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Petroleum License Deals

Petroleum Prospecting License 236

Current Development Status
Our Wahoo prospect, targeting seismically defined indications in PPL 236, has matured to the drill-ready stage and preparations to facilitate access to the proposed drilling location are underway.

PPL 236 consists of 53 graticular blocks covering an area of 4,502 square kilometers or 1,112,464 acres.

The following are the work commitments for PPL 236 for the remaining two-year term of the PPL, ending in March 2013:

  • A minimum expenditure of $ 9.85 million;
  • Drill an exploration well at a location acceptable to the State;
  • Complete a thorough petroleum system and basin study in PPL 236.

As at February 27, 2013, we have submitted to the DPE a request for a variation of the drilling commitment under PPL 236 by deferring it into year five of the second term. As required under the Oil & Gas Act, we submitted a work program and expenditure proposal for year five. We are still awaiting confirmation of the approval of the variations from the DPE.

Petroleum Prospecting License 237

Current Development Status
The Triceratops field is located on PPL 237. Following successful flow from a drill stem test, the Triceratops-2 well was declared a discovery by the State on June 14, 2012. The Triceratops-2 well has been suspended as a discovery for recompletion at a later date as a future production well. We have begun the process of farming out portions of our interest in PPL 237 to industry partners in order to reduce our costs of delineating the bounds of the Triceratops field.

PPL 237 consists of 34 graticular blocks covering an area of 3,238 square kilometers or 715,648 acres. On November 30, 2010, a total of four graticular blocks were excised from PPL 237 and incorporated into PRL 15.

The following are the work commitments for PPL 237 for the remaining two-year term of the PPL ending in March 2013:

  • Minimum expenditure of $10.0 million;
  • Acquire, process and interpret new seismic data focused on selecting a drilling location;
  • Complete a thorough petroleum system and basin study in PPL 237.

We intend to apply for a PRL over an area of PPL 237 surrounding the Triceratops gas and condensate discovery totaling 9 graticular blocks. As at February 27 2013, we have submitted a work program and expenditure proposal for year five of PPL237. We are still awaiting confirmation of the approval of the variations from the DPE.

Petroleum Prospecting License 238

Current Development Status
Our Tuna prospect, targeting seismically defined indications in PPL 238, have matured to the drill-ready stage and preparations to facilitate access to the proposed drilling location are underway.

PPL 238 consists of 94 graticular blocks covering an area of 7,922 square kilometers or 1,978,565 acres. On November 30, 2010, a total of five graticular blocks, including the blocks in which the Elk-1, Elk-4 and Elk-4A gas /condensate discovery wells were drilled, were excised from PPL 238 and incorporated into PRL 15.

The following are the work commitments for PPL 238 for the remaining two-year term of the PPL ending in March 2013:

  • Minimum expenditure of $10.0 million;
  • Acquire, process and interpret new seismic data focused on selecting a drilling location;
  • Complete a thorough petroleum system and basin study in PPL 238;
  • Drill a well at a location acceptable to the State.

On December 5, 2012, we submitted a request for a variation of the drilling commitment to be replaced by the Airborne Gravity and Magnetics and Seismic that had been acquired in 2011 and 2012. We also submitted a work program and expenditure proposal for year five.

Petroleum Retention License 15

Current Development Status
In November 2012, the Antelope-3 appraisal well in PRL 15 penetrated the top of the reservoir. We believe that the Antelope-3 well further confirms the continuity of a highly productive reservoir into which the Antelope-1 and Antelope-2 wells were drilled. We had previously drilled the Elk-1, Elk-2 and Elk-4 wells on PRL 15. We are now planning the development of infrastructure for the Elk and Antelope fields, which is expected to include gas gathering pipelines, the Condensate Stripping Project and pipelines to deliver natural gas to the LNG Project and condensate to the Midstream Refining segment.

Petroleum retention licenses may be granted to licensees of PPLs in which petroleum fields or parts of petroleum fields have been discovered to permit time for the licensee to develop the means for commercialization of the gas discoveries. In August 2009, we applied for a PRL over the declared location and on November 30, 2010, PRL 15 was granted by the State and was excised from of PPL 237 and PPL 238. The initial period of a petroleum retention license is for five years and further extensions of two 5-year terms may be granted at the discretion of the State.

The total financial commitment over the first five year term of PRL 15 amounts to $73.0 million. Following are the work commitments for PRL15 for the first two years of this term, ending in November 2012.

  • Drill 2 wells in the Elk and Antelope fields;
  • Acquire, process and interpret 100 kilometers of two dimensional seismic acquisition and complete geoscience studies;
  • Conduct social mapping and social and economic impact studies;
  • Conduct commercial and marketing studies;
  • Conduct surface and subsurface engineering studies.

    • – Static and dynamic reservoir modeling
    – Base case depletion plan
    – Surface facilities.

On June 27, 2012, we submitted an application for a variation of the PRL15 License commitment to extend the well commitments into years three and four of the License. After the successful mobilization and spudding of the Antelope-3 on September 8, 2012 we submitted a request to modify this variation to the extension of 1 well obligation into Years 3 and 4. The variation was granted by the DPE on November 27, 2012.

Petroleum Development License (“PDL”)

In order to progress the proposed development and commercialization of the Elk, Antelope and Triceratops fields, we will need to apply for and obtain a PDL from the State. Assuming that a PDL is issued, it will replace PRL 15 and include the Elk and Antelope fields and additional acreage required for in-field facilities and gathering systems. We will also need to apply for and be granted a Petroleum Processing Facilities License (“PPFL”) for the LNG Project and Pipeline Licenses (“PLs”) for the dry gas and condensate pipelines. We have commenced preparation of an application for a PDL.

The application for a PDL is made to the DPE and must be accompanied by detailed proposals for the financing, construction, establishment and operation of all facilities and services for and incidental to the recovery, processing, storage and transportation of gas from the PDL area. Collectively these will constitute the Development Plan. In addition, certain agreements and approvals from the State will need to be in place prior to the grant of the PDL including a gas agreement defining the fiscal regime applicable to the development and providing for the State’s equity participation in the fields. Environmental approvals will be necessary and we will also be obliged to submit comprehensive social mapping and landowner identifications studies of those customary landowners within the PDL area. Ministerial recognition of landowner groups is customarily based on such reports.

Upon application, the State will undertake a comprehensive review of the Development Plan and any other incidental agreement or approval required before granting the PDL application. Following its review, the State shall take steps to conduct a ‘forum’ as set out under the Oil & Gas Act. The forum requires that the State co-ordinate a meeting for all affected stakeholders including the provincial, local level governments and customary landowners with a view towards establishing a regime for the distribution of royalties and other benefits that will arise from the commercialization of the fields.

Once all formalities are completed and the State is satisfied, the State may grant the PDL, the PPFL and the PLs. Should the licenses be issued, the acreage would be held subject to; (i) periodic review provided for in PNG’s Oil & Gas Act, and (ii) the license holders continuing to meet commitments associated with the license grant.