Papua New Guinea - Petroleum Exploration Technical Assistance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8069 PROJECT COMPLETION REPORT PAPUA NEW GUINEA PETROLEUM EXPLORATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1279-PNG) SEPTEMBER 19, 1989 Industry and Energy Operations Division Country Department V Asia Regional Office This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency UeAt - Kina (K) 1982 (Project Appraised): Kl = US$1.48 1988 (Project Completed): K1 = US$0.86 ABBREVIATIONS BCF - billion cubic feet bbl - billion barrels DME - Department of Mineral and Energy ESMAP - Energy Sector Management Program FDB - Flower Doery Pty. Ltd. GOPNG - Government of Papua New Guinea km - Kilometers mbbl - million barrels MCF - 1000 cubic feet OPEC - Organization of Petroleum Exporting Countries PAB - Petroleum Advisory Board PDL - Petroleum Development License PPL - Petroleum Prospecting License PRAG - Petroleum Resources Assessment Group RRA - Robertson Research Associates (Australia/UK) TCF - trillion cubic feet WEC - Worldwide Exploration Consultants (USA) THE WORLD BANK FOR OFFICIAL USE ONLY Washgtor. DC 20433 USA 01ice no oecfenewal Opaumn IVAkuAtIn September 19, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Papua-New Guinea Petroleum Exploration Technical Assistance Project (Credit 1279-PNG) Attached, for information, is a copy of a report entitled "Project Completion Report on Papua-New Guinea - Petroleum Exploration Technical Assistat.ce Project (Credit 1279-PNG)l prepared by the Asia Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment This document has a restricted distribution and may be used by meipients only in the performl=c of their offRdal duties. Its contents may not otherwise be disclosed without World Bank authoriation. FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT PAPUA NEW GUINEA PETROLEUM EXPLORATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1279-PNG) TABLE OF CONTENTS Pagae Preface ..................................................i Basic Data Sheet........................................ ii List of Abbreviations.........o........o................ iv I. INTRODUCTON.... .. .. ... .. .. ... .. .. ..... . ..os . 1 Institutional Aspects.... .... ...... ..... ..o... .... 2 PNG's Petroleum Geology......o.......#............. 2 Project Background........ t...... . .... . ... ....... 3 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL... 5 Project Origin and Approach ........o................ 5 Project Preparation, Appraisal and Negotiations..... 5 III. IMPLEMNENTATION...........................** 8 Institutional Arrangements.......................... 8 Basin Studies....................................... 9 Exploration Promotion. ........................... .. 11 Provision of Technical Data Base in PRAG............ 12 Other Studies ....................................... 12 Extensions of Closing Date.......................... 13 Project Costs.. . . . . . .. .. ................ 14 Procurement.. . . . . . .. . . . ................. 15 Disbursement ........................................ 15 Performance of Consultants..... ..................... 15 IV. PROJECT RESULTS..................................... 15 Basin Studies....................................... 15 Exploration Promotion............................... 16 Evaluation of Potential of Oil and Gas Discoveries.. 16 V. INSTITUTIONAL DEVELOPMENT AND PERFORMANCE........... 17 Organization and Management......................... 17 Training ............................................ 18 Complianca with Credit Covenants.................... 18 VI. BANK GROUP'S PERFORMANCE...... ........... . ....o.. 18 VII. CONCLUSIONS AND LESSONS LEARNED..................... 18 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS (Cont.) ANNEXES 1. DME's Petroleum Operations....................... 20 2. PNG Petroleum Handbook........................... 21 3. Status of Professional Staff in PRAG/Petroleum ... Division ......................................... 39 ATTACHMENT 1. Comments from Co-financier ................................ 41 MAP - IBRD 16390 PROJECT COMPLETION REPORT PAPUA NEW GI PETROLMUN EXPLORATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1279-PNG) PREFACE 1. This Project Completion Report reviews the Petroleum Exploration Technical Assistance Project in Papua New Guinea for which an IDA Credit (Credit 1279-PNG) of SDR 2.7 million was signed on November 5, 1982. Although the Original Closing Date was December 31, 1986, it had to be extended by one year and half (to June 30, 1988) to complete the ongoing and additional activities. 2. This report was prepared on the basis of the findings of a mission that visited Papua New Guinea in October 1988, a project completion report prepared by DME, and documents and reports available in the project files. 3. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower and Cofinanciers for comments and they are attached to the Report (Attachment 1). BQRW OJPIN REQ (CREDIT 1279-PNG) BKSIC DRTA SHEET KEY PROJECT DATA Appraisal Actual as % of EXpoetation Actual Apaisal Eitimate (US$ million) Total Project Costs 5.6 n.a. (*) Loan Amount 3.0 3.0 - Cofinancing-Total 2.0 1.7 85 OPEC Fund 2.0 1.7 85 Date Physical Components 12/31/86 12/31/88 133 Completed Economic Rate of Return n.a. n.a. - Institutional Performance Satisfactory Satisfactory CUMLATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (SDR million) EXa FX4 18. M X Ft FY87 PY88 FY89 Appraisal Estimate 1.1 1.9 2.7 - - - - Actual 0.2 1.5 2.2 2.4 2.5 2.7 2.7 Actual as % of 18.2 78.9 81.5 88.9 92.6 99.2 100 Appraisal (t) Date of Final Disbursement 12/30/88 PROJECT DATES Original Plan Revisions Actual First Mention in Files - - 05/00/80 Negotiations - 05/00/82 Board Approval - - 07/01/82 Signing (Credit Agreement Date) - 11/05/82 Effectiveness 08/00/82 - 04/08/83 Closing Date 12/31/86 12/31/87 06/30/88 (*) The Borrower did notprovide local costs. Total foreigncosts were US$ 4.6 million (92% of the appraised estimate (PARA 3.24)). - tii - STAFF INPUTS (staff weeks) .1 ZU E1M1 IA 18 Zi rX81 FY 8 9T Identification/ Preparation 4.0 3.0 7.05 Appraisal 22.5 22.5 Negotiations 2.3 2.2 4.5 Loan Operation 2.1 7.4 0.5 10.0 Supervision 7.5 17.9 14.4 2.6 3.6 7.3 53.4 Completion Report 6.6 6.6 Project Administration 0.9 0.1 0.4 1.4 Cofinancing 0.3 0.3 Total 6.2 35.1 11.0 18.0 14.4 2.6 4.3 7.3 6.6 105.6 MISSION DATA Date No. of Performance Mission (mo./yr.) Persons Rating Trend Pre-Appraisal 2/81 2 - Appraisal 2/82 2 2 2 Supervision I 2/84 3 1 1 Supervision II 9/84 4 1 1 SupeLvision III 5/85 3 1 1 Supervision IV 3/86 2 1 1 Supervision V 8/86 2 1 1 Supervision VI 7/87 2 2 1 Supervision VII 11/87 2 2 2 Supervision VIII 10/88 1 2 2 other Data Borrower: Government of of Papua New Guinea (PNG) Executing Agency: Petroleum Division, Department of Minerals and Energy Follow-On Projects: None - iv - PROJECT COMPLETION REPORT PAPUA NEW GUINEA PETROLEUM EXPLORATION TECHNICAL ASSISTANCE PROJECT (CREDIT 1279-PNG) HIGHLIGHTS Project Objectives 1. The project was the Bank Group's first lending operation in the petroleum sector of Papua New Guinea (PNG). The primary objectives of the project were: (a) to generate an integrated picture of PNG's petroleum potential and identify new exploration leads; (b) to assemble past exploration data and organize a data bank; (c) to strengthen the capacity of the Government to offer exploration acreage to international oil companies and to improve the monitoring of company activities; and (d) to evaluate the potential for commercial development of known gas reserves. The project was specifically designed to include: (a) a geological and geophysical reassessment; (b) strengthening of geological survey; and (c) studies. Project Implementation 2. The project was implemented by the Petroleum Resources Assessment Group (PRAG), now Petroleum Division, of the Department of Minerals and Energy. A Project Manager provided professional project management, while the administrative and financial aspects of the project were managed by the Chief Geologist through the officer in-charge of PRAG. 3. Foreign consultants were engaged for carrying out a review and interpretation of all existing open file geological and geophysical data pertaining to hydrocarbon exploration in PNG and preparing geological reports on its four main sedimentary basins, namely: Papuan Basin, North New Guinea Basin, Cape Vogel Basin and Bougainville Basin. The planned commencement and completion dates for these studies were January 1, 1983 and January 1, 1985. However, due to delays in obtaining the release of data and files, insufficient staff support, and possibly due to underestimation of the work involved, the studies could not be completed until December 1988. 4. The exploration promotion of PNG's sedimentary basins was conducted in two stages involving: (a) full-fledged promotion seminars, held in the second half of 1984, for the Papuan Basin, which had by far the greatest potential and (b) mini-presentations, in the second half of 1985, for Cape Vogel and Islands Basins, which had limited potential. Both the promotions were undertaken after the completion of the relevant studies. 5. The acquisition of technical data commenced with the - v - project preparation in 1982 by the consultants. All data was microfilmed, digitized, recatalogued, computerized and stored in the PRAG building by late 1985. Additional studies were undertaken by consultants and PRAG staff both during project preparation and project implementation. In September 1986, the Government requested the extension of the Credit Closing Date by a year (from December 31, 1986 to December 31, 1987) to complete ongoing and additional studies and project activities. The Government also requested another extension of the Credit Closing Date to June 30, 1988, which was agreed. Project Results 6. Through high quality analysis, integration and interpretation of all available data, the basin studies provide a very credible, and indeed the best possible, b4sis for exploration promotion of PNG's sedimentary basins. The promotion of the Papv.an Basin was highly successful, resulting in 15 bids on 14 blocks totalling about US$30 million in work commitments over the first two-year period. The exploration promotion of Cape Vogel and Island Basins *-esulted in 14 enquiries but no exploration contracts have been signed so far. The exploration promotion of North Guinea Basin could not be undertaken in this project. The consultants' reevaluation of past gas discoveries was reviewed by the Bank Group staff and discussed with the Government. None of these discoveries appeared susceptible to commercial development. Based on recommendations during project preparation, an institutional review leading to reorganization and consolidation of DME's petroleum responsibilities resulted in the creation of a Petroleum Division within DME and training of national staff. Conclusions and Lessons Learned 7. The project revitalized exploration in PNG at a time when international oil industry's interest in PNG's petroleum prospects were flajging. Its core component, the extensive work to improve the organization and quality of geologic information on PNG's sedimentary basins, has given PNG an excellent reputation as a region which companies can explore efficiently. 