PAPUA New Guinea oil and gas powerhouse Oil Search Ltd believes the recent decision by ExxonMobil to buy a stake in the Papua LNG project is a game changer for the country’s petroleum industry.
The company said the recent decision by PNG LNG project operator ExxonMobil to take a major stake in the rival Papua LNG project’s gas assets may lead to billions in savings and the fast-tracking of the expansion of PNG LNG and the development of the Papua LNG gas fields.
Speaking to shareholders, analysts and the media recently, Oil Search managing director Peter Botten and executive general manager, Exploration and New Ventures, Keiran Wulff, said that the company had no hesitation in supporting the ExxonMobil bid for Papua LNG partner InterOil, even though it had already lodged its own bid for the latter.
The pair told the large online audience that the entry of ExxonMobil into the Papua LNG project and the potential integration between PNG LNG and Papua LNG had created the strategic opportunity that it had been aiming for when it initiated its InterOil takeover bid.
While they said that there is still a long, hard road to be followed to see the integration proceed, they were confident that it would be the right outcome and would lead to massive cost savings, while potentially speeding up development outcomes.
Mr Botten said that the major parties involved in the potential integration have already undertaken separate, significant studies into how the obtain the best outcome and that they will all come together in October to discuss those opportunities.
A lot of those discussions will focus on the potential cost savings of processing gas from Papua LNG’s Elk and Antelope fields through an expansion of the current two train PNG LNG project.
Oil Search says its initial estimates are that integration could provide US$2 billion to US$3 billion in Capex savings and US$125 million per annum in Opex savings.
Interestingly, a leading outside research firm has suggested the Capex saving could be as high as US$5 billion.
Those types of savings would make Papua New Guinea LNG even more attractive to international buyers.
Mr Wulff said that there were a number of potential supply windows that the expanded PNG LNG project could target with a supply/demand gap opening up around 2022/23 and the need for an additional 150 MTPA of new supply to meet a 2030 shortfall.
Oil Search is hopeful that the integration and the massive gas reserve and resource figures sitting behind an expanded PNG LNG expansion will enable the project to meet those time schedules, with a Final Investment Decision (FID) for the additional two trains targeted for 2018.
Oil Search is envisigaing an initial PNG LNG integration expansion encompassing:
* Two new ~4 MTPA trains constructed together at existing PNG LNG site, operated by ExxonMobil, operational 2022/23
* These trains woud be underpinned by ~10 tcf of 2C resource from P’nyang and Elk-Antelope, with resource upside for a possible further train from planned drilling
* Operations to be optimised across four+trains for the next 40 years.
Mr Wulff said aggresive upcoming exloration and appraisal programmes in both Papua LNG and PNG LNG-related fields and blocks could add signifiacantly to the already known reserves and resources.