Papua New Guinea (PNG) has produced more than 400 MMbbl of oil since commercial production began in 1992, with current production coming from the Moran, Gobe, Kutubu, and Agogo fields. The country’s real golden egg, however, is its proved gas reserves, estimated at 15.6 Tcf.

Gas production to date has come from the Hides gas field in the Highlands area of the Papuan Basin from which it is transported 45 miles (72 km) north to the Pogara Gold Mine. The PNG government tried to encourage more development in 2001 when it dropped the tax rate on new projects to 30% from the previous 50%. Oil Search and ExxonMobil tried for several years to find enough customers in eastern Australia to justify a gas pipeline from PNG, but they gave up that attempt in 2007.

A huge flare testified to the success of InterOil’s 705 MMcf/d Antelope-2 well in the highlands of PNG. (Photo by Don Lyle)

To streamline development, PNG formed the Mineral Resources Develop-ment Co. (MRDC) to manage the thousands of tribe and landowner interests in minerals and oil and gas and mandated a 2% share of oil and gas projects for that government agency.

In 2007, PNG formed Petromin PNG Holdings Ltd., a state-owned company that would hold the government’s mineral interests. That organization was given the option to back into projects for up to 22.5% interest by assuming its share of sunk and development costs.

One of Petromin’s first activities was to purchase Eda Oil from MRDC, which owned a 20.5% interest in the Moran field. In late 2008, the entity took a 20.5% interest in InterOil Corp.’s Elk-Antelope field.

When ExxonMobil and Oil Search abandoned the pipeline project, they redirected their efforts to the PNG LNG project, which proposed to move 960 MMcf/d of gas from the Hides and Juha fields some 466 miles (750 km) to the southern PNG coast and southeast to a location across the bay from Port Moresby.

That group planned a 6.6 million metric-ton-per-year (mtpa) LNG plant and already had partners and buyers lined up when it received government approval. First sales are scheduled for 2014.

Meanwhile, InterOil set up a vertical company in PNG as it built the nation’s first refinery, established a products distribution network, picked up 4.6 million gross acres of properties in the Papuan Basin east of the existing giant fields, and began looking for production. At the same time, it proposed its own LNG project with facilities at its refinery, also across the bay from Port Moresby.

InterOil also proposed a gas processing plant on the Purari River, near its Elk and Antelope discoveries to recover liquids for initial sales. Until a pipeline could be built, the company planned to re-inject produced gas into the reservoirs to maintain pressure.

With the prospect of an export market for gas, both groups began front-end engineering and design work on their proposals, and InterOil stepped up its drilling and testing operations, identifying 40 prospects on its acreage in addition to the Elk and Antelope projects.

Elk-1 tested in 2006 for 102 MMcf/d of gas and 510 b/d of condensate. Elk-4 followed in 2008 with a test of 105 MMcf/d of gas and 1,880 b/d of condensate, but those were minor discoveries compared with the Antelope wells.

InterOil’s Antelope-1 well qualified for a Guinness record when it tested for 382 MMcf/d of gas and 5,000 b/d of condensate. The company followed up with Antelope-2 in December 2009, with a test rate of 705 MMcf/d of gas and 11,200 b/d of condensate.

According to Phil Mulacek, CEO, that single well could support a two-train LNG plant if the well produced at the test rate through a 4.375-in. choke imported from Saudi Arabia. An independent report places recoverable resources for the Elk structure at 6.1 Tcf.

InterOil also has planned a two-train, 8 million mtpa plant at a cost of US $7 billion, but at press time the company still was negotiating with partners.