8. Significant lessons learned from the project include: (a) when technology transfer is a project objective, the constraints to tht availability and development of indigenous professional manpower should be examined during project appraisal; (b) exploration is the first phase of "prospecting to production" sequence. The second phase involves commercial development of discoveries. For efficient dove-tailing of the two phases, it is desireable to identify the major issues of the development phase at the outset of the exploration phase; (c) where the implementation agency is still to be organized, the Borrower's interim arrangements for keeping project accounts should be specified. PROJECT COMPLETION REPORT INDEPENDENT STATE OF PAPUA NEW GUINEA PETROLEUM EXPLORATION TECHNICAL ASSISTANCE PROJECT (CR. 1279-PNG) I. INTRODUCTION 1.01 The project under review is the Bank Group's first lending operation in the petroleum sector of Papua New Guinea (PNG). Petroleum products account for about 90% of the commercial energy consumption in the country, all of which (about 5.1 mbbl in 1987) are imported as there is currently no domestic source of supply. In 1932, when this project was appraised, petroleum products import amounted to US$198 million, a three-fold increase since 1978, largely due to increased mining operations and oil price escalation. As a percentage of total imports it had increased from 7.5% in 1978 to about 192 in 1982. Although the share of this import has since fallen to 11% (in 1987), due to falling oil prices, it still affects significantly the overall balance of payments (deficit increasing from US$0.2 million in 1986 to an estimated US$90.7 million in 1988). While the hydrocarbon exploration in the country has been oriented toward finding oil, so far all the discoveries, except for Iagifu field, have been of gas and condensate, with total in-place reserves estimated at 6-7 TCF natural gas and 35 mbbl condensate. The depressed market for LNG an.. relatively small size of reserves has discouraged che development of export-based projects for natural gas, and the remote location of the gas finds, combined with the small size of domestic market (the country's total consumption of petroleum products amounted to 5.1 mbbl in 1987, equivalent to about 30 BCF natural gas), has constrained its development for local consumption. The oil reserves of Iagifu fiEld and its commerciality are being evaluated. According to preliminary indications a recoverable reserve of 250-300 mbbl would establish the commerciality of this discovery based on crude export. This venture would involve field development, construction of a crude oil pipeline to the coast and an oil loading terminal at an estimated cost of US$750 million. The base case for this development assumes a conservative reserve estimate of 250 mbbl and current Bank oil price forecasts. Under these assumptions it could produce a peak year direct state revenue of US$250 million and a lifetime (10 years) revenue of US$1,500 million. With a GDP of about US$2.5 billion, export earnings of about US$1.2 billion anc. central government receipts of US$705 million (all 1987 figures), even a single commercially exploitable discovery of 300 mbbl oil would make a substantial contribution to the government revenue and to the economy in general. - 2. - Institutional Aspects. 1.02 The broad responsibility for the assessment and development of PNG's energy and mineral (including :iydrocarbons) resources is vested wiLh the Department of Minerals and Energy (DME), which is equivalent to a Ministry in some other countries. It is organized in four sub-departments namely, Mineral and Energy Policy, Geological Survey, Mines, and Finance and Administ,ative Services. DME is headed by a Secretary who reports to the Minister. Each sub-department is supervised by an Assistant Secretary. Petroleum exploration is controlled and monitored by the Petroleum Division, which is one of the four divisions in the Geological Survey. The Petroleum division is headed by a professional entitled Chief Petroleum Geologist who is also the Chief Petroleum Inspector of the Government of Papua New Guinea (GOPNG). Its functions are, Petroleum Exploration Administration, Resource Assessment, Drilling Control and Supervision, Reservoir Engineering and Evaluation, and Petroleum Geophysics. 1.03 All petroleum exploration activ les are performed by the oil companies holding petroleum prospecting 1 !nses from the Government. The Petroleum Act of 1977 governs petroleum E dloration and development in PNG. Any area in PNG can be the subject of an application for a Petroleum Prospecting License (PPL). All applications are received by te Principal Petroleum Registrar of the Petroleum Exploration Administration and, after 4ue processing, are submitted by the Chief Petroleum Geulogist to the Petroleum Advisory Board (PAB) for clearance and advice to the Minister. The decision for the grant of PPL is made by the Minister after hearing PAB's recommendationa. The PAB is a statutory body established under the Petroleum Act of 1977. It is made up of five members; three from DME (the Secretary, who is also its Chairman, the Assistant Secretary Mnes and the Chief Government Geol3gist) and one each from the Dep rt.,- .,1 of Finance and Provincial Affairs. A PPL is granted for six years. .%n initial two-year work program and expenditures commitment is agreed upon pt.or to the issue of a PPL and, at two-year intervals, the licensee haq to submit an additional work program satisfactory to the Government. In the event of a commercial discovery the licensee has the right to obtain a Petroleum Development License (PDL) for 25 years. The State has the option to obtain a "carried interest" of upto 22.5% through both exploration and development with the "carry" repayable from the State's share of future production. The licensee pays 1.25% royalty, a 50? petroleum income tax and an additional profits tax payable after the investor has recovered his investment and a predetermined return on capital. PNG's Petroleum Geology 1.04 Papua New Guinea comprises 461,691 km2 on the eastern half of the world's largest island lying at the east end of the Indunesian archipelago, cojuncturing with Australian continental and 2acific ocean plates. It has endured a stratigraphic and structural history conducive to the generation and entrapment of hydrocarbons. Its five main sedimentary basins are: Papuan basin (212,000 km2), North New Guinea basin (93,000 km2), Cape Vogel basin (26,000 km2), Bougainville basin (4,400 km2) and New Ireland basin (56,400 km2). The Papuan basin, the most explored of all, is the largest sedimentary -3- basin in the country (about the same size as Syria in the Middle East). It is effectively the continuation of the Capentaria basin in North Queeensland, Australia. All the elements necessary for the generation and entrapment of hydrocarbons are present in most areas of this basin. These include, a wide range of structural and stratigraphic traps, good source rocks at sufficient burial depths, good to excellent reservoir rocks, and suitable cap rocks. A total of 146 wells have been drilled since 1913. All of PNG's hydrocarbon discoveries are located in this basin. The North New Guinea basin is actually made up of three smaller basins. A limited amount of exploration has taken place, with only seven wells drilled to date, and sparse seismic survey coverage. There is up to 5 km of sedimentary section in some parts of the basin. The oil generating potential of this region is suggested LV the presence of numerous oil seeps. The Cape Vogel basin is largely offshore and has been only partially explored. Shallow bores drilled on the Cape Vogel peninsula (in 1928) did have some shows of hydrocarbons but only two deep exploration wells have been drilled (in 1973) and there are few seismic data available. Large structures are known to exist in the subsurface offshore but have not been tested by drilling. There is a thick section of tertiary sediment in the basin but much of the sequence cannot be identified from the existing data, which include only limited offshore exposure. It is likely, however, that reservoir sand stones and shaley source rocks occur at depth. The basin is adjacent to the tectonically active Solomon trench, which may also be a source for hydrocarbons. The Bougainville basin is located offshore on the western side of Bougainville island. Very little exploration work has been done in this region. Only one vell has been drilled. It is very much a "frontier area". There is up to 5 em of sedimentary section in parts of the basin and several large drillable structures have been recognized from existing seismic data. It is believed likely that suitable fine grained source and carbonate reservoir rocks will be intersected at depth. The New Ireland basin is the least explored of all. In fact it was not recognized as a basin with resource potential until a research vessel cruised the waters to the northeast of New Ireland in early 1980s. The only available data that give clues to the potential of this basin are the results of the research cruise seismic survey and mapping of onshore sequences of New Ireland. From this limited information it is possible to say that there is some potential for hydrocarbon accumulations off the coast of New Ireland. Much of the basin is in deep water so it will likely be necessary to look for structures near the shore. Suitable source, reservoir and cap rocks have been recorded in the onshore sedimentary sequence and are believed to extend offshore where there is probably more than 4 km of sediment. In addition to these basins, there are large areas of Bismark and Solomon Seas under which the thickness of sedimentary section is virtually unknown, although they have been partially covered by separate seismic surveys. Project Background 1.05 Oil exploration in PNG was first attempted between 1913 and 1920 when six bore holes were sunk in Gulf province (Papuan basin) yielding small amounts of crude considered commercially unattractive. During the next fifty- five years (till independence in 1975) about 125 wells were drilled, almost all the Papuan basin, resulting in small gas discoveries at Kuru, Barikewa, lehi, and Bwata in the southcrn highlands of Gulf province and a condensate discovery at Pasca offshore Gulf province. By 1977. no significant oil discovery had been made and the international oil industry was not showing any interest in accelerated exploration of PNG's petroleum prospects. The inhibitions to accelerated promotion were in three areas, (i) the basins appeared to be gas prone rather than oil prone, (ii) most of the identified structures w7ere either complex or small, (iii) the cost of exploration was very high due to remote environment and lack of suitable infrastructure. Taking stock of the situation, the Government concluded that, while the exploration in the country should still be conducted through private sector participation (to ensure efficient operations and deployment of latest technology), its promotion should no longer be left to the oil companies alone. A good understanding of the country- petroleum geology and results of past exploration efforts leading to organized and institutionalized promotion of PNG's petroleum prospects by the Government would be necessary to accelerate -nd broalen participation by the international oil industry. Also the Government's technical and contractual expertise would have to be enhanced to maximize the benefits to the country. 