However, with the gas project destined to supply natural gas to Australia from about late 2009, there has been an upsurge in exploration activity because gas is viewed as being just as valuable as oil.
But even that picture is about to change in the coming decade, with newly interpreted seismic data suggesting that many oil fields, some potentially mega-sized, could be awaiting discovery in the Gulf of Papua.
Even before formal bidding starts later this year on 15 oil exploration blocks covering some 100,000 square kilometres in the Gulf, Shell Exploration International has been able to take a bite of the cherry, so to speak.
The PNG Government has never conducted a bidding round like this before but has been convinced by Fugro Multi Client Services, one of the giants in the geophysical world, that this is the way to go.
Fugro is funding a seismic acquisition and interpretation program costing some $20 million ($A27 million) after looking at regional opportunities for sale of such regional data and selecting the Gulf of Papua ahead of highly prospective areas in Indonesia.
A Fugro subsidiary, Chinampa, an obvious believer in the area’s hydrocarbons potential, took out an option to farm-in to three deepwater blocks – PPL254, PPL255 and PPL256 – which are all located in the Gulf, where work by Fugro has significantly raised prospectivity.
Now Shell has agreed to fund a 12,000km seismic survey in these three offshore areas following analysis by Fugro’s geophysicists that the Gulf could contain billion-barrel fields.
One explorer, who attended a recent Fugro presentation at the Australian Petroleum Production and Exploration Association conference on the Gold Coast, thought it was more likely the shallow and deep water traps would contain oil pools in the 100-300 million barrel range.
All this augurs very well for the bidding round, which Petroleum and Energy Minister Sir Moi Avei says will probably start in August and last for about a year. Later this year, a road show will see the area’s potential touted to exploration companies in Singapore, Calgary, Houston and Perth.
Water depths in areas on offer range from about 20m near the mouth of the Fly River to over 2500m in the eastern frontier areas, where only companies with big exploration budgets are likely to participate.
Part of the attraction is that, considering the geological prospectivity for hydrocarbons, the Government’s fiscal regime could be among the most attractive, especially given current crude oil prices.
As Avei puts it: “I am pleased to note that in the Asia-Pacific region, PNG’s fiscal terms for frontier areas is more attractive than our nearest neighbouring petroleum-producing countries.
“The risks are high for petroleum exploration in frontier areas, but then the rewards must also be high to attract the right explorer.”
Companies that make oil discoveries in the Gulf will only pay a 30% corporate tax on their oil and gas revenue if they can develop their discoveries before 2017.
The Fugro analysis suggests the existence of a variety of play types – Permian fault blocks; upper Jurassic to Lower Cretaceous plays similar to PNG’s Highlands discoveries in the Toro, Iagifu and Hedinia intervals; source rock equivalents from the Permian right through to the Tertiary as well as Upper Cretaceous turbidites.
Could PNG become the region’s next oil production powerhouse as the only Asian OPEC member, Indonesia, starts becoming dependent on crude imports? For now that is a billion-dollar question.
