Oil Search is aggressively pursuing a gas aggregation strategy in Papua New Guinea to drive the next phase of LNG development. The Company is well positioned, with extensive interests in two major gas hubs, the PNG Highlands and in the Papuan Basin.
One of Oil Search's strategic objectives is to aggregate gas resources in the PNG Highlands to underpin further LNG development, capitalising on the asset base being constructed by the PNG LNG Project. In early 2012, an exploration well at P'nyang South in PRL 3 discovered a substantial gas accumulation, which has led to a material increase in total estimated gas resources at P'nyang. The PRL 3 joint venture (OSH 38.5%, ExxonMobil 49.0%, JX Nippon 12.5%), led by ExxonMobil, is undertaking studies on the potential development of this multi-tcf gas and condensate field, with the use of the gas as a foundation resource for a potential T3 the primary option. This work will continue through 2014, in preparation for the submission of a development licence application for the field in early 2015.In addition to the P'nyang resource, potential gas upside exists within the existing Project gas fields, most notably in the Hides gas field, which is not yet fully constrained. The two G wells will help define the north-western extent of the Hides gas field, while the Produced Water Disposal well will help to better define the gas-water contact in the field. Development drilling at the Hides gas field will continue through most of 2014. In addition, towards the end of 2014, drilling is expected to commence on the Hides F1 Deep well, designed as both a producer and to penetrate a a deeper reservoir, which may potentially underlie the existing known Hides reservoirs and which has not yet been penetrated in the Hides field. All these Hides wells will provide important information on the Hides gas field and potentially augment existing proven resources at P'nyang to underpin potential LNG expansion. During 2014, Oil Search expanded its Highlands acreage footprint, taking an interest in PPL 464, south of the P'nyang field and entering a conditional agreement to acquire 100% of PPL 402, located north of the Hides and Juha gas fields. The Company also entered a conditional agreement to acquire a 10% interest in PPL 269, located south of the P'nyang field, with a seismic programme underway aimed at confirming prospects to be drilled in late 2015. All these new licences are believed to have additional gas potential.
In March, Oil Search took a significant step forward in its gas aggregation strategy, with the acquisition of a 22.835% interest in PRL 15. Located in the onshore Papuan Basin in PNG, the licence contains the Elk/Antelope gas discoveries, the largest remaining undeveloped gas resource in PNG, as well as significant exploration upside. The interest in Elk/Antelope is highly complementary to Oil Search's existing asset base and, subject to the results of an exploration and appraisal programme which is expected to take place throughout 2014-2015, has the potential to underpin either a major new standalone LNG development or LNG expansion, both of which are commercially attractive and would be value accretive for shareholders. The PRL 15 joint venture is presently scoping Concept Select studies and surveys, which are likely to assess a number of LNG development options, ranging from an integrated development at existing facilities through to a greenfields LNG development. Given Oil Search's extensive in-country operating experience and proven ability to deliver, Oil Search will be seeking to provide leadership on a number of the Concept Select activities.