1.06 Accordingly, in 1977, a Petroleum Act was promulgated to govern exploration and, in 1978, a Petroleum Resources Assessment Group (PRAG) was created within the Geological Survey to promote and control this activity. PRAG's terms of reference included, (a) collection and synthesis of all available information to obtain a good understanding of PNG's petroleum geology and the results of past exploration, (b) establishment of a data bank and information service to encourage private sector exploration under appropriate concession terms, and (c) acquisition of adequate expertise to advise the Government on petroleum exploration technical matters and resources. Under the PRAG project (as it was then called), a team of petroleum geologists and geophysicists, on full-time basis for seven years, was to strengthen the Government's technical capabilities in the area of oil exploration with a view to (a) increasing the level of exploration activities in PNG, and (b) by effectively monitoring the activities of oil companies under contract, ensuring that their activities met the best interest of PNG. This approach turned out to be infeasible as suitably qualified PNG nationals were not available for staffing the PRAG and expatriate experts could not be engaged due to inadequate salaries allowed under the prevailing Government rules. In 1980, the Government requested the Bank Group's assistance in undertaking a program leading to the fulfilment of aforementioned objectives, which was provided through the Petroleum Exploration Technical Assistance Project. Financing for this project was provided by an IDA Credit (Cr. 1279-PNG) for SDR 2.7 million signed Nov. 5, 1982 and an OPEC loan (No. 312 P) for US$1.7 million signed January 19, 1983. This report is based on the findings of a mission that visited PNG in October 1988, a project completion report by DME, and documents and reports available in the project file. - 5 - II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL Project Origin and Approach 2.01 Although institutional reform resulting in the creation of PRAG had been initiated by the Government in 1978, no progress was made towards the implementation of the PRAG pr6ject till 1980. The group was initially to be made up of three expatriate petroleum geologists and one petroleum geophysicipt and was expected to start functioning in 1979. It could not be constituted due to reasons mentioned in the foregoing para 1.06, and in May 1980, the Government sought the Bank Group's assistance in the implementation of this project. 2.02 As the DME did not have any staff experienced in petroleum matters, the Bank Group suggested a two phased approach using the services of consultants (to be procured under Bank Group guidelines) for project preparation, implementation, and management. The first phase (approx 3-4 months) would involve review of past exploration data and the formulation of a 2-3 year work program. The second phase would involve implementation of the recommended work program. The consultant's services for the first phase would be financed through a Project Preparation Facility (PPF) as no financing was available from altprnative sources. These suggestions were accepted by the Government in November 1980. Project Preparation, Appraisal, Negotiations and Approval 2.03 The project was prepared, during the second half of 1981, by a consultant (Robertson Research of Australia/UK) engaged under Bank Group guidelines. The consultant's services were financed through a US$250,000 advance under PPF. The consultant carried out an overall review of all the past exploration data available in Port Moresby, Canberra and Sydney, covering approximately 90 well records, 350-400 geologic and geophysical reports, about 7,500 sheets of seismic data including sections and shot points covering some 50,000 line-kilometers, gravity data covering about 40,000 stations, aeromagnetic data consisting of 120,000 line-kilometers, air photos, regional maps of surface geology, well cuttings and cores, stored in Port Moresby; a duplicate set of data (acquired prior to independence in 1975) stored at Bureau of Mineral Resources in Camberra; and the raw geophysical data including about 30,000 seismic tapes (about 27,000 analog and 3,000 digital) stored in Sydney. Following this, the consultant submitted a report summarizing the findings and recommending a work program and budget for the project. 2.04 The project was appraised by a Bank Group mission in February 1982. It was defined on the basis of Robertson Research's review and recommendations and discussions of Bank Group staff with PNG officials. Its objectives were outlined as follows: (a) to generate an integrated picture of PNG's petroleum potential and identify new exploration leads; - 6 - (b) to assemble all past exploration data in Port Moresby and organize a data bank to enable the Government to design oil exploration strategies based on a continuous review of past and current exploration data. Such a facility will also facilitate the familiarization of new oil companies interested in exploring PNG's potential; (c) to strengthen the capacity of the Government to offer exploration acreage to international oil companies using competitive bidding and to improve the review and monitoring of company activities and negotiating satisfactory work programs; and (d) to evaluate the potential for commercial development of known gas reserves, both for domestic power genetation and for gas based export projects. 2.05 The project approach differed from the Government's initial plan (for the PRAG project) in: (a) the means of implementation, ie coasultants services were to be used instead of PRAG's regular staff as timely recruitment of adequate staff for PRAG did not appear feasible; (b) the implementation period, which was reduced by half to abcut 3 1/2 years through faster mobilization of expertise using consultants' services; and (c) the project objectives, which now included studies to re-evaluate the potential for commercial development of known gas/condensate reserves. Two kinds of consultant services were to be employed for project implementation: (a) for conduct of studies for geological and geophysical reassessment of PNG's hydrocarbon potential, evaluation of development potential of known hydrocarbon deposits, and supervision of discrete exploration activities; and (b) for project management. Employment of consultants for project management was deemed necessary as there was no likelihod of obtaining the services of an experienced professional to head PRAG at the level of emoluments allowed under the prevailing Government rules (see para 1.06). Therefore, during project preparation it was agreed that a Project Manager from an experienced firm of consultants would be employed to: (a) supervise, on behalf of the Government, the geological/geophysical reassessment ccmponent; (b) to build- up the PRAG unit; (c) to advise the Government on exploration strategy in general and during negotiations in particular; and (d) to help promote PNG's petroleum prospects. He would be appointed on a retainer contract with a commitment to visit Port Moresby 4-6 times a year for periods of 1-2 weeks. In view of Project Manager's key role in the implementation of the project, an appropriate covenant (Section 3.01 (c,) was included in the Loan Agreement requiring the Borrower to "employ a project manager whose qualifications and experience shall be satisfactory to the Association," and it was made a condition of loan effectiveness. Addition of (c) above to project objectives was considered necessary, as due to lack of petroleum expertise the Government had not been able to assess independently the scope for developing these reserves (para 1.05) for domestic use, following large petroleum price increases. 2.06 The project involved no technical or policy issues except IDA eligibility. Until its appraisal (in February 1982), the proposed project was in IDA category and a sum of US$250,000 for project preparation had been -7- advanced as a PPF under IDA, then due to graduation of PNG from IDA, the Bank Group suggested IBRD financing to which the Government objected on the grounds that an understanding for IDA financing of this project already existed. In view of these special circumstances the Bank Group acceded to the Government's request for IDA financing. 2.07 The DME's overall responsibility for the assessment and development of PNG's hydrocarbon resources was shared (down the line) by two of its divisions, namely, the Geological Survey Division and the Mines Division. The Geological Survey Division was responsible for collection and review of past exploration data and providing technical advice to the Petroleum Advisory Board. The administration and processing of petroleum prospecting licenses (PPLs) and the monitoring of safety aspects of exploration activity were the responsibility of the Mines division. Apart from this split in responsibility neither division had the staff and resources required to negotiate and effectively monitor the termu and conditions of PPLs. To accelerate the exploration and to ensure its adequate monitoring and administration it was desirable to consolidate all petroleum related activities into a separate unit. Therefore during negotiations the Bank Group proposed and the Government accepted to include a covenant (Section 3.05) in the Loan Agreement for the Government to carry out, not later than July 1, 1983, a study to (a) determine the optimal institutional framework for the administration and monitoring of.petroleum exploration activities in PNG, (b) furnish the Bank Group with the findings and recommendations of such study, (c) and thereafter implement such recommendations as the Borrower and the Bank Group may agree. 2.08 The project was defined to include the following: Part A: Geological and Geophysical Reassessment 1. Carrying out a review and interpretation of all existing data pertaining to hydrocarbon exploration in the Borrower's territory and preparing geological reports on the four mair sedimentary bains in Papua New Guinea. Such a review to include inter-alia; a. reprocessing of about 1,000 line-Km of existing seismic survey to improve data quality; b. interpretation of about 33,000 line-km of seismic data and analysis and interpretation of existing geological and aeromagnetic data, together with a limited number of geochemical and polynological analysis of existing wells, c. acquisition of additional geophysical and geological data; and d. re-evaluation of six existing gas deposits and one existing oil deposit to determine whether the exploration of such deposits is commercially possible. 2. Integration and storage at Port Moresby of all data derived from the carrying out of Part A.1 and Part C hereof. 3. Promotion of PNG's sedimentary basins for petroleum exploration by interested enterprises. -8- Part B: Strengthening of Geological Survey 1. Carrying out a training program of GS staff at selected locations outside PNG. 2. Provision of facilities for PRAG for storage of data and provision of equipment, staff and technical assistance therefor. Part C: Studies 1. Carrying out a study to determine the feasibility of developing the offshore Pasca gas field to strip condensate from wet gas and supplying natural gas to Port Moresby. 2. Carrying out of other high priority studies pertaining to the energy sector. 2.09 Credit negotiations with the Borrower were held in May 1982 and the Credit was approved by the Board on July 1, 1982. The Credit became effective on April 8, 1983. after the three conditions of effectiveness under the Development Credit Agreement were met, i.e.: (i) appointment of a Project manager; (ii) execution and delivery of the Credit Agreement duly authorized and ratified; and (iii) legal opinions. III. IMPLEMENTATION Institutional Arrangements 3.01 PRAG was constituted late 1982 as a sub-section of Regional & Economic Geology section of Geological Survey with an expatriate senior regional geologist (not a petroleum geologist) acting as its officer in- charge. It was staffed with an expatriate petroleum geologist, an expatriate mineral geologist (working as technical officer) and two national geologists (one experienced in mineral geology and the other a new graduate from the University of Papua New Guinea). A project manager, from Worldwide Exploration Consultants (WEC) of USA was engaged (Feb. 1983 through Dec. 1987) as per terms of reference briefly described in para 2.05 of this report. The Project Manager provided professional project management, while the administrative and financial control of the project was exercised by the Chief Geologist through the officer in-charge of PRAG. The PRAG staff was fully involved in the project implementation. 