Oil Search to venture into CSG exploration

OIL Search says the award of seven mineral exploration licences with coal seam gas potential in the Papua New Guinea Foreland is an exciting new venture for the company.
Oil Search to venture into CSG exploration Oil Search to venture into CSG exploration Oil Search to venture into CSG exploration Oil Search to venture into CSG exploration Oil Search to venture into CSG exploration

The company secured the seven licences covering 17,500 square kilometres from the PNG government. The licences are in an area characterised by lowland forests and swamps, with few roads and sparse population.

"It is a potentially significant new development in our exploration strategy and certainly very strongly complements our existing conventional gas and there are many synergies that can be driven from that exercise," managing director Peter Botten said in a webcast of the company's results.

Under the terms of the award, Oil Search will spend about $US5 million over two years on evaluating existing data within the seven licences as well as the drilling and sampling of three shallow wells.

The company then has the option to extend the licences for an additional two years, subject to relinquishments and another committed work program.

The award of the seven licences could be seen as a strategic acquisition for the company and could help underpin train 3 of the PNG LNG project.

A final investment decision for trains 1 and 2 on the ExxonMobil-led PNG LNG project is expected by the end of the year.

Botten said over time the CSG resource could represent another significant source of gas but it was at grassroots stage.

"The coal seam gas, I should highlight, remains a high-risk play," he said.

"It is something that we're very encouraged about, the intersections we have seen in the oil wells, but there is a lot of work to do to identify the resource and make sure those coals do and can actually liberate gas.

"We see encouragement but there is a lot of work to do, but certainly, a coal seam gas resource complementing our conventional gas resource could be an important factor for potential reserve underwriting in the future."

Botten said the company did not have particular in-house CSG experience but he believed there was enough outside CSG expertise to help with the evaluation.

"I don't believe honestly that we have particular CSG experience in-house.

"In our analysis of the opportunity we did use some specific outside expertise to help us in that evaluation - we're very comfortable with that advice and these people have impeccable experience in CSG," he explained.

"Our attitude at the moment is to make sure that we have appropriate CSG experience and we certainly have access to that now.

"How we manage that portfolio going forward, I think it's not essential that we bring in at this stage people with CSG experience or anybody else, but it will be part of our overall portfolio management process and there is undoubtedly enough CSG experience out there right now for us to get a handle on the potential resource out there."

  • NEW: Digital version of PNG Report magazine - View here
  • Porgera: Barrick-PNG talks go on - Read more
  • Follow the companies investing in the PNG market - Read more