The Kutubu Oil Project, which was Papua New Guinea's first commercial oilfield development, is located in the southern highlands of Papua New Guinea and takes its name from nearby Lake Kutubu. Oil was first discovered at Kutubu in the Iagifu sandstone structure in 1986 and commercial production commenced in June 1992.
The Kutubu development comprises a network of wells that produce oil from the Iagifu-Hedinia, Usano and Agogo fields, a gathering system and on-site processing facilities (the Agogo and Central Processing Facilities) and supporting infrastructure, as well as a 265 kilometre export pipeline to the coast and a marine loading terminal in the Gulf of Papua. The pipeline operates under Pipeline Licence 2 (PL-2), while the oilfield operates under Petroleum Development Licence 2 (PDL-2). Both licences were issued in December 1990 for a term of 25 years and were extended in December 2009 until December 2035.
Production from the Kutubu field peaked in 1993 at 130,000 bopd. Although still a strong contributor to Oil Search's profitability, the Kutubu Oil Project is in its decline phase due to natural field depletion and increasing gas production. However, efforts over the past several years to arrest the production decline have been highly successful with additional production resulting from the drilling of development wells at Kutubu, Agogo and Usano. Towards the end of 2009, an Agogo development well was deepened to test an exploration target and discovered oil in a previously untested footwall forelimb compartment. Intervals within the footwall forelimb were flow tested in early 2010 and produced oil from the Digimu interval. Importantly, the recovery of oil from the footwall forelimb of Agogo, together with the confirmation of a hydrocarbon charge in the footwall at Wasuma in PPL 219, has opened up a new play fairway in the Fold Belt and has upgraded the potential of similar footwall structures that are mapped on trend and in adjacent acreage.
At the time of application for PDL-2 in May 1990, the Kutubu Project fields were estimated to contain proved plus probable reserves of approximately 170 million barrels. As at 31 December 2009, Kutubu had produced 319 million barrels and the gross proved plus probable ultimate recovery was estimated at 357 million barrels with 38 million barrels remaining. Oil Search’s share of remaining recoverable reserves as at 31 December 2009 was 23.0 million barrels. The main reserves are contained within high permeability oil rims in the Toro and Digimu sandstones with smaller volumes in the Iagifu and Hedinia reservoirs.
The Kutubu crude oil is a light, sweet 45 degree API oil and is sold as part of the "Kutubu Blend" together with Moran and Gobe crudes.
Net Oil Search production from the Kutubu field during the first quarter of 2010 was 0.93 mmbbls. Gross production rates averaged 17,184 barrels of oil per day (bopd) compared to 19,963 bopd in the previous quarter.
While 2010 first quarter production was 16% lower than in the fourth quarter of 2009, production rates were approximately 20% higher than in the corresponding quarter of 2009, reflecting the significant continuing contribution from new development wells drilled at Kutubu, Agogo and Usano in 2009. The production decline from the previous quarter was due to natural field decline and a zonal testing programme in some of the key wells for reservoir management purposes. The results of the individual zone testing programme will enable production to be optimised over the balance of 2010.
During the quarter, testing of the recently completed Agogo ADT2 ST3 well continued. The uppermost Digimu interval flow tested at rates of 1,500 to 2,000 bopd. Three of the deeper intervals were also tested and flowed water with traces of oil. The well is currently on production from the Digimu while plans are made to test the remaining three sands in the two untested zones.
Several well intervention opportunities have been identified across the Kutubu fields which will be implemented over the coming months and are expected to improve production rates. Additionally, a number of workover opportunities are being planned with a workover programme expected to commence in the second half of 2010.
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