3.02 By early 1984, PRAG had 9 established positions (4 geologists, 2 geophysicists, 1 geochemist and 2 technical officers) and out of these, 5 positions (2 geologists, 1 geophysicibt, 1 geochemist and 1 technical officers) had been filled. In terms of national and expatriate staff, there were 2 national officers and 3 expatriates. -9- 3.03 Prior to July 1, 1983, complying with the loan covenant (Section 3.05a), the Government had concurred with the Bank Group that the Bank Group staff and the Governo -t would undertake a review of the institutional needs in the petioleum sub-sector under the aegis of the Energy Sector Management Program (ESMAP). The Bank Group mission visited PNG in the second half of 1983 and carried out a detailed review of the institutional arrangements of the whole energy sector (including the petroleum sub-sector) with full cooperation from the Government. Its report [PNG: Energy Sector Institutional Review Report] was submitted to the Government in early 1984. Thereafter, the Government established a Program Management Unit in 1985 to review the staff requirements and the format for restructuring DME to make it more efficient and capable of monitoring petroleum exploration activities. This evaluation was completed in 1986 and petroleum operations of DME were reorganized along the lines recommended in the Bank Group's report. A petroleum division was created in the Geological Survey, headed by the Chief Petroleum Geologist (who had been recruited in April 1986). All petroleum related activities were consolidated into this Division. The organograms of DME's petroleum related activities before and after the reorganization are given in Annex 1. The functions and responsibilities of Petroleum Division emerging from this reorganization have already been described in para 1.02 of this report. In terms of staffing, it has been provided with 18 established professional positions (6 expatriate and 12 national) of which 15 positions (6 expatriate and 9 national) have been filled. Basin Studies 3.04 The consultants, Robertson Research Associates (RRA) and Flower Doery Buchan Pty. Ltd. (FDB) were engaged in Jan./Feb. 1983 for carrying out a review and interpretation of all the existing open file geological and geophysical data pertaining to hydrocarbon exploration in PNG and preparing geological reports on its four main sedimentary basins namely; Papuan basin, North New Guinea basin, Cape Vogel basin and Bougainville basin. RRA was to carry out the geological and geochemical component of the studies and FDB was to conduct the geophysical component under RRA's overall responsibility. This review and reassessment involved: (a) reprocessing of approximately 1,000 line-km of existing seismic data in an attempt to improve data quality; (b) reinterpretation of approximately 33,000 line-km of seismic data; (c) analysis and reinterpretation of geological and aeromagnetic data provided in the existing technical reports; (d) analysis of several thousand well cuttings and core samples for geochemical, sedimentological, micro-paleontological and palynological information; and -10- (e) in the case of the Papuan basin study, assessment of six previous gas discoveries (Bwata, Barikewa, Kuri, lehi, Uramu and Pasca) and one previous oil find (Puri) and presentation of results to encourage further exploration and possible developments. 3.05 The planned commencement and completion dates for these studies were Jan. 1, 1983 and Jan 1, 1985. Apart from initial delay in signing, the agreements with RRA and FDB (signed Jan. 28, 1983 and Feb. 7, 1983 respectively), additional delays occurred in obtaining the release of data and files from the Australian Bureau of Mineral Resources. The Papuan Basin study (by far the largest) scheduled to be completed by Dec. 31, 1983 was finalized by August, 1984. In this study, RRA made a complete review of the biostratigraphic section using well and outcrop data, and in-.'epth review of sedimentological facies using core samples and well cuttings, a geochemical analysis of potential source beds and correlation with produced hyrocarbons and seeps and, an analysis of regional plate tectonics. FDB reinterpreted the available geophysical data, gravity, magnetic and seismic and tied most of the deep wells to this interpretat on. This was followed by the completion of structure, facies and isopach maps, cross-sections and maps indicating the area of principal oil and gas plays and, a series of datumed cross-sections to demonstrate the geologic evolution of the basin both in the structural and depositional sense, as well as burial history plots of all wells with available geochemical data, enhancing the discrimination between oil and/or gas plays which were presented as established, indicated and postualted. 3.06 According to original planning, this study was to be followed by the North New Guinea basin study. However, since by early 1984 all prospective area within this basin had been licensed to Shell (in return for a six well commitment), the need for this study was removed. Therefore in consultation with the Bank it was decided to restrict the contract with the consultants to the review of Cape Vogel and the islands (Bougainville, New Britain and New Ireland) basins and a limited program of work on the North New Guinea basin specifically to integrate the Shell data into the regional geological frame. The Cape Vogel and Islands Basin study commenced in Sept. 1984 and was completed by mid-1985. Compared with the Papuan Basin study, it was limited, as relatively little data existed from previous explorations. This study involved examination of Landsat imagery, review of seismic data, interpretation of aeromagnetic data and some geochemical analysis leading to synthesis of all available information. 3.07 In accordance with revised planning (discussed in the foregoing para. ) a limited program of work on North New Guinea basin was undertaken by RRA, in the second half of 1985, involving digitization of available data and preparation of gravity and magnetic maps, which was completed by end 1985, along with the conclusion of RRA contract for basin studies. Following this, PRAG undertook an in-house study of the basin from early 1986 with the assistance and advise of WEC (the project manager) in -11- geophysical data preparation and interpretation. Upon Shell's relinquishing the exploration acreage in 1986, additional data were made available to PRAG and also the need for the preparation of a basin study leading to exploration promotion was revived. Accordingly, WEC's contract was extended till end-lq87 to assist, inter alia, in the completion of the study and to manage its presentation to the industry. However due to insufficient staff support, possibly due to underestimation of the work involved, the study could not be completed till Dec. 1988. WEC remained involved with the study till the completion of its management contract in Dec. 1987. The synthesis of all data, their interpretation, and compilation of the report were carried out by PRAG's (now Petroleum Division's) expatriate staff with the full involvement of junior national gqologists. Exploration Promotion 3.08 The exploration promotion of PNG's sedimentary basins was conducted in two stages involving: (a) full-fledged promotion seminars, held in the second half of 1984, for the Papuan Basin, which had by far the greatest potential and (b) mini-presentations, in the second half of 1985, for Cape Vogel and the Islands Basins, which had limited potential. Both the promotions were undertaken after the completion of the relevant studies. 3.09 The Papuan basin promotion was initiated by advertising at the annual conferences of the learned societies of Petroleum Explorationists and Geologists in Australia, United States and Europe and, in world prominent industry journals and newspapers. This was followed by presentation (by the Government) in the promotion seminars held in the second-half of 1984 in, Sydney, Tokyo, Houston and London outlining: geology and geophysics of the basin; hydrocarbon occurrence, plays, trends and prospects; and legal, contractual and tax aspects. More than 100 international oil companies attended these presentations. The promotion effort was further supported by the distribution of a brochure summarizing the Government policies and a technical data package containing geological maps, petroleum prospecting license map, exploration synopsis, petroleum policy outlines, contractual and fiscal terms. In all 25 open license areas in the basin (covering about 210,000 sq. km) were offered containing a wide range of prospective plays both identifiable and prognosticated. The invitations for submission of applications for grant of petroleum prospecting licenses in the basin were formally gazetted Dec. 20, 1984. 3.10 The promotion of Cape Vogel and the islands (Bougainville, New Britain and New Ireland) basins as well as the remaining open areas of the Papuan basin involved mini-presentations to the industry in the second half of 1985 in Sydney and Houston along similar lines as for Papuan basin promotion but with considerably reduced Government and consultant resources. About 100,000 sq. km exploration acreage of Cape Vogel and the islands basins and also the remaining 4,400 sq. km of Papuan basin were promoted. -12- 3.11 The planning, organization and conduct of these promotions and preparation of brochures and technical data packages was arranged by the consultants (WEC & RRA) with full involvement of PRAG and guidance from the Bank Group staff. 3.12 Although the need for North New Guinea basin promotion had been revived with Shell's relinquishing of exploration acreage in second half of 1986 and the promotion efforts had been tentatively scheduled for mid-1987, it could not be undertaken as the basin study was not comDleted till Dec. 1988 and the credit closed on Dec. 31, 1988. Provision of Technical Data Base in PRAG 3.13 The acquisition of technical data commenced with the project preparation in 1982 by the consultants (RRA). This was followed by sifting and gathering of data, by the same consultants, for the basin studies. All this data (from Australian Bureau of Mineral Resources and the Archives of PVG's Geological Survey) was microfilmed, digitized, recatalogued, compu- rized and stored in the PRAG building by late 1985. The construction of PRAG building was delayed by about a year due to backlog in public works. It was completed, equipped and fully occupied by Dec. 1985. Its construction cost about kina 300,000.00 (US$350,000 approx.). Apart from the data storage, all of the PRAG staff is housed in this building. By late 1987, PRAG (now Petroleum Division) needed more space for data storage which was arranged through purchase of additional storage facility (524 sq. meters) for US$100,000 from the OPEC loan. Other Studies 3.14 The study to determine the feasibility of developing offshore Pasca gas/condensate field for stripping the condensate and supplying natural gas to Port Moresby could not be undertaken as Pasca well A3 blew out soon after its spudding in Jan. 83. In 1984, the licensee (Superior Oil) relinquished all Pasca acreage and since then no new licensee for Pasca has been found to conduct drilling operations. 3.15 During project preparation, RRA conducted the following studies that were financed out of a US$250,000 advance under a PPF. (i) North Delta Gas Reserves. (ii) Reservoir Engineering Study of Pasca field. (iii) Pre-feasibility Study for Pasca field development. 3.15 During project implementation, the following additional studies were conducted by different consultants and were financed from the proceeds of the Credit/OPEC loan. (i) Juha (Paupuan Basin) Gas/Condensate Field Reserves Estimates -- prepared in 1986 by WEC. -13- (ii) Detailed Cross-Sections through the Papuan Basin -- prepared in 1986 by WEC. (iii) Toro Sandstone (Papuan Basin) Pressure Gradients (based on Iagifu 2x and 3x wells data) -- prepared in 1987 by S. S. Derrington. (iv) A Casing Program for Futur) Pasca wells -- prepared in 1287 by S. S. Derrington. (v) Pipeline Alternatives for LPG mix from Iagifu Field (Pap.ian Basin) to Offshore Loading Facility -- prepared in 1998 by Borcom Associates. (vi) Geological and Reservoir Engineering Study of Iagifu Field -- prepared in 1988 by Borcom Associates. (vii) Domestic Use of Hydrocarbons in PNG (Inception Report) prepared in 1988 by Coopers and Lybrand. Extensions of Credit Closing Date 3.17 In Sept. 1986, the Government requested the extension of Credit closing date by a year (from Dec. 31, 1986 to Dec. 31, 1987) to complete the following ongoing and soon to be undertaken activities; (a) the geologic study of North New Guinea basin and its promotion, (b) the extended staff training program and, (c) the evaluations of economic viability of different options for the development of recent hydrocarbon discoveries. 