KINA Petroleum Limited has entered into a farmin agreement with Santos Limited in the PPL-339 exploration licence near the giant Elk-Antelope gas-condensate fields in PNG

Under the agreement Santos will acquire a 20% participating interest in PPL 339 licence and joint venture. Kina will retain a 10% participating interest in the licence and joint venture.

Santos will also acquire a portion of Kina’s remaining well cost carry for $825,000, payable on receipt of requisite joint venture and government approvals;

Kina is also entitled to a partial carry of well costs from Oil Search. That carry is in excess of the 10% participating interest that Kina would retain under this present farmout. The excess amount is the portion that will be acquired by Santos;

* Santos to reimburse part of Kina’s share of any pre-drilling geophysical costs.

* Santos has the option to return the acquired interest to Kina, at no cost to Kina, after assessing the results of the pre-drilling geophysical work and ahead of the first well, with drilling expected in 2019.

* With a 10% participating interest share at the time the first well is drilled, Kina will be fully covered up to an agreed amount of gross well costs (under the terms of the existing carry from Oil Search), and will be reimbursed by Santos for a portion of pre-drill costs already incurred

The farmout is subject to extension of the licence. Oil Search Limited, as licence operator, continues to work with the PNG Department of Petroleum and Energy to progress the extension.

A number of prospects have been identified in PPL-339 including Kalangar and Eclectus, which benefit from their proximity to the Elk/Antelope fields which are to be developed by the participants in the PRL 15 joint venture to underpin the proposed Papua LNG project.

“We have long considered PPL 339 to be located in an attractive area given its proximity to the Elk-Antelope fields in PRL-15 but have wanted to ensure that our commitment to early stage exploration work reflects a balance between of our assessment of the licence’s prospectivity, the costs involved in proving that prospectivity and the capital required to carry out this work. This farmout achieves that balance,” Kina’s managing director, Richard Schroder, said.

“PPL-339 contains a large target that lies in a natural drainage path out of the Aure trough, however elements of the prospect are high risk. Kina has nonetheless high-graded this area on the basis of abundant oil and gas seeps and vintage seismic data. Aerogravity data confirms that a very large structural feature reaches a crest at Kalangar and, by analogy with Antelope / Triceratops, gravity data has inferred the presence of a large carbonate reef of Kalangar.”

Interests in PPL-339 license after the Santos farm-in are: Oil Search (PNG) Ltd (Operator) 35%; Total E&P PNG 2 B.V 35%; Kina Petroleum (PPL339) Limited 10%; and Barracuda Limited (Santos) 20%.