After a two-year wait for government approval, the Stanley gas project joint venture is about to enter its construction phase. There’s also a second, even bigger, project in the offing, according to Horizon Oil’s senior representative in Papua New Guinea.

The Stanley joint venture’s drill rig in Western Province.

The oil and gas industry in Papua New Guinea’s Western Province received a significant boost in April with execution of the Stanley Gas Agreement, paving the way for the government to a development licence for the gas condensate project.

The US$300 million (K837 million) project, a joint venture between Canada’s Talisman Energy (40%), Australia’s Horizon Oil (30%), and Japan’s Osaka Gas (20%) and Mitsubishi Corp (10%), has a forecast production life of 20-25 years and is expected to provide the province with substantial economic benefits.

Kelvin Bramley, Horizon’s Chief Company Representative in PNG, told Business Advantage PNG the Stanley joint venture was now preparing  for ‘construction to start in earnest’, with a target of mid-2016 for first production.

For Horizon, which also announced it would merge with Australia company Roc Oil Company in April, the government approval represents a significant step in the sale of a 40 per cent stake in some of its PNG assets to Osaka Gas.

This agreement will trigger the transfer of approximately US$77 million (K 215 million) to the company-funds earmarked to finance the construction of the Stanley project.

Once commissioned, Stanley will start life as a condensate recovery operation with forecast output of 140MMscf of gas a day from two production wells to yield about 4,000 barrels of condensate.

Sales

The next aim for the Stanley joint venture is to secure a gas sales agreement.

Preferably, says Bramley, this will be in the domestic market, with discussions already taking place with Ok Tedi Mining about it using Stanley gas-fired power to offset its reliance on diesel-fired electricity.

Bramley explained that export opportunities for condensate would also be explored, with the east coast of Australia an obvious destination.

As with the gas, however, the preference is for condensate to be sold into the domestic market, with Interoil’s Napa Napa refinery the obvious beneficiary.

The potential for large volume gas exports from Western Province will be reliant on development of additional resources to improve the prospect of a LNG plant development in the region.

Potentially three times the size of Stanley, the Elevala/Ketu project could be in production by mid 2017, dependent on the regulatory approvals.

‘Ultimately we are looking to reach a stage where there are sufficient reserves to support a mid-scale LNG plant, ideally focused or located in the Western Province,’ Bramley said.

‘Such a scenario would very much suit the agenda of the provincial government, which has been keen to see production, as well as refinement and export capacity, remain in Western Province.’

Second project

Horizon Oil’s drill rig at Ketu-2 in Western Province.

Horizon, with its joint venture partners, recently submitted an application for a petroleum development licence for a second condensate recovery project, involving the Elevala and Ketu fields in the Western Province forelands.

Potentially three times the size of Stanley, the Elevala/Ketu project could be in production by mid 2017, dependent on the regulatory approvals.

To support its progress in Western Province, Horizon has established a comprehensive program aimed at ensuring local involvement in its projects, including a substantial national presence on the Stanley construction phase.

The local content plan aims to nationalise the production workforce at Stanley as quickly as possible once the project becomes operational.

It is anticipated that the PNG Government will take a 22.5 per cent state share in the Stanley project, with two per cent reserved for local landowners.