3.18 The North New Guinea basin was essentially all under license by 1984, therefore, its promotion effort had been excluded from the project scope. However, by 1986, a large portion of the licensed acreage had been relinquished and its exploration data was made available to the Government, reviving the need for geologic study and promotion. 3.19 The training program had been expanded to include: (a) an additional year for undergraduate studies in petroleum geology for a Papua New Guinea national at an overseas university, (b) an in-house short course for Petroleum Division's geologists in recognition and interpretation of Carbonate Facies and (c) a similar course in Electric Log Interpretation. 3.20 The evaluation of economic viability of different options for the development of recent hydrocarbon discoveries was essentially to be focussed on Iagifu oil field, discovered in the first half of 1986 with preliminary reserve estimates of about 150-250 mm bbls. After accounting for the ongoing and aforementioned planned expenditures, a residual amount of US$170,000 in the credit was earmarked for the this purpose. -14- 3.21 In view of above consideration, the Bank Group extended the credit closing date to Dec. 31, 1987. The contract for Project Manager (WEC) was also extended by a year to Dec. 31, 1987. 3.22 The proposed options study was, however, not undertaken as Chevron, the lagifu field operator, decided to conduct a pre-feasibility study of the discovery as a prelude to development license application. Chevron presented this study to the Government in the second half of 1986, whereafter the Government obtained Bank Group's clearance for geological and reservoir engineering study of Iagifu field based on the information provided in Chevron's study and as its complement, for a study of Domestic utilization of PNG's hydrocarbons, both to be financed out of the credit funds earmarked for the options study. To facilitate this undertaking, the Government also requested another extension of credit closing date to June 30, 1988, which was agreed. 3.23 No further extension of credit closing date was requested thereafter. Project Costs 3.24 DME haf not provided the local costs incurred in project implemen- tation. TherefLre a comparison of only foreign costs (financed from IDA credit and OPEC loan) with the estimates is given below. 1/ IDA Credit OPEC Loan -------- SDR'000------- -------US$ '000------ Estimated Actual Estimated Actual Materials, Equip. & Printing 270,000 202,187.40 - 291,939.00 Consultants Services 1,600,000 1,643,203.23 - 1,390,601.12 Acquisition of Geophysical Data 205,000 232,891.44 - Overseas Training and Promotion 130,000 408,672.27 - Refunding of Advance Under PPF 153 225,000 206,224.49 - 2,700,000 2,693,178.83 1.7 1,682,540.13 Considerable overspend!ng in overseas training and promotion (item 4) is largely due to underestimation of these costs during project preparation. The total foreign cost is very close (98-99Z) to the estimate. 1/ The borrower did not have arrangements for maintaining itemized accounts. Therefore, a comparison with the heads of expenditures included in Project Costs Estimates given in the President's Report is not possible. -15- Procurement 3.25 IDA's procurement guidelines were fully complied with. No d4fficulties were faced by the Borrower in following these guidelines. Disbursement 3.26 A comparison oF actual disbursement with the appraisal estimates is given in the following table. Fiscal Year Appraisal Estimate Actual -------------SDR '000------------ 1983 1.1 0.206 1984 0.8 1.302 1985 0.8 0.682 1986 - 0.245 1987 0.103 1988 - 0.148 1989 0.006 2.7 2.692 The slow disbursement is on account of extended project execution discussed in paras 22 and 33 thru 37. Performance of Consultants 3.27 The consultant's performance in the geological and geophysical study of Papuan basin has been commendable and formed a sound basis for promotion of its exploration prospects. The work on the other basin study, though not of the same quality (due to limited data availability), is still exhaustive. Both the reports have been very well received by the industry and have generated an upsurge in the sale of technical data totalling about US$1.5 million. The project management consultant played a key role in the preparation of technical reports and in the organization of promotion seminars. The consultants expertise and experience of industry was particularly evident during the promotional phase. The performance of other consultants engaged on short studies/evaluations has been generally satisfactory. IV. PROJECT RESULTS Basin Studies 4.01 Through high quality analysis, integration and interpretation of all available data, these studies provide a very credible, and indeed .ne best possible, basis for exploration promotion of PNG's sedimentary basins. The Papual Basin Report, mainly due to availability of extensive data, is -16- by far the most comprehensive. Its identification of possible oil plays is the single most important result insofar as the promotion of areas to prospective oil companies is concerned. The Cape Vogel and Islands (Bc gainville, New Britain and New Ireland) Basins Report provides a complete reinterpretation of all available geological and geophysical data. Both the studies have been very well received by the industry. About US$1.5 million worth of technical data, largely on account of these studies, has been sold to exploration companies. The North New Guinea Basin Study though considerably delayed, has provided a valuable on-the-job training opportunity to national geologists. Exploration Promotion 4.02 The promotion of the Papuan basin was highly successful. It resulted in 15 bids on 14 blocks (out of 25 offered) totalling about US$30 million in work commitments over the first 2 year period. Only 5 petroleum prospecting licenses (PPLs) were in existence prior to promotion. Since then, 28 new PPLs have been negotiated and awarded and about 9 more applications are being negotiated, covering almost all of the 210,000 sq. km exploration acreage of this basin. The current 33 PPLs are operated by 22 separate groups of international companies. 4.03 The exploration promotion of Cape Vogel and the islands basins resulted in 14 enquiries but no exploration contracts have been signed so far. As a result of general interest generated in PNG's hydrocarbon potential, 4 PPLs have been signed for North New Guinea basin, following the relinguishing of acreage by Shell in 1986. (See Annex 2 for maps and license details). 4.04 The exploration promotion of North Guinea basin could not be undertaken in this project as the basin geologic study (conducted in-house by Petroleum Division staff) could not be completed till Nov. 1988 ie a few weeks before the credit closing date. Evaluation of Commercial Potential of Past Oil and Gas Discoveries 4.05 Puri (Papuan Basin) was PNG's lone oil find before Iagifu in 1986. It was discovered in 1958 and a production rate of 1,600 bbl/day was achieved from Puri 1 well but it was soon replaced with water. In 1959, two side tracks (Pu.:i LA & lB) failed, further drilling was abandoned and the exploration license was relinquished. A new PPL was granted (to Kundu Exploration of Australia) in 1983 but the work program has so far not included any drilling activity and in the absence of such data it has not been possible to evaluate this field. 4.06 The consultants' reevaluation of past gas discoveries (Bwata, Uramu, Kuru, lehi, Barikewa and Pasca) was reviewed by the Bank Group staff & PRAG in 1984. Discussions were also held with Elcom, the national electric utility, regarding its needs for fuel gas and with some foreign -17- companies (notably Costain Process Engineering and Steamships) for export based projects. None of these discoveries appeared susceptible to commercial development. The depressed international market for LNG discouraged export based projects and in view of very difficult access, high development and transmission costs and fragmented domestic market no economic development based on local use appeared feasible. V. INSTITUTIONAL DEVELOPMENT AND PERFORMANCE Organization and Management 5.01 During project preparation two basic institutional problems in the management of petroleum affairs of DME had been diagnosed: (a) insufficient professional staff, and (b) fragmented responsibility (ref paras 2.02 and 2.07). The solutions adopted were (a) employment of consultants for project implementation as well as its professional management and, (b) institutional review leading to reorganization and consolidation of DME's petroleum responsibilities, resulting in the creation of a Petroleum Division within DME and training of national staff. While the employment of consultants and institutional review were undertaken expeditiously, a delay of two years was encountered in the implementation of recommendations emerging from the institutional review due to involvement of lengthy procedures. (Although the review was completed by early 1984, the Petroleum Division could not be created till early 1986). 5.02 The status of professional staff employed (since 1983) in PRAG/Petroleum Division is given in Annex 3. Due to the acute shortage of experienced national staff (only one was available during 1983-85 and none since then), the employment of expatriates was resorted to, which was slow in build-up due to insufficiently attractive emoluments offered. For the sai:e reason, entry of national staff to the young professional cadre has been severely limited. (It has lately improved, possibly due to enhanced interest of international oil industry in PNG's petroleum prospects with implicit promise of lucrative career opportunities in petroleum sector.) 