Horizon Oil - Oil and Gas Exploration Production
Activities Operations
Papua New Guinea
Papua New Guinea Activities Operations
- PRL 4 - Stanley (50.00%)
- PRL 21, Elevala / Ketu (45%) (former PRL 5)
On 15 September Horizon Oil completed a transaction with a subsidiary of Talisman Energy Inc. regarding the company's interests in PRLs 4 and 5 (now PRL 21).
The net effect of the transaction which include the transfer of a working interest and the shares in a wholly-owned subsidiary of Horizon Oil to Talisman, is that each will hold 50% interests in PRLs 4 and 21 (formerly PRL 21). The consideration of US$60 million to be received by the Company is to be paid as follows:-
- US$30 million in cash which was received at closing on 14 September 2009
- US$8 million to be drawn down at any time and applied to the Company's share of capital expemditure on the licences
- US$22 million to be drawn down and applied to the Group's share of capital expenditure on the licences after PNG Government approval of the working interest transfers required by the transaction has been granted.
PRL 4 - Stanley (50.00%)
Background:
- PRL 4 is located in the forelands of the Western Province of Papua New Guinea, lying in close proximity to the Fly River. Recoverable P50 resources are estimated at 261 bcf of gas and 8 mmboe of condensate.
- A successful workover and production test of the Stanley-1 well was conducted in mid 2008. The well flowed at rates of up to 30 million cubic feet of gas per day (‘mmcfd’). The well was tested through a separator unit and stable production rates of gas at 10 mmcfd and associated condensate at a yield of 24 barrels / million cubic feet of gas, with no formation water, were recorded. These rates were limited by the capacity of the test unit. Preliminary interpretation of the results indicates reservoir performance at the upper end of expectations. The Stanley-1 well was suspended on 27 July 2008 as a gas reinjection / back-up supply well.
The good flow rates from the successful Stanley-1 production test have been supported by analysis of the gas properties and condensate content. A BOD for the Stanley field development was completed by Icon Engineering Pty Ltd. The better than anticipated deliverability of the gas reservoir and hydrocarbon liquids content of the gas have enabled a substantial gas recycling / condensate stripping development project to be designed.
Following completion of the BOD, the Company commissioned RISC Pty Ltd, a leading engineering consultancy in the region, to carry out an independent audit of all the work carried out by the Company and its advisers on Stanley field in PRL 4 (and the Elevala and Ketu fields in PRL 21). This included a technical review of resource volumes, development plans, costs and schedules. The RISC report provided confirmation of the work done to date, in particular on the Stanley gas-condensate project, and allowed an economic evaluation of the assets to be carried out. Following receipt of this report, work on the initial stages required to bring Stanley field to development began in earnest.
In summary, the proposed project entails the production of 140 million of cubic feet of gas per day from two wells, extraction of initially over 4,000 barrels of condensate per day and potentially 40 tonnes of LPG per day, with re-injection of the dry gas until a gas market develops. Detailed reservoir modelling supports the recovery of more than 8 million of barrels of condensate over a 10 year period. The Company lodged the field development plan with the PNG Department of Petroleum and Energy ("DPE") in February 2009.
The participants are:-
Horizon Oil (Papua) Limited (operator) 50%
(a wholly owned subsidiary of Horizon Oil Limited (HZN:AU))
Talisman Niugini Pty Limited 50%
(a wholly owned subsidiary of Talisman Energy Inc (TLM:US))
Subject to reduction to allow for PNG State Nominee participation at 22.5%
Current activities:
Subsequent to the completion of drilling in May 2011, detailed geological and engineering evaluation of the data accumulated during drilling and testing has been finalised. Horizon Oil, on behalf of the PRL 4 joint venture participants and their respective financiers, commissioned RISC to carry out an independent resource audit of the Stanley gas/condensate field development. RISC is the leading oil and gas advisory firm in the region, providing independent commercial and technical advice to the oil and gas industry.
The assessment of reserves and resources was carried out in accordance with the Society of Petroleum Engineers Petroleum Resource Management System to update the independent evaluation carried out by RISC in 2008, prior to the drilling of the Stanley-2 and Stanley-4 wells. The report will be used to:
- Certify resources to enable Horizon Oil to obtain financing for development capital expenditure funding;
- Provide independent confirmation of gas resources in anticipation of the field owners entering into gas sales contracts; and
- Will constitute a key component of the FID (Final Investment Decision) package.
In-place and recoverable hydrocarbon volumes from the RISC report are summarised in the table below. (A glossary of terms is included at the end of this release). In summary, current audited volumes are approximately 30% higher than the pre-drill volumes. Pleasingly, a high level of the 2P (P50) resource is in the proven (P90) category.
RISC has continued to classify the resources as contingent resources, but notes that when FID is approved the condensate resources will move to the reserves category. As gas sales are confirmed, those associated gas resources will also be classified as reserves.
Stanley field will be developed as a condensate recovery project, with the condensate exported to market via pipeline and river tanker. Gas will be available for possible consumption locally in the near term, with the balance of the dry gas volume to be marketed in the future to regional industrial consumer(s) or into a possible large-scale gas aggregation project. As previously advised, front-end engineering and design (FEED) for the development is complete. With reference to the map below, key components of the development are:-
- The condensate production facility to be located at the surface location of the Stanley-2 and -4 wells (site and access largely complete, detailed design of plant underway and supplier selected);
- The condensate export pipeline to the port of Kiunga (route selected and survey contracted);
- A condensate storage facility in Kiunga (site largely prepared); and
- The condensate load out facility on the Fly River (location selected).
Early 2014 has been targerted for first production from the field.
PRL 21 (former PRL 5), Elevala / Ketu (45%)
Background:
- PRL 21 (former PRL 5) is located in the forelands of the Western Province of Papua New Guinea, lying in close proximity to the Fly River, approximately 65 km from PRL 4. Recoverable P50 resources are estimated at 480 bcf of gas and 25 mmboe of condensate.
- Reprocessing of some 120 km of 2D seismic data across the Elevala structure was carried out, in order to better define the potential closure and assist in selection of an appraisal location. The success achieved in reprocessing the seismic has led to the decision to process a further 232 km on the Licence area. New mapping and the potential for a sizeable gas and condensate (50 barrels condensate per million cubic feet of gas) resource underlines the need to develop a commercialisation scheme.
-
Current activities:
The Elevala-2 well has confirmed a gas/condensate zone in the primary Elevala sandstone target. The current operation is drilling ahead in 8-½” hole at a measured depth of 3,148 m towards the secondary Toro sandstone objective. The well spudded with Parker Rig 226 on 14 November 2011 and is being operated by the Company’s wholly owned subsidiary, Horizon Oil (Papua) Limited.
Since the last report, 9-⅝” casing was set on 9 December at 2,422 m and the well drilled in 8-½” hole to a depth of 3,114 m. A core was cut over the interval 3,114 m to 3,142 m, with 100% recovery. Good gas shows were encountered during the coring operation. Preliminary results of the coring and logging while drilling indicate the hydrocarbon zone to be about 15 m thick, with sand thickness and quality similar to that of the equivalent zone in Elevala-1.
The Elevala-2 well is located in Petroleum Retention Licence 21 (PRL 21), approximately 50 km east of the port of Kiunga on the Fly River in Western Province, PNG (see map below). The well is designed to appraise the Elevala gas/condensate accumulation, discovered in 1989-1990 by the Elevala-1 well, which flowed on test at a rate of 11.9 million cubic feet of gas and 634 barrels of 54 deg API condensate per day.
The well program is to drill to penetrate the Elevala sandstone and the deeper Toro sandstone at a location 2.1 km west the Elevala-1 discovery well. The well was specifically located to test the northern extent of the hydrocarbon accumulation about 60 m down-dip of Elevala-1. In fact, the gas zone has been encountered high to prognosis, approximately 20 m down-dip and no water leg was observed. Further drilling results and interpretation will be required before being able to comment on hydrocarbon pay thickness and resource volume.
On completion, the plan is to drill the Ketu-2 appraisal/development well. Preparation of the Ketu-2 drilling site is at an advanced stage and will be ready to receive the rig at the end of December.
The participants in PRL 21 are:
Horizon Oil (Papua) Limited (operator) 45%
(a wholly owned subsidiary of Horizon Oil Limited (HZN:AU))
Talisman Energy Niugini Limited 40%
(a wholly owned subsidiary of Talisman Energy Inc (TLM:US))
Kina Petroleum Limited (KPL:AU) 15%