PAPUA NEW GUINEA'S THIRD OIL DEVELOPMENT GETS FIRST NOD

A group led by a unit of Chevron Corp. has obtained a green light for work leading to Papua New Guinea's third commercial hydrocarbon development project.

Cost of developing Gobe and South Gobe oil fields in the Papua New Guinea highlands is pegged at $300 million

The two fields, with combined reserves estimated at least 100 million bbl, are expected to go on stream by 1997.

The project follows Papua New Guinea's first commercial hydrocarbon development, Hides gas/condensate field being developed by a group led by British Petroleum Co. plc., and the country's crude oil export project, Kutubu, being developed by another Chevron group. The idea is to use Kutubu infrastructure and have Gobe oil supplant Kutubu oil as the latter begins to decline.

GOBE DEVELOPMENT

Chevron Niugini Pty Ltd. was named operator of the Gobe development project. The Papua New Guinea government and Chevron's petroleum prospecting license partners have agreed to proceed with design and feasibility studies to determine the project's economic viability

Gobe development is viable because it is near infrastructure created in support of the Kutubu project., notably the pipeline extending from the highlands to the Gulf of Papua near the proposed Gobe development (see map, OGJ, Apr. 18, 1994, p. 24).

The project will straddle two permits held by two joint venture groups.

Chevron Niugini operates and holds a 25% interest in PPL 161 with other interests held by Oil Search Ltd. 35.017%, Ampolex (PNG Petroleum) Inc. 14.983%, BHP Petroleum (PNG) Inc. 12.5%, and Merlin Pacific Oil Co. Ltd. (Ampolex) and Merlin Petroleum Co. 6.25% each. Barracuda Pty. Ltd. operates and holds a 20% interest in PPL 56, with other interests held by Southern Highlands Petroleum Co. Ltd. 50.5%, Iona Pty Ltd. (Oil Search) 20%, Nomeco PNG Oil Co. Ltd. 7%, and Mountains West Exploration Inc. 2.5%.

Oil Search, Port Moresby, has acquired BP Exploration Operating Co. Ltd.'s 25% interest in PPL 161 for $71.4 million (Australian), giving it a total interest of more than 35% in the license. Oil Search will fund the purchase with a $30 million placement to several present and prospective institutional shareholders.

BP remains involved in the Kutubu project, which is producing 120,000 b/d of oil, and in continued development of the Hides/Kariius gas discoveries to the northwest.

PPL 161 contains Gobe field and part of Southeast Gobe, while PPL 56 contains the remainder of Southeast Gobe.

The development will be a cooperative project using personnel from both groups. Survey, design, front end engineering, environmental, business development, and training programs are to begin immediately to bring the project to the petroleum development license application stage.

The two joint ventures have approved provisions for project planning, cost sharing, and pre-unitization.

OTHER PNG ACTIVITY

Also in Papua New Guinea, the government is considering floating as much as 49% of its $760 million Mineral Resources Development Corp. holding company for the country's resources equity.

This represents a slightly different tack from an earlier proposal calling for direct sale of the country's equity in major oil and mining projects, such as Ok Tedi, Porgera, and Kutubu, disclosed last year as part of the government's efforts to resolve its $3.8 billion debt crisis.

The new proposal, favored by Minister for Mining and Petroleum John Giheno, would enable the government to retain a controlling 51% share and still pay off the resource debts. It is being considered in light of an improving investment climate.

Meantime, Mobil Exploration Niugini has ceased operations in Papua New Guinea.

That follows a string of disappointing drilling results and outlays totaling tens of millions of dollars on its PPL 8 and PPL 152 in the Gulf of Papua during the past 2 years.

Mobil was looking for enough reserves to support a liquefied natural gas export project. Although it found some gas, the reserves were too small to support a stand alone project. However, Mobil does not rule out the possibility of returning to the country if the right opportunity arises.