5.03 Notwithstanding these constraints, the Petroleum Division has been established, effectively consolidating all petroleum exploration operations (see paras 1.02 and 1.03). It has been provided with 18 professional positions, of which 15 positions have been filled with 6 expatriate and 9 national staff (Annex 4). Apart from processing new license applications, it is monitoring 33 petroleum prospecting licenses (PPLs) operated by 22 separate groups of international companies, and manages a high quality data base with an equally high degree of credibility in the international oil industry. It continues to collect, reassess and publish technical data on PNG's petroleum exploration prospects. (The latest PNG Petroleum Handbook is attached as Annex 2). -18- Training 5.04 The training progran for national professional staff was broadly divided into two categories: (a) in-house training and (b) advanced training abroad. All national professional staff have received in-house training, through attachments with expatriate staff and consultants in petroleum administration, resource assessment, data management, drilling, reservoir engineering and geophysics. Additionally, a number of workshops, seminars and in-house schools have been organized by the Petroleum Division using video training programs in petroleum geology, geophysics and engineering. Advanced professional education and training has been received by 5 national staff (3 geologists, 1 engineer, 1 technical officer) in Australian universities and professional schools. Compliance with Credit Covenants 5.05 All covenants of the Development Credit Agreement have been complied with except Art IV regarding the auditing of accounts. DME did not submit the Audit Report each year as required under the Agreement. The audited accounts for FYs 83/84 and 85/86 were submitted in 1986 and 1988 respectively. Final project audit is in progress and is expected to be received by the Bank Group in FY89. Apart from furnishing the yearly audited accounts, DME has complied with all other reporting requirements. VI. BANK GROUP'S PERFORMANCE 5.06 A cooperative and productive relationship was maintained by the Bank Group with DME and other concerned Government agencies throughout the project cycle. The Bank Group's analysis of Borrower's problems in petroleum exploration promotion and suggested remedial measures, particularly the approach to project preparation and implementation, played a key role in the successful implementation of the project. Through the Energy Sector Institutional Review, the Bank Group established the need to reorganize and consolidate DME's petroleum exploration operations, resulting in the creation of a Petroleum Division within DME and thus providing a sound framework for institution building. The Bank Group undertook eight supervision missions between January 1983 and December 1988 which adequately covered the project needs and fallow-up actions. VII. CONCLUSIONS AND LESSONS LEARNED 7.01 The project revitalized exploration in PNG at a time when international oil industry's interest in PNG's petroleum prospects was flagging. Its core component, the extensive work to improve the organization and quality of geologic information on PNG's sedimentary basins, has given PNG an excellent reputation as a region which companies can explore efficiently. This, supplemented by the project sponsored promotional activities, has given PNG a high profile in the industry and -19- has attracted (and continues to attract) many good explorers to PNG. (The exploration interest in PNG is now intense, with little open acreage remaining in Papua basin and much interest is now being shown in the North New Guinea basin.] 7.02 The institution building aspect of the project covered: (a) coneolidation of DME's petroleum exploration operations, which was achieved through the creation of the Petroloum Division and establishment of a sound geological data base; and (b) technology transfer, which was only moderately successful due to limited availability of national graduates with adequate education in geosciences. There are two main causes for this constraint: (a) inferior emoluments offered by DME, and (b) inadequate curriculum and coaching provided at the University of Papua New Guinea, both should be addressed as early as possible to accelerate the much needed technology transfer. 7.03 Excessive time has been consumed in the North New Guinea basin study. It seems that the decision to conduct an in-house study of the basin was not based on a clear, analysis of the work involved and the Petroleum Divisions' own available resources. While there is no doubt as to the quality of the report, it could have been completed and promoted at least two years earlier had consultants been employed along the same lines as for other basins studies. To the extent that this may have been due to inexperience of the Petroleum Division, guidance from the Bank Group, at an early stage, would have been helpful. Nevertheless, the in-house conduct of this study has provided excellent on-the-job training to national geologists. 7.04 Significant lessons learned from the experience gained from this project are: (a) reference para 7.02 above, when technology transfer is a project objective, the constraints (if any) to the availability and development of indigenous professional manpower should be examined during project appraisal so as to provide remedial measures in the project design; (b) exploration is the first phase of "prospecting to production" sequence. The second phase involves commercial development of discoveries. For efficient dove-tailing of the two phases (to maximize the resource benefit) it is desirable to identify the major issues of the development phase (such as organiza- tional and regulatory framework, nature and level of required expertise, extent of state participation, etc) at the outset of exploration phase and address these issues, to the extent possible, through the exploration technical assistance project; and (c) where the implementation agency is still to be organized, the Borrower's interim arrangements for keeping project accounts should be specified. DME'S PETROLEUM OPERATIONS BEFORE REORGANIZATION SECRETARY FOR MINERALS & ENERGY II III POLICY& MINES GEOLOGICAL PLANNING SURVEY I I I I I I 1 PETROLEUM MINES & PETROLEUM LICENSING PETROLEUM & EXPLORATION INSPECTION ASSESSMENT MONITORING GROUP (PRAG) DUE'S PETROLEUM OPERATIONS AFTER REORGANIZATION o SECRETARY FOR MINERALS & ENERGY II I POLICY& MINES GEOLOGICAL r I i PETROLEUM I I I III PETROLEUM RESOURCES RESERVOIR PETROLEUM EXPLORATION AHIV DRILLIN ENGINEERG GEOPHYSICS AMMISTRATION EKW44400A 21 - ANNEX 2 THE INDEPENDENT STATE OF PAPUA NEW GUINEA Page 1 of 18 DEPARTMENT OF MINERALS AND ENERGY PETROLEUM HANDBOOK - Geological Review - PPL Application Guide - Permit Map - Current Permit Holders Petroleum Division - Geological Survey DEPARTMENT OF MINERALS AND ENERGY APEA Conference - Brisbane -22 - Annex 2 Page 2 of 18 PETROLEUM AND NATURAL GAS IN PAPUA NEW GUINEA MARCH 1988 Introduction The Geological Survey believes that Papua New Guinea has the potential to become one of the major oil producing nations of the world outside the Middle East. There are five large sedimentary basins in Papua New Guinea with petroleum potential (see page 5). Since Independence in 1975, the Government has placed a high priority on the development of its potentially very large petroleum~ resources. In 1982, with the aim of encouraging increased exploration, the Department of Minerals and Energy undertook to carry out comprehensive technical studies and produce reports on the petroleum potential of the country. These studies were largely carried out by geological and geophysical consultants. A series of promotional seminars and meetings followed release of the final reports of the project. That promotional activity resulted in many new exploration companies making applications for Petroleum Prospecting Licences (PPLs). Most petroleum exploration has occurred in the Papuan Basin where the existence of large oil and gas deposits has been suspected since oil seeps were discovered in the Papuan Gulf in 1911. A number of discoveries of gas and gas condensate and one minor oil discovery were made between 1950 and 1968. Exploration activity was quiet during the 1970's but has picked up considerably in recent years, due to Departmental promotional activities. With the relatively recent development of helicopter transportable drilling rigs, drilling in the rugged Highlands region has become possible. Large and possibly even giant hydrocarbon discoveries has r suited from this drilling. There are currently thirty-three separate Petroleum Prospecting Licences with five additional under offer and four applications to consider. These Peuoleum Prospecting Licences are operated by twenty- two separate groups. There is little vacant acege in the Papuan Basin but farmin opornties are available. Vacant acreage is present in the other basmn areas. Five wells, Niugini Guls lagf 4, 5, SE Hedinia 1, BPs Hides 1 and Shell's Nopan 1 were drilled in 1987. Of these SE Hedina 1 was a gas condensate and oil producer. Hides 1 was a gas condensate producer. The other wells were dry. During 1987, 3856 kms of offshore seismic and 886 kms of onshore seismic were recorded in the Papuan Basin. Total possible producible reserves in Papua New Guinea known to date are 587 mmbbis (million barrels) oil and 8.5 tcf (trillion cubic feet) gas (see Table 1 and following map). In the next five years present operating companies have a committment to carry out 11,000 km of seismic and drill 100 wells. Major prospects continue to be the Lower Cretaceous Toro Sandstone present over a wide area in the Papuan Basin and the Miocene reef limestone also widely present along several trends. The latter prospect is also present in the other basins. In the Papuan Basin the Miocene shelf limestone which produced oil at Puri is also an excellent prospect as well as the the underlying Eocene sandstone. These other basins, North New Guinea. Cape Vogel Bougainville and New Ireland also have excellent prospects. There is a section of unknown thickness under the Bismark Sea. - 23 - Annex 2 Petroleum Prospects Page 3 18 The Papuan Basin is effectively a continuation of the Carpentaria Basin in North Queensland (Fig. 1). The simplified stratigraphy of the Western Papuan Basin is:- Tertiary shelf limestone Tertiary sandstone Cretaceous Ieru marine shale and minor sandstone (Rolling Downs equivalent) Lower Cretaccous-Jurassic Toro quartz sandstone (Gilbert River sandstone equivalent) Jurassic Imburu shale and sandstone Jurassic Koi-lange sandstone To the west the Toro and lower beds lap out at Lake Murray in similar fashion to the Carpentaria Basin on its wt stern side. To the north, the Mesozoic section thickens and becomes volcanoclastic eventually passing .to basement under the North New Guinea Basin. To the cast the Papuan Basin thickens by the addition of clastic Tertiary beds. In this area are also buried Tertiary reefs including the Pasca gas- condensate gas field. The northern and eastern extent of the Toro Sandstone, the main reservoir bed of the Papuan Basin is a matter for surmise at present The structure of the basin (see opposite) consists of an overthrust belt of Upper Miocene age in the north and fold structure parallel to it to the south, signs of which can be seen as far south as the Croydon-Smithbourne Ridge in the Carpentaria Basin. It is no certain how far north the thrusting extends, but thrusting has been mapped in the South Sepik area by Papua New Guinea Geological Survey geologists and noted on seismic lines in the North New Guinea Basin, though this was disputed by Shell geologists. Unfortunately, it is not possible to obtain usable seismic in the areas in those parts of the Papuan Basin where Darai karst limestone outcrops. To date the most useful tool to elucidate structure in those areas has been SAR (sidelook radar) which penetrates the thick jungle cover. Elsewhere reflection seismic is effective but costs about K10,000/m for onshore seismic. Dealing with some significant results:- Iagifu Oilfield in PPL 100 has provided the most encouragement with a possible producible resource of 400 million bbls of 43 API sweet crude. Five wells have been drilled on the Iagifu Structure. Iagifu 1 slinmhole did not reach Toro Sandstone. Iagi'u 2 at 7973-8320 feet in Toro obtained about 79 feet gascap and 230 feet oil. Ihe oil sand was estimated to have a capacity of 16000 bopd Le. would produce about 8000 bopd. There was no water contact in.the sand; no boundaries were found on production testing. Iagifu 3 drilled 4 km NW intersected Toro Sandstone 880 feet lower. It was the same thickness but there was only 108 feet of 43 API oil with a water contact. The well was deepened to 10152 feet and three further sands were intersected with an additional thickness of 120 feet. At TD the well as still in an oil sand with a water contact. Basement had not been reached. Production testing indicated the well was close to boundaries in all sands. RFT data suggest a fault between 2 and 3 wells at the Toro Sandstone level. Iagifu 4 drilled 2km SW of lagifu 3 reached the Toro 400 feet higher than lagifu 3 but it contained water. It was located on the Soro Thrur. getting a repeated section and steep dips lower in the well. Despite substantial oil shows thee were no lower sands considered worth testing. Iagifu 5 drilled 2 km E of number two well reached Toro at 8690 feet below the oil water contact. Sands lower in the well had no shows. SE Hedinia 1 was drilled 26km SE of lagifu 2 on a closure on Hedinia Anticline, the next structure to the south of lagifu. 