Fresh eyes bring offshore PNG into focus

REVELATIONS from extensive seismic and data reprocessing on the Gulf of Papua have prompted Papua New Guinea’s first-ever competitive bidding round for offshore petroleum licences, which could lead to the country’s first commercial offshore development within five years.
Fresh eyes bring offshore PNG into focus Fresh eyes bring offshore PNG into focus Fresh eyes bring offshore PNG into focus Fresh eyes bring offshore PNG into focus Fresh eyes bring offshore PNG into focus

The licensing round and accompanying roadshow held its final meetings in Perth last month after starting in Singapore in September and stopping at Calgary, Houston and London.

The licensing round is being driven by geophysical survey group Fugro on behalf of the PNG Government.

International oil and gas players of all sizes have been invited to view the latest data and analysis from Fugro, along with presentations from the PNG Department of Petroleum, the PNG Investment Promotion Authority and the Internal Revenue Commission.

The 15 blocks up for grabs cover about 107,000 square kilometres.

Fugro has been assessing offshore PNG’s potential for several years and after reprocessing historical data from the 1960s and 1970s using modern technology, the company launched a $US20 million ($A26.5 million) seismic survey on the Gulf of Papua earlier this year.

Fugro says its analysis suggests about 10 play types ranging from Palaeozoic to Pliocene, some containing multiple reservoir-seal pairs, sourced by non-marine and marine rocks. These include Permian fault blocks; upper Jurassic to Lower Cretaceous plays similar to the PNG Highlands discoveries in the Toro, Iagifu and Hedinia intervals; and source rock equivalents from the Permian right through to the Tertiary as well as Upper Cretaceous turbidites.

Central to the new data and renewed interest in offshore PNG is improved understanding of the area’s prospectivity, according to Fugro bidding round coordinator Warwick Greville.

“Previously, coverage of that section in the southeastern area was fairly thin – there was basically a tertiary section and shallow basement,” he said.

“But reprocessing showed there was a much thicker section, about another 200 million years, which is what really led to collecting more seismic data.”

The southeastern area is one of two regions covered by the survey and indicates a new hydrocarbons frontier.

Greville said the southeastern blocks were exciting but represented high-risk opportunities in deepwater. The interest in these blocks had been restricted to larger companies able to fund the expensive exploration and development.

The second area of the survey comprises northwestern blocks covering existing gas fields. These lower cost, lower risk opportunities have created the most interest amongst prospective bidders.

Previous discoveries from the 1960s and 1970s include the 1.5-3 trillion cubic feet Pandora gas field currently the subject of a retention lease by Canadian player Talisman Energy, the 500,000 billion cubic feet gas field being retained by Oil Search, and the Pasca gas field.

Aiming to revitalise the country’s petroleum industry, the PNG Government introduced several incentives for oil and gas players timed perfectly for the bidding process.

A corporate tax rate reduction from 50% to 30% on petroleum production applies to any discovery made on an exploration licence awarded between January 1, 2003 and December 31, 2007 over which a production licence is awarded before December 31, 2017.

Provisional profits tax has been abolished and petroleum producers are zero-rated for GST.

The Government had realised reserves in Highlands fields currently under production were running low, generating a need to encourage exploration for new fields, according to Fugro consultant and former PNG Department of Petroleum and Energy geophysicist and assistant director Stanley Pono.

The new blocks could lead to the development of an offshore sector, Pono said. This would contribute to domestic supply and infrastructure, and would stimulate development of an export industry that could take advantage of current oil prices.

Petroleum and Energy Minister Sir Moi Avei confirmed the Government’s stance during the opening presentation in Singapore.

“I am very hopeful this licensing round will lead to commercialisation of oil and gas discoveries that will generate revenue, profits, dividends and taxes for decades to come,” he said.

The licensing round had a major coup in the months leading up to the roadshow launch, with Shell Exploration re-entering PNG through a joint venture with Fugro subsidiary, Chinampa.

The major took up an option to farm-in for 75% of three deepwater exploration blocks in June, which were licensed to Chinampa in February last year, in return for funding acquisition and interpretation of up to 12,000km of 2D seismic.

Pono said Shell’s return indicated to the industry the region’s “huge unexplored potential”.

“With Shell being a substantial company, other companies are going to see that and it’s going to promote further interest in the licensing round and roadshow.”

Around 50 companies received data and sat in on the roadshow presentations, with the smaller companies generally forming syndicates to be competitive.

Companies are now evaluating the data presented and considering their bids, which must be in by April next year.

All bids will include seismic and drilling work programs, which the PNG Government would review over a two-month period before blocks are awarded and work can start.

Greville said the first commercial wells would most likely come from the northwestern blocks and the first commercial developments would most likely come to fruition in about five years time, with a pipeline of discoveries to follow for years afterwards.

Greville was quietly pleased with the result.

“Some companies that have already been in there are going to have another look and now companies are looking at this area that have never been here before,” he said.

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