By Robert Sullivan Posted 24 September 2014 12:37 GMT
With PNG LNG operational, several other companies are working on liquefaction projects.
Papua New Guinea will take a firmer line on oil and gas licence holders that are not making a demonstrable effort to move forward with exploration and development, as the government looks to maintain the momentum generated by the startup of the country’s first LNG project earlier this year.
The government is carrying out a strategic review of exploration licences issued by its Petroleum Advisory Board, to identify licence-holders they think are not genuinely committed to exploration and development, Nixon Philip Duban, Papua New Guinea’s Minister for Petroleum and Energy, told Interfax.
Some of the Petroleum Advisory Board’s exploration licences have not been properly reviewed, and certain licence-owners have been warehousing their exploration permits while they raise funds, Duban said on the sidelines of the CWC Group’s World LNG Series Asia Pacific Summit in Singapore. However, he did not single out any particular company.
“I don’t want to entertain companies who are lazing around and not doing enough work,” Duban said. “Those companies who have warehoused licences for too long and are not doing any serious work will not be allowed to hold their licences.”
The Papua New Guinea government is eager to see new liquefaction capacity built beyond ExxonMobil’s two-train PNG LNG project. It is optimistic another two trains can be added to PNG LNG, and that InterOil’s Elk and Antelope gas fields could underpin a separate project with two or three trains.
The scope for LNG beyond these five trains is still uncertain, as extensive exploration has only been carried out in one of Papua New Guinea’s five identified petroleum basins, according to Duban.
“At the end of the day, we want to ensure that, once the review is complete, companies serious about undertaking exploration and other gas-related businesses in Papua New Guinea are given the opportunity to bid for those licences,” he said. Moratorium on the horizon
The review is expected to examine three categories of petroleum permits –prospective licences, retention licences and development licences. The government expects to have completed the bulk of its investigation into prospective licences by mid December.
The government will allow companies to bid on any available permits following the full review, but it may suspend the award of new licences until more work is done on existing ones, Duban said.
“Once we complete this process we will probably put in place a moratorium, until we see the full utilisation of those licences,” he said. “We are looking at a long-term arrangement where licences are given to reputable companies who can come in and do serious work, and then we will put in the moratorium.”
The government may also review the conditions under Papua New Guinea’s Oil and Gas Act as part of this long-term plan to fine-tune the licensing framework, the minister added. “We may have to raise the standard a bit higher so that only serious companies will be given the opportunity to bid.”
The review of the oil and gas act may also look at the government’s participation in energy projects, which is set by law.
Oil and gas developments have the potential to significantly boost Papua New Guinea’s economy. The $21 billion, 6.9 mtpa PNG LNG plant was a boon for the country. It provided 21,220 jobs at its peak in 2012 – when the country’s GDP also jumped by 9.2% year on year. GDP rose again by 6% in 2013, but the project’s completion means the country is facing an economic downturn until the next wave of investment starts.
The government is also eager to open up opportunities for FLNG and small-scale LNG projects in western Papua New Guinea, where there have been several discoveries on- and offshore, said Duban.
“We want to promote Papua New Guinea as a destination for FLNG, so those who have the expertise and the ability can take that opportunity,” he said, adding the majority of the licences up for review are for offshore areas. Smaller projects
While two joint ventures, led by Exxon and InterOil, are focused on developing big onshore gas fields for large LNG plants in east Papua New Guinea, a handful of smaller companies are looking at banding together for a smaller liquefaction project in the west of the country.
The companies have put forward a plan to aggregate their gas reserves into one smaller – and cheaper – FLNG plant, using tolling agreements like those in the United States (see PNG explorers looking at joining forces for tolling LNG, 23 July 2014).
Among those is Australian explorer Cott Oil and Gas, which is proposing setting up a ‘buoyant tower’ production, processing and reinjection facility, and piping the gas to a liquefaction barge with a capacity of 1 mtpa or more. Both facilities would be 5-10 km from Papua New Guinea’s Daru Island.
Cott is a partner in the Talisman Energy-operated Pandora offshore gas field, along with Santos and Papua New Guinea’s Kina Petroleum. Talisman also operates onshore fields with Mitsubishi and with Osaka Gas and Australia’s Horizon.