240 feet of very permeable Toro was penetrated and testing wet (to CS) gas. There was no water or oil contact so a sidetrack was drilled in an attempt to prove an oil leg. However. despite committing 7 inch casing, circulation could not be maintained and the well was P&A. Hedinia I is currently drilling and has tested wet gas from the top 30 feet of the Toro Sandstone. - 24 - Annex 2 Page 4 of 18 aCb II-CAPE VOGEL t ßBASINC -&-cm To ORj~ zel. i + + +(+CimmAel5I + ++++ CARPENTARIA\ +++ BASIN -• •+ + + + +osot DIAGRAMMATIC CROSS SECTION A B +onÄA+ + a + -r 4.4. I- SANOSTONE +MASIE ES S TON A.C.M. Laig. 1986 PAPUAN & CARPENTARIA BASINS SHOWING DISTRIBUTION OF GILBERT RIVER SANDSTONE -25- Annex 2 Page 5 of 18 The Niugini Gulf consortium has difficult drilling problems. All supplies have to be transported by helicopter 40km from Poroma base which is 600kms by toad fom the port of Lac. IThe Darai Limestone which is about 4000 feet thick has to be drilled with air because of lost circulation problems. The ler is overpressured but the underlying Toro is underpressured. Despite these difficulties, they are just completing a prefeasibility study on a lagifu development which includes a pipeline to the Gulf of Papua. In PPL 27 BP Petroleum recently completed Hides No. 1 well in the Southern Highlands 80km NW of lagifu 2. In the well, the Toro Sandstone from 2999-3053m produced gas at a rate of 15.9mmcf/day and 39.6bbls condensate per day. Negotiations are at present in progress for the sale of Sas to Placer for power generation at Porgera gold mine. BP estimate the gas reserves as 1.5 trillion cubic feet. In PPL 51 Kundu Petroleum Limited recently completed a reflection seismic survey near the Puri No. 1 well which in 1958 produced oil at the rate of 1600 bopd for a few days before going to salt water. The oil was produced from fractured Miocene shelf limestone in a subthrust block. The additional seismic has located a substantial closed structure in a similar situation about km south of the Puri 1 well. The seismic also shows a distinct zone of decollement at 3.00 seconds believed to be the top of the Cretaceous. This structure will be drilled in the second quarter of 1988. In PPL 82 International Petroleum Corporation have mapped a large reef structure, the Pandora Structure, south of Pasca in the Gulf of Papua. They propose to drill this structure in April 1988. In PPL 79 Kelvin Energy also propose to drill in April 1988 on the Pasca A structure. Many companies have shown interest in the prospects in the Gulf of Papua as well as the flat Fly River/Strickland River platform and the onshore region to the northwest of Port Moresby. All of these areas are much easier to explore than the more mountainous Highlainls, and may well contain sizeable oil accumulations. The Papuan Basin covers a very large area (approximately 212,000 km square) but despite the long history of exploration, vast areas remain largely unexplored. To give some idea of the areas involved, the Papuan Basin is about the same size as Syria in the Middle East or the state of Nevada in the USA. All of the offshore Gippsland Basin (which has supplied 60% of Australia's oil needs for 20 years) would fit into one of the smaller existing Petroleum Prospecting Licences. All the elements necessary for the generation and entrapment of hydrocarbons are present in mo- t areas of the Papuan Basin. These include a wide range of structural and stratigraphic traps, good source rocks at sufficient burial depths, good to excellent reservoir rocks (limestone and sandstone) and suitable cap rocks. The North New Guinea Basin is actually made up of three smaller basins and covers an area of approximately 93,000 km square (or an area the size of Portugal). A limited amount of exploration has taken place with only 7 wells drilled to date and sparse seismic survey coverage. The oil generating potential of the region is suggested by the presence of numerous oil seeps, particularly along the borders of the central mountain range. There is up to 5 km of sedimentary section in some parts of the basin. The Petroleum Division has prepared a comprehensive report on the NNG basin which will be available for sale shortly. The Cape Vogel Basin is a largely offshore basin which has been only partially explored. Shallow bores drilled on Cape Vogel peninsula in 1928 did have shows of hydrocarbons but only two deep exploration wells have been drilled (in 1973) and there is little seismic data over the basin's approximately 26,000 km square. Large structures are known to exist in the subsurface offshore, but have not been tested by drilling. There is a thick section of Tertary sediments in the basin but much of the sequence cannot be identified from the existing data which includes only limited onshore exposure. It is likely, however that reservoir sandstones and shaly source rocks occur at depth. The basin is adjacent to the tectonically active Solomon Trench which may lso be a source for hydrocarbons. -26- Annex 2 -Page 6 of 18 NORTH NEW GUINEA BASINs• PAPUAN BASIN s •- SYNN 43/ 8 SEDIMENTARY BASINS IN PAPUA NEW GUINEA -27- Ainex 2 Page 7 of 18 5.1 After one month a recommendation is made on the application by the Chief Petroleum Geologist to the Petroleum Advisory Board. Often there will be discussion and modification of the proposed work programme which is the main factor in the recommendation. The financial resources of the applicant ;e also checked. Clear evidence of sufficient funds to cover the first two years of the PPL must be present before a favourable recommendation can be made. 5.2 The Petroleum Advisory Board will meet sometime after the last day for receiving objections to consider the applications and make recommendations to the Minister. 5.3 After hearing the recommendations of the Petroleum Advisory Board the Minister will advise the applicant (a) he is prepared to grant the licence, or (b) he will not grant the licence. 5.4 If the Minister is prepared to grant the licence, he will serve an instrument on the applicant containing (a) information he is prepared to grant the licence; (b) the conditions of the licence (i.e. a draft licence document); (c) a bond to be executed by the applicant giving security for compliance with the licence conditions, either in the form of a cash deposit or bank guarantee for the amount of K50,000. 5.5 Within one month of receiving the above insaument (or up to four months at the Minister's discretion) the applicant will; (a) request the Minister to grant the licence; (b) lodge the security with the Director, and (c) pay the first annual fee. 5.6 After the applicant has conformed with 5.5 the Minister will grant the licence subject to the conditions contained in 2.4(b) or such other conditions as may be agreed. 5.7 Notice of granting the licence will be gazetted. 6. Eligibility to hold Prospecting Licences Petroleum Prospecting Licences may be held by: (a) a natural person, (b) a corporation incorporated under the Companies Act; or (c) a corporation registered as a foreign company under the Companies Act. -28- Annex 2 Page 8 of 18 The Bougainville Basin comprises some 4,400 km square, offshore on the western side of the island of Bougainville. It is very much a "frontier" area in the very little petroleum exploration has occurred to date (only one well has been drilled). Despite this shortage of data, staff of the Petmleum Division believe that the region has considerable potential. There is up to 5 km of section in parts of the basin and several large drillable structures have been recognised from existing seismic data. It is believed likely that suitable ine grained source and carbonate reservoir rocks will be intersected at depth. The New Ireland Basin is the least explored of the presently known basins in the county. In fact. it was not recognised as a basin with resource potential until a research vessel cruised the waters to the northeast of New Ireland in the early 1980's. The only data presently available which gives clues to the potential of this basin are the results of a research cruise seismic survey and mapping of onshore sequences of New Ireland. From this limited information it is possible to say that there is some potential for hydrocarbon accumulations off the coast of New Ireland. Much of the basin is in rather deep water so it will likely be necessary to look for structures near to shore. Suitable source, reservoir, and cap rocks have been recorded in the onshore sedimentary sequence and are br.ieved to extend offshore where there is probably more than 4km of sediment. In addition there are large areas of the Bismarck and Solomon Seas under which the thickness of sedimentary section is virtually unknown, although they have bec. covered in part by sparker seismic surveys. For this reason we are proposing to offer a speciel category of offshore licence. This would basically be a shooting option over a large area. Anyone interested should discuss it with us. Discoveries such as the oil at PurL the Pcondensate at Pasca, the recent Juha gas/condensate and the exciting and potentially very large Iagifu oil find, have generated much interest within the petroleum exploration industry which iad labeled Papua New Guinea as "gas prone" and therefore unaaractive as an oil prospect Papua New Guinea is now seen as one of thefew remaining places in the world where giant oil fields may still be discovered, as well as being a country with a stable political climate which encourages explorers. Further information on the petroleum potential of Papua New Guinea, including copies of the consultants reports, are available from the Petroleum Division of the Geological Survey, P.O. Box 778, Port Moresby, Telephone 224200, Fax 224222, Telex NE23305. The Geological Survey wishes to thank County NatWest Securities Australia Limited for their kind assistance in the printing of this handbook. Details of how to apply for petroleum prospecting licences follows:- Petroleum Prospecting Licences 1. Any area in Papua New Guinea can be the subject of an application for a Petroleum Prospecting Licence. 2. Under the Petroleum Act not more than 200 blocks (5x5 minutes) can be applied for in one application. Within the known basinal areas generally the limit is 60 blocks. Separate arrangements will be acceptable within the Bismarck and Solomon Sea areas but would have to be a series of 200 block applications. 3. Petroleum exploration is controlled by the Petroleum Division of the Geological Survey of Papua New Guinea. The Petroleum Division is headed by the Chief Petroleum Geologist who is iso Chief Petroleum Inspector. The Principal Petroleum Registrar is also in the Petroleum Division. 4. When applications are received a notification is put in die government gazette and one month is allowed for obiection%. Annex 2 7. G a Page 9 of 18 7.1 It is recommended that foreign companies engage a firm of local solicitors or public accountants to handle their affairs during the aipplication period, particularly if the company requires registration in accordance with above. 7.2 The Minister responsible for granting prospecting licences is the Minister for Minerals and Energy and his Department is responsible for their administration. 7.3 The Secretary of the Department is presently the chairman of the Petroleum Advisory Board and is the Directwr appointed in accordance with the Petroleum Act 7.4 The Petoleum Advisory Board is made up of five members: three from the Department of Minerals and Energy and one each from the Department of Finance and the Department of Provincial Affais It meets from time to time to make recommendations tot o Minister on matters relating to petroleum explaration, including variations to licence con.tions and the approval of work programmes at the end of the second and fourth years of the licence period. 