Shell's return underlines upsurge in PNG exploration

OIL and gas exploration in Papua New Guinea is growing rapidly, PNG Petroleum and Energy Minister Sir Moi Avei told the South-East Asia Australia Offshore Conference (SEAAOC) in Darwin on Monday.
Shell's return underlines upsurge in PNG exploration Shell's return underlines upsurge in PNG exploration Shell's return underlines upsurge in PNG exploration Shell's return underlines upsurge in PNG exploration Shell's return underlines upsurge in PNG exploration

In a coup for the Government’s efforts to draw in more explorers, Shell has decided to re-enter the country, Avei announced to the delegates.

Avei had been having discussions with representatives of Fugro and Shell in Darwin.

“Chinampa, a subsidiary of Fugro, has enticed Shell Exploration Limited back into PNG,” he said.

Shell recently sold up its retail outlets in PNG and had seemed determined to quit PNG and other Pacific island nations.

But now it has agreed to an option to farm-in to three deepwater exploration blocks that were licensed to Chinampa in February last year. Shell has the option of taking up to 75% equity in PPL254, PPL255 and PPL256 in return for funding the acquisition and interpretation of up to 12,000km of 2D seismic data.

If Shell decides to exercise its options to farm-in to some or all of the blocks, this would be followed by potential drilling activities covering one well per block over a further two-year period. The company will have the right to assume operatorship of any blocks it farms-in to.

As Shell is one of the world’s largest oil companies, its return to PNG will probably encourage international oil and gas companies to seriously assess the upcoming licensing round for offshore waters in the Gulf of Papua extending over eastern Papua Plateau into Milne Bay Province, Avei said.

This licensing round is due to open in August and will be open for about six months, he said.

Fugro Multi Client Services is currently working with the Department of Petroleum and Energy on information packages for the licensing round. Its subsidiary, Chinampa (PNG) has exploration licenses near the area currently reserved for the licensing round.

In January 2003, the PNG Government reduced petroleum tax from 45% to 30% in an effort to attract more explorers.

“PNG’s fiscal terms for frontier areas is more attractive than our nearest neighbouring petroleum-producing countries,” Avei said.

“We are now seeing more oil and gas companies showing an interest in exploring for petroleum in PNG.

“In 2002, the exploration budget was $US90 million. It is now over $US500 million.”

In addition to Fugro and Shell, there were six new juniors petroleum explorers in PNG, and a joint venture comprised of Austral Pacific, Cheetah and InterOil recently announced a gas find in the Foreland region, he said. Further appraisal, however, would be needed to determine whether the find was commercial.