The InterOil Corporation, through its wholly owned subsidiary company (SPI (208) Limited) has been conducting exploration activities for oil and gas in Papua New Guinea for several years. Currently InterOil holds 100 % equity in three Petroleum Exploration Licenses; PPLs 236, 237 and 238 located onshore in the East Papuan Basin, and 15% equity in PPL 244, located offshore in the Gulf of Papua.
In the latter half of 2006 it drilled the exploration well Elk-1 located within PPL238 and which resulted in a significant gas/condensate discovery in fractured Puri limestones of Miocene age. Since that time Elk-2, a downdip flank test and Elk-4, located south of the discovery to test the Antelope feature have been drilled. Both Elk-1 and Elk-4 flowed gas at excellent rates in excess of 100 mmcfpd, establishing PNG record flow rates.
InterOil commenced drilling the Antelope-1 well in October 2008 which is located approximately 2.5 miles (4 km) south of the discovery Elk-1 well. The Antelope-1 targeted a seismically interpreted reefal complex with indications on seismic of superior reservoir characteristics. InterOil announced that its Antelope-1 well flowed at 382 million cubic feet of natural gas per day (MMcfd) with 5,000 barrels of condensate per day (BCPD) for a total 68,700 barrels of oil equivalent per day (BOEPD), setting a new record rate for the country of Papua New Guinea and possibly the world for an onshore vertical well. The flow test recorded a maximum calculated rate at 545 MMcfd for a dry gas reading through a 6 inch capacity choke that was only opened to 3 1/2 inches or about 30% of capacity. Conservatively adjusting the dry gas flow rate of 545 MMcfd to compensate for 13 Bbls of condensate per MMcf results in the 382 MMcf effective gas flow rate reported above.
As far as we are aware, the world record breaking gas flow rate from a vertical well confirms other records recently established by the well, such as the largest vertical hydrocarbon column height in a single onshore carbonate reef structure and the largest calculated absolute open flow (CAOF) at 17.7 Billion cubic feet of natural gas per day. The well results establish the country of Papua New Guinea as a world class gas resource base in close proximity to the largest and most well developed LNG market in the world.
InterOil believes the Antelope-1 well clearly confirms the gas resource potential sufficient to proceed with plans to build a liquefied natural gas (LNG) plant on company land next to the InterOil refinery. Antelope-1 and previous wells, have confirmed over 120% of full capacity, estimated at 500 MMcfd, for the first proposed LNG train. Third party resource estimates are currently underway.
InterOil, together with its commercial partners are undertaking feasibility studies with a view to developing early cash flow by stripping the condensate from the gas and re-injecting the gas back into the Elk and Antelope structures. The goal is to sell the condensate early and have the gas for the the LNG facility. The LNG facility is to utilize the recently discovered gas resource at the Elk/Antelope gas field.
The planned LNG Facility is being reviewed for Final Investment Decision - FID, it is planned for the gas to be transported from the field to Napa Napa near Port Moresby by pipeline, a distance of some 218 miles (350 km), where it will be processed at the proposed LNG plant adjacent to the InterOil refinery and then exported to international markets.
Much of the proposed plant development is being organized by InterOil.s downstream partners, however the InterOil upstream division supported by expert consultants will independently develop the Elk/Antelope gas field and transport raw gas to a proposed compressor station on the bank of the Purari River. It is this project (Elk/Antelope gas field development, pipeline to the Compressor Station and related infrastructure) that is the subject of a Petroleum Development License (PDL) Application, an Environmental Impact Statement and Environmental Permit Application.
InterOil will initially develop the Elk/Antelope gas field by the drilling of sufficient production wells, currently estimated at between 6 and 12, to supply approximately 650-900mmcfgpd as feedstock for a single train 3.5-5.0 mtpa LNG plant to be constructed at Napa Napa, near Port Moresby. These production wells will be connected by a gas gathering system and delivery pipeline to separation and drying facilities to be located on the northern bank of the Purari River approximately 20 km south of the gas field. At this location condensate and water will be separated and the gas dried by TEG contact. The dry gas will then be sold to Liquid Niugini Gas Limited, a company in which InterOil owns a 45% interest, who will compress it prior to transportation to Napa Napa for LNG processing, based on tolling economics. Condensate will be re-injected to the trunk line downstream of the compressor. Produced water will be treated for discharge or reinjection. Sufficient capacity will be incorporated into the above facilities to support a second LNG train should adequate gas reserves be proven.
As a means of early monetization of the gas resource InterOil is currently evaluating the potential of a gas stripping project at the gas field itself whereby condensate would be extracted from the gas stream and transported by barge directly to InterOil.s refinery at Napa Napa. Should this project proceed it has the potential to generate substantial revenue prior to the LNG project coming on-stream.