8. Details needed in Application 8.1 When granting a prospecting licence the Minister for Minerals and Energy must be satisfied the applicant has a coherent exploration strategy for the licence area as well as having the technical and financial resorces to carry out the requisite work programme. The following information must therefore be included in an application: (a) the ful name of the individuals or companies who are to be the licence holders, (b) if more than one individual or company is to hold the licence, the respective participating interests and who is to be the operator; (c) the specific blocks being sought and a sketch map indicating their position; (d) an outline of the technical resources of the applicant, prior experience in Papua New Guinea and descriptions of similar exploration programmes carried out elsewhere as well as the resumes of key individuals to be involved in the proposed programme, (e) details of the financial and asset resources of the applicants including most recent financial seennt (f) detailed work and expenditure programmes proposed for the first two years of the licence period; (g) indicative work and expenditure programmes proposed for the final four years of the licence period; (h) a synopsis of the technical rationale used in developing the work programme proposed; (i) oal and telex addresses of the applicants; (j) non-returnable application fee of K2,000; and (k) any other relevant information. 8.2 Applications to be delivered to the Director cire of Principal Petroleum Registrar, Petroleum Division, Geological Survey of Papu- New Guinea, Elanese Street, Newton, Port Moresby - Papua New Guinea or posted to above Post Office Box 778. Port Moresbv. Pana New Guinea. There iq no nmtal tielivery in Pnvi Kew aMliv-* -30- Annex 2 Page 10 of 18 TABLE 1. RECENT PLTROLEUM DISCOVERIES, PAPUAN BASIN wel Nam km.mInervlsmls pi fdcabn Flows Juba 1-X 3196 - 3225 1984 Gas at 14.81 MMSCFPD and condensate at rate 991 BPD. Juba 2-X 3221 - 3265 1984 Gas at 24.11 MMSCFPD and condensate at rate of 1680 BPD Juha 3-X 3301 - 3322 1985 Gas at 13.29 1MSCFPD, and condensate at 1538 BPD on a 40/64 inch choke. Absolute open flow potential is 46.8 MMSCFPD. Iagift 24 2430 - 2542 1986 Gas at rates up to 10.5 MMCFPD and oil (43 deg.API) at 2300 BPD through a 1 inch choke. On a 2 inch choke, oil at 3400 BPD was measured. Iagifu 3-X 2585-2591 1986 Oil at 3668 BPD 46 deg.API, 3.81 MMCFGPD, 1/4 inch choke. 3027 - 3042 3168 BOPD 46 deg.API, 7.85 MMCFGPD, 1 inch choke 3066 - 3071 322 BOPD 46 API, 0.82 MMCFGPD. 7/16 inch choke 3076-3082 1231 BOPD, 4038 BWPD, 4.07 MMCFGPD, 1 inch choke SE Hedinia 1.X 1861 - 1867 1987 Gas at 7.81 MMSCFPD through a 40/6- inch choke. 2057.3-2062.2 Oil (44.4 deg.API) at 215 BPD and gas at 0.7 MMCFPD through a 20/64 inch choke. SE Hedinia 2-X 1926 - 1988 1987 Gas at undetermined rate Betow 2124 " " t Hides 1 2999 - 3053 1987 Gas at 23 MMSCFPD on a 1/2 inch choke, and 15.9 MMSCFPD on 3/8 inch choke. 3248-3257 Gas at 1.15 MMSCFPD on a 1/2 inch choke, and associated condensate estimated at 235 BPD 3190 -3200 Gas at 7.89 MMSCFPD on a 3/8 inch choke, and associated condensate at 217 BPD 3149.5-3162.5 Gas at rate of 12.07 MMSCFPD on a 3/8 inch choke, and associated condensate at 408 BPD. - 31 - Annex 2 Page 11 of 18 PPL310 PPL7PL9 B/-AS(kf -4. PPL106PjL103l aPans s PPL3 C Gas PP10 i h i t 6 ix utPLs .p EO P52PkfTcm PPL81j 400M,/ 1 1P 6PL PPL68MifGm5drca PPL94 PP 1=i*=EL 0-3/ GerPPL51 PPL102 -e PPL60- OUt 3 M 3i M30 APP I APL3 APPL 1131PPL, 9 PPL 82 -' ~PROTECTED ZONE oca PETROLEUM PROSECT~N TENEMENTS AND RESERVE ESTIMATES OF SP?UanU assu neI@enuenli=e - - - ，…－-－…………■－■■■■■ ■ 긴긔：-，· NEW IRELAND NORTH NEW GUINEA BASIN 15 Å c 9 SIA N E W 5 0 L 0 0 N SIA MOUGAINME SASN CAPE voott SASIN fft AffLICAIM AttA MOTECTED ZONE fli PAPUAN SASIN 0 tD 9 CID - 34 - Annex 2 Page 14 of 18 THE INDEPENDENT STATE OF PAPUA NEW GUINEA PETROLEUM PROSPECTING LICENCE (PPL) AS AT FEBRUARY 11, 1988. Lcence/ Oa/ Province Dane No. Licencees Contact Address Basin Offshore Granted of (%) (exin4 .Blocks (on= ocfafr) (Licence Basin: A - Appication. E* E-Etdon. O- Qifer) 27(E) Papuan On Southern 14 Nov 86 47 BP Pet. Dev. (95) (op) D. Balchin. BP Petroleum Hgands (14.11.91) Oil Search (5) Development Aust. Ltd, 1 Albert Road, Vic. 3004 Australia Ph:268 4397 30(E) Papuan O/ Gulf and 25 Sep 86 86 Peuo*Canada (79.17) P. Kaye, Petro-Canada Off Cantral (25.9.91) (op/K.Graham (18.33) P.O.Box 2844, Austin Oil N.L (2.5) Calgary, Alberta,Canada T2P3E3. Tlx-03 821524 Ph:(403) 296 8734 31(E) North On West 25 Sep 86 81 Touoa No 86 P/L (op) A. Kugler New Guinea Sepik (25.9.91) K.Graham (90) Toutu No. 86 Pty. Ltd., Austin Oil NL (10) Building 8, 500 Capital of Texas Hwy, North Austin Texas 78746 Ph:(512) 326 0878 Fax:(512) 328 5103 51 Papuan Ont Gulf 29 June 83 60 Kundu Exploration(100) R.W. Evans Off (29.6.89) (op) Kundu Exploration Pty Ltd P.O. Box 6364. Boroko PNG, Ph:454101 Fax.213036 Sydney office: Ph: (02) 964 4588 Fax:(02) 929 5467 56 Papuan On Gulf 12 Dec 85 71 Base (97.5) (op) A.Fleming, (12.12.91) Mountains West Expl. Giant Resources. (2.5) 17th floor, 141 Walker Street, North Sydney NSW 2060 Ph: 957 1054 Fax: 922 5033 59 Papuan On Gu & 24 Feb 87 70 Overseas Petroleum Y.T. Lee, Western (24 Feb 92) Investment Corp (100) Overseas Petroleum (op) Investment. Rwa Road. Cororation. 83 Chunr Annex 2 - 35 - Page 15 of 18 60 Papuan On/ Gulf& 14 Mar 86 84 SE Oil & Gas (op) SePPL31 Off Contal (14.3.92) Nigin Minint L) (45) Andrew Kugler. Jr (25) W.S. Newberry (25) Austin Oil NL.(5) 3 Papuan Off Gulf 14 Mar 86 64 Pmier Oilfields of D. Melzr (14.3.92) Niugini P/L (OOXop) Prmnier Oilfields of Niugini Pry. Ltd., Castrol House, 6 Hill View Road. F 8055 Ph: 760 7711 TIx 33581 66 Papuan O/ Gulf& 7 Aug 86 90 Toutu No 84 P/L (op) See PPL 31 Off Central (7.8.92) Andrew Kugler Jr. (90) Austin Oil N.L (10) 68 Papuan On Western 14 Mar 86 183 ANZ Petoleum (100) See PPL 51 (14.3.92) Kuadu Exploration (op) 49% F.L Pending 69 Papuan On Western 14 Mar 86 200 ANZ Petroleum (100) See PPL 51 (14.3.92) Kundu Exploration (op) 49% F.L Pending 72 Papuan On Gulf 27 Oct 86 64 Kelvin Energy (100) (op) B. Carter, (27.10.92) 2295-1055 W. Hastings St Vancouver, B.C. Canada V6E2E9 TIx 04-50789 Ph:(604) 6815141 74 Papuan On Chimbu, 7 Nov 86 127 S.E. Oil & Gas (op) See PPL 31 Gulf (7.11.92) Andrew Kugler, Jr (47.5) Eastern W.B. Newberry (47.5) Highlands Austin Oil NL (5.0) 76 Papuan On Gulf & 21 Nov 86 53 Kundu Petroleum (50) (op) See PPL 51 Southern (21.11.92) Base Resources (50) 77 Papuan On Western 1 Dec 86 48 Peabody Venture P/L J. Larson Gulf & (1.12.92) (60) (op)/ Garnet PNG 2425 S. Colorado Blvd. Southern Ventures (40) Denver Colorado 80222 Highlands USA Fax 303 756 6755 Ph: 303 758 1231 -36- Annex 2 Page 16 of 18 78 North On West Sepik 24 Nov 86 -10 Toutu No 86 P/L (op) See PPL 31 New (24.11.92) K. Graham (67.5) W.B. Newberry (11.25) Andrew Kugler, Jr. (11.25) Austin Oil N.L. (10.0) 79 Papuan Off Gulf 21 Nov 86 80 Kelvin Energy (100) (op) See PPL 72 (21.11.92) 81 Papuan On Southern I Mar 87 200 Santos Ltd. (100) (op) R. Causebrook, Highlands, (1.3.93) Santos Limited. Western 39 Grenfell SL, & Gulf Adelaide, S.A. 5000 Aumalia Tlx 87716 Fax:(08) 218 5357 Ph:(09) 218 5854 82 Papuan Off Gulf 20 Feb 87 124 Inernational Petoleum A. Lundin. (20.2.93) Corporation (100) (op) International Petoleum Corporation, 6 rue de Rive 1204, Geneva, Switzerland TIx: 428 744 Ph(022) 217488 85 Papuan Off Gulf 11 Feb 87 32 Premier Oilfields of See PPL 63 (11.2.93) Niugini (100) (op) 86 Papuan On Enga & 31 Jul 87 135 BP Pet Dev.(100) (op) See PPL 27 Southern (31.7.93) 87 Papuan On/ Western 31 Jul 87 60 Papuan Gulf Peroleum A. Rintoul Off (31.7.93) (100) (op) EDS Pty. Ltd., 8th floor 169MillerSmeet, North Sydney 2060 TIx* 70238 Fax: (02) 957 5368 Ph: ,J2) 957 6932 89 Papuan On Southern 31 Jul 87 18 Lakes Oil (PNG) Ltd R. Annels Highlands (31.7.93) (50) (op)/Mariebw Lakes Oil, 4th floor & Enga International (Qld) Pty. 60 Albert Road, Ltd. (50) South Melbourne 3205 TIx.136149 Ph:(03) 321 4011 93 Papuan On Southern 31 Jul 87 46 Rigg Exploration (100) T.L Reiner Highlands (31.7.93) (op) Rigg Exploration Pty Ltd Cl- PO Box 904 Port Moresby PNG -37- Annex 2 Page 17 of 18 94 Papuan On Western & 13 Nov 87 96 Bosavi Exploration (100) W.A. Forster Southern (13.11.93) (op) GPO Pox T17265 Highlands Perth WA 6001 Fax: (09) 325.8560 Tel:.(09) 325.8866 95 Papuan Off Gulf 31 Jul 87 17 Interational Petoleum See PPL 82 (31.7.93) Corporation(100)(op) 96(A) North Bougainville Off Solomons 95 As above As above 98 Papuan Off Central 29 Dec 87 9 Papuan Gulf Petroleum See PPL 87 (29.12.93) (100) (op) 99Papuan On Gulf 29 Dec 87 5 As above As above (29.12.93) 100 Papuan On Southern 3 Aug 87 49 Niugini Gulf Oil (25) E. Robins, Highlands (3.8.93) (op)/BP (25)/Picon Pet. Niugini Gulf Oil, & Gulf Inc(14.98)/BHP (12.5) Port Moresby PNG Oil Search (10.017)/ TlIx NE22205 Merlin Pet (12.5 FO)/ Fax: 211102 Bond Corp (5 FI) Ph: 211088 Ampol Ex (5 FI) 101 Papuan On Western 3 Aug 87 98 Niugini Gulf Oil(25)(op) As above (3.8.93) BP(21.01)/Ampol (13.99) Picon Pet Inc (13.99) Merlin Pet (12.5 FO) BHP (7.5) / Oil Search (6.01)/Bond (5 Fl) 102 Western On Western 29 Dec 87 111 Gedd Inc (100) (op) J.H. Harmon (29.12.93) Gedd Inc., 2000 N.Woodward Avenue Suite 200, Bloomsfield Hills Michigan 48013 USA Ph(512)991 9232 103 North On Madang 29Dec87 60 Papan Gulf Petroleum See PPL 87 New Guinea (29.12.93) (100) (op) - 38 - Annex 2 Page 18 of 18 105 North On/ East & 15 Feb 88 84 Armadale One Pty Ltd B. Phillips Guinea Off West (15.2.94) (100) (op) Petroleum Securities Sepik Australia Limited. PO Box R204, Royal Exchange NSW 2000 18th floor, 56 Pitt Street, Sydney NSW 2000 Ph: (02) 27 4605 Tlx. 71999 Fax: (02)251 2410 106 Papuan On West 1 Feb 88 85 Highland Petroleum P/L J. Mulready Sepik. (1.2.94) (33.3)/Victoria MuIready Consulting Western & Exploration (PNG) Pty Services, Southern Ltd (33.3)/First 11 Norman Street, Highlands Australian Resources East Doncaster, (PNG) Pty. Ltd. (33.3) Vic. 3109 Australia Ph:(03)848 3660 Fax:(03)848 5934 108 Papuan On Chimbu 10 Feb 88 60 TMOC Resources Ltd H. Gordon Gulf, (10.2.94) (op)/Nowra No. 49 P/L 23rd floor, Western (55)/Flinders P/L (25) 12 Creek Street, & Southern Pagini Oil & Gas (20) Brisbane QId. 4000 Highlands Ph: (07) 221 8288 TIx: 41040 109 Papuan Onl Gulf 13 Nov 87 1 Touru No 86 P/L (op) See PPL 31 Off (13.11.93) Niugini Mining (45) Andrew Kugler JR (25) W.D. Newberry (25) Austin Oil N.L. (5) 112(0) Papuan On Western 73 Cahill Pty Ltd (10) (op) P. Lavers /Off Batabata No 47 Co.(50) Pan Pacific Petroleum Cochin Pty Ltd (40) Sth floor, Norplaza, 169 Miller Street, North Sydney NSW 2060 TIx 70238 Fax (02) 925 0564 113(0) On/ Western 163 Continental Oil N.L. RJ.S. Hollingsworth Papuan Off (50) (op)/Batabata No. Continental Oil Expl. 90(50) Pty. Ltd., 44 Greenhill Road. Wayville SA 5034 Australia Ph 2121 377 TIx: 88909 116(A) Off Gulf 35 Internatioa Petroleum See PPL 82 Papuan Corporation (100) (op) - 39- Annex 3 Page 1 of 2 STATUS OF PROFESSIONAL STAFF IN PRAG/PETROLEUM DIVISION No. of Experienced No. of Young Professional Staff Professional Staff Year National Expatriate National 1983 1 2 1 1984 1 3 1 1985 1 a/ 3 2 1986 - 4 6 1987 - 5 6 1988 - 6 9 2! Transferred out of PRAG on promotion. PETROLEUM DIVISION Chief Petroleum Geologist Expatriate Staff-I Petroleum Resource Archives Drilling Reservoir Petroleum Exploration Assessment Engineering Geophysics Administration Expatriate Staff I 1 I 1 1 Vacant National Staff as 2 I 2 2 2 Vacant Understudies 0I ZCZC OERPO302 W01029 OEDD2 .TCP D.S. ATTACHMENT 1 *OEDD2* -41 - COMMENTS FROM CO-FINANCIER WB1029 SUSPECTED DUPLICATE 89.08.21.0820 1029 89.08.21.0822 197688 WORLDBANK 131734 FUND A REFNO. 5656/21 AUG. 21, 89 FROM: OPEC FUND, VIENNA TO: MR. ALEXANDER NOWICKI7 CHIEF, POLICY-BASED LENDING INDUSTRY PUBLIC UTILITIES AND URBAN SECTORS DIVISION, OPERATIONS EVALUATION DEPT., WORLD BANK, WASHINGTON D.C. RE - PNG - OPEC FUND LOAN NO. 312P, TECHNICAL ASSISTANCE IN THE ENERGY SECTOR7 URLET AUG. 1. PLSD TO ACKNOWLEDGE WITH THANKS RECEIPT OF ABOVE LET WITH ATTACHED DRAFT PCR ON AFORESAID PROJECT. WE WENT OVER THE REