oil and 550 billion cubic feet of gas, in addition to further high potential exploration targets.

Block 7 is a key addition to the Company providing material upside to Petsec’s existing Production Licence, Damis (Block S-1) acquired in February 2016 from Occidental Petroleum, which holds the developed An Nagyah Oilfield and four undeveloped oil and gas fields, containing substantial oil and gas resources in excess of 34 million barrels of oil and 550 billion cubic feet of gas. The developed AnNagyah Oilfield was estimated, based on limited production rates of 5,000 bopd for trucking purposes, by DeGolyer and MacNaughton, reserve engineers, to contain gross 2P reserves of 12.8 MMbbl, of which the financial net to Petsec Energy is 5.6 MMbbl of oil, having a NPV 10 of US$155.4 million based on January 2016 forward oil prices.

Petsec’s Chairman, Mr Terry Fern stated:

'We are pleased to have secured the acquisition of 100% of both Blocks 7 and S-1 so we can now concentrate on bringing these acquired oil and gas fields into production. This oil and gas production is critically important to the local Yemeni people to provide employment and revenues, absent since 2015 because of the country’s political issues. We were heartened by the recent welcome and encouragement we received from senior members of the Yemen Government currently based in Riyadh, Saudi Arabia, and hope this offered support will allow the early restart of production of the An Nagyah Oilfield, which will demonstrate to the World that foreign investment is welcome in Yemen, and will encourage other foreign oil companies to join us in rebuilding the Yemen oil industry. We look forward to working with the Ministry of Oil & Minerals in developing Yemen’s oil and gas industry.'

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Papua New Guinea LNG force majeure a week after expansion plans announced

ExxonMobil has declared force majeure on PNG LNG after Papua New Guinea was hit by a 7.5 magnitude earthquake on Monday. The partners in the plant, which exported 7.8 million tonnes last year, are ExxonMobil (33.2% operator), Oil Search (29%), State of Papua New Guinea (16.8%), Santos (13.5%), JX Nippon (4.7%) and Mineral Resources Development Company of Papua New Guinea (2.8%). Latest reports are that the pipeline and liquefaction plant sustained minimal damage, but could potentially be another six weeks before it can be restarted.

This comes a week after the announcement by the upstream partners in Papua New Guinea’s giant gas resources to more than double the country’s liquefaction capacity to 16mmtpa at a cost of USD13 billion. The partners are planning to help add a further three trains in the country – one to support growth at ExxonMobil’s P’nyang field, and two to service new gas from Total’s Elk-Antelope development. FEED is planned to start later this year, but will require agreement of terms with the PNG government first including domestic supply obligations.

Given this is a brownfield expansion, it is significantly cheaper than the original USD19.5 billion construction cost of the project. The partners were previously toying with the idea of having a separate facility for Elk-Antelope gas as Total and ExxonMobil could not reach agreement. ExxonMobil was pushing for the gas to go through PNG LNG supported by train expansions, while Total was considering a new plant (Papua LNG). While the details on the new three trains remain high level and could still see a separate Papua LNG project, this agreement thaws the development discussions which have been frozen for more than a year. The separate trains supporting the different upstream gas sources will also be conducive to structuring and financing of the proposed project – avoiding the complexity involved with unitisations and co-mingled gas marketing. The new LNG could come onstream by the early 2020s and would arrive in time for an emerging LNG supply gap that is foreseen by the industry.

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