Published in the Feburary 2012 PNG Report magazine

With planned total depths of around 3000m each, Oil Search will drill at least two wells in Petroleum Prospecting Licence 244 which French supermajor Total SA farmed into last year. The Hagana prospect hosts multiple structures, while the Flinders prospect is based mainly on a single potential reservoir.

Both prospects are marine fan plays targeting amalgamated turbidite sands and Oil Search will decide which one to drill first once it considers the various technical issues after getting hold of the rig.

On pre-drill estimates, Oil Search exploration and business development executive general manager Julian Fowles told PNG Report that each prospect could hold several hundred billions of cubic feet of gas up to 1.5 trillion cubic feet of gas.

He didn't reveal the estimates for condensates and said the Gulf of Papua exploration program fitted in with Oil Search's gas growth strategy, or "where we go next after PNG LNG".

A 29% stakeholder of PNG LNG, Oil Search's Gulf of Papua strategy could lead to providing more feed gas for this project's LNG plant, which is under construction near Port Moresby, but a separate LNG project option has not been ruled out.

The cost of each well is not publicly known, but a ballpark figure is that they will cost $US40 million each, depending on the costs for mobilising and demobilising the rig.

This is cheaper than the typical well in the PNG LNG project fields of the Southern Highlands region, where rig moves and site preparation can be costly.

Another key advantage to this offshore drilling, apart from it being based on 3D seismic which is impossible to capture effectively in the Highlands, is how much time can be saved.

"The good thing about these wells is that they are relatively quick to drill," Fowles said.

"You are drilling through much younger and softer sediments to the target compared to the PNG mountains, where you drill through solid rock from the surface."

Each well is expected to have a 60-day window to complete, although 35-40 days could be achieved, with a successful find likely to take longer for additional testing.

The prospectivity of these plays is not new either.

The Flinders target was identified on 2D seismic some 18-20 years ago.

Fowles helped answer why it had taken so long for new wells to emerge in this address, even though the Gulf of Papua had notched up three discoveries to date.

"The hold up in Gulf of Papua is the recognition that the area is prospective for gas, not oil," he said.

"Now we have a potential commercialisation route, with an LNG development already underway."

Fowles said it was also costly to mobilise and demobilise a rig into the Gulf of Papua and would be hard to justify for a single-well campaign. In this regard, Oil Search aims to achieve better value with a multiple-well campaign that spreads these costs across several wells.

Oil Search has long flagged the possibility of two other wells to further optimise the total costs, with the potential for up to four wells in total.

Fowles commented that this outcome was dependent on how the first two wells fared and how farm-in talks go for Oil Search's wholly-owned, new and adjacent exploration license PPL 385.

Having been awarded only late in 2012, this block is not part of the joint venture struck with Total last year and Oil Search is currently running a data room on it to attract a suitable farminee.

Oil Search is also yet to reveal the full details of the JV it struck with Total last year, and it is reluctant to do so until the French supermajor's acquired interests in the onshore and offshore Gulf region licences are officially registered.

As for the Stena Clyde, Oil Search originally planned to spud its first offshore well in late 2012 before two men died on this semi-submersible rig in August, with this accident later followed by a separate electrical fire incident.

The investigations into the fatal accident, which occurred when the rig was operated by Origin Energy in Victoria's Otway Basin, have taken several months.

Although the findings of the review into the incident are still to be published, Oil Search will undertake a full safety audit once it receives the rig.

Update

Oil Search has more recently flagged that the Kidukidu prospect in PPL 244 could be the third well drilled as part of this offshore drilling campaign.

Total agreed to acquire 40% stakes in the relevant offshore licences (Oil Search 40%, Nippon Oil 20%)

but this remains subject to PNG government approval.