Talisman Seeks PNG Partner
David Winning, The Wall Street Journal, 28 December 2011
Papua New Guinea may look a one-trick pony in global gas markets, with only the ExxonMobil-led PNG LNG project under construction. But Talisman Energy’s move to bring in a partner on its acreage in the country is a reminder that there are other games in town.
Talisman has appointed Sydney-based advisory firm RFC Corporate Finance to find an investor for four licenses in the forelands of western Papua New Guinea, which contain a mix of gas discoveries and exploration targets. The company reckons it can aggregate between 2 trillion and 4 trillion cubic feet of gas in Papua New Guinea–enough to underpin a single unit producing liquefied natural gas, or LNG, for export.
“Our intent was always to seek a strategic partner in what is a very large license interest position, once sufficient resources have been aggregated,” said Dave Mann, a spokesman for Calgary-based Talisman. “RFC represents a formal process to execute on this.”
Once a frontier region for exploration, Papua New Guinea has been transformed into a playground for the energy industry’s big beasts seeking gas reserves that can be developed and shipped to Asia’s booming economies. Talisman drove that process in the forelands area in 2009 and 2010, completing deals such as the US$177 million acquisition of Rift Oil and taking stakes in gas discoveries owned by ASX-listed Horizon Oil.
According to a BP study, Papua New Guinea had 15.6 trillion cubic feet of proven reserves of natural gas at the end of 2010. That figure likely underestimates the true resource as Papua New Guinea has been lightly explored up to now.
Talisman is offering to sell a 50% interest in the PPL 235 and PPL 261 licenses, which it wholly owns, and 10% stakes in the PRL 4 and PRL 21 blocks. RFC is calling for binding bids to be submitted by the end of January.
PPL 235 contains the Puk Puk, Douglas and Langia discoveries that contain a combined 2.4 trillion cubic feet of gas in place. Three exploration wells have been drilled so far in PPL 235, which it acquired through the Rift Oil takeover, and all have discovered natural gas.
“The exploration activity in these blocks has matured a series of drillable prospects with exciting prospective resource potential, and we are looking for a partner with a similar vision to Talisman for aggregation of gas resources in the PNG Foreland,” Mann says.
PRL 4 and PRL 21 also contain discovered resources, but the near-term focus is on developing reserves of condensate there with a view to bringing the gas to market later.
For now, Talisman is keeping its options open on a route to market for the gas. It could pipe gas to the US$15.7 billion PNG LNG project to support an expansion there. In its first phase, PNG LNG will have a annual production capacity of 6.6 million tons of LNG, with shipments to customers in Japan, Taiwan and China due to begin in 2014.
Piping the gas to PNG LNG is attractive because it would likely be cheaper than building and operating an onshore plant, or locating a floating LNG vessel in the Gulf of Papua.
But to strengthen its hand in any negotiations with Exxon and joint venture partners like Santos and Oil Search, Talisman likely needs an alternative route to market. If it succeeds in attracting a strategic partner with deep pockets, such as from China or Japan, then it opens doors for potential financing of a standalone LNG development.