Horizon Oil - Oil and Gas Exploration Production
Activities Operations
Papua New Guinea
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Papua New Guinea Activities Operations
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.
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 5. 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 5). 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.
Current activities:
Significant progress has been made in preparing for the drilling of the
Stanley-2 well. Well planning has been completed and tenders have
been issued for the majority of services. The well site has been
identified and cleared of bush and small trees and civil works will
commence in February 2010. The site will accommodate two
production wells (Stanley-2 and -4) and will later be able to be
adapted to site production facilities, being located close to the
main road and easily accessible. Long lead items such as casing
and wellheads have been ordered and other key services are under
evaluation for award. Negotiations are underway for a drilling
rig, with drilling on Stanley expected to commence in August 2010.
It is expected that there will be greater than one year’s program
when combining wells to be operated by Horizon Oil with those
to be drilled by other operators and this should lead to economies
of scale and logistics synergies.
Work on the application for a Production Development Licence (PDL) for
Stanley field is progressing well, with the Social Mapping and Landowner
Identification Report and Environmental Impact Statement both now
lodged with relevant PNG Government authorities. Negotiations on the
Gas Agreement, which is required as part of the PDL application, with
the Department of Petroleum and Energy (DPE) are also continuing.
PRL 5, Elevala / Ketu (50.00%)
Background:
- Horizon Oil’s interest in PRL 5 is now 50.00%. 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.
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Current activities:
Planning and preparation for the Elevala-2 appraisal well are progressing
in parallel with the Stanley-2 well. Preliminary site investigations have
been conducted but, as a result of new mapping, it has been decided to
acquire some 60 km of new seismic before a final decision is made. The
seismic will be located in the area between Elevala and Tingu to define
the structure in more detail so that an appraisal location can be optimized.
It is anticipated that the seismic will be acquired in March 2010 and a
location defined in April for construction.