THE refurbished Kumul terminal in the Gulf of Papua is gearing up for a new burst of life after two decades of declining fortunes as PNG’s sole crude oil export facility. By Wantok

Despite the new-found optimism generated by the PNG LNG project, it is conceivable that the Kumul terminal may never regain the heights it commanded in its early days when the prolific Kutubu field hit peak production of 150,000 barrels per day.

Production in the first full year of operation averaged 140,000bpd and export sales have been declining almost since the day first oil was produced on June 27, 1992.

The exploration climate in PNG was pretty downbeat in those years. The pace only began to pick up again early in the past decade after Oil Search took over operatorship of the Kutubu joint venture when it purchased the Chevron Niugini stake.

Currently, production is around 35,000bpd, with the oil export pipeline and Kumul terminal greatly under-utilised.

But that is all about to change in the coming year as the PNG LNG project begins to export 6.9 million tonnes of LNG annually to four customers in Japan, China and Taiwan.

Along with the gas that will be piped to the LNG plant near Port Moresby there will initially be around 50,000bpd of condensate, which should take total export capacity via the Kumul terminal to around 85,000bpd.

As predicted in the previous Wantok column, LNG exports should commence in the second quarter of next year.

Further confirmation of this has come from the latest Oil Search annual results, which indicated that commissioning gas from its Associated Gas project should be piped to the LNG plant in the second quarter of this year.

ExxonMobil has been implementing the PNG LNG project like clockwork ever since construction began in 2010. There has only been one significant blemish to its record – the ongoing problems it has faced with construction of the Komo airstrip in Hela Province, where geotechnical surveys somehow did not pick up the huge amounts of clay beneath the surface.

This has greatly delayed construction activity and we now hear that the first Antonov aircraft with essential equipment for the Hides gas conditioning plant has again been delayed, from February to April, as a result. Nevertheless, mechanical completion of the plant is still anticipated by the end of this year.

From around 2015 – the first full year of LNG production – it is conceivable that Oil Search may lift its own crude oil production with expectation the Manada oilfield could be producing some 15,000bpd.

It is difficult at this stage to predict the net increase in Oil Search production due to the maturing of its operations and the declining output from Kutubu and Moran, although there has been significant success in moderating the rate of production decline.

The wet gas produced from the Associated Gas project could, in fact, also contribute to a net increase in oil production.

So a possible target of around 100,000bpd could well be reached in 2015 – a level not seen since the 1990s.

Oil Search itself is well-primed for a significant corporate upgrade besides the opportunity offered by completion of the LNG project.

Three current projects have the capacity to contribute to a re-rating of Oil Search.

Oil has already been discovered at Taza-1 in Kurdistan (Iraq) and production tests are not long off for a field potentially capable of hosting 250-500 million barrels; then there is the 100% owned Semda well being drilled in Tunisia that is targeting 50-100 million barrels of crude oil plus natural gas and, in a similar time frame, a decision could be made by the year end on possible use of the 2.5-3 trillion cubic feet at P’nyang for a third LNG train.

Click here to read the rest of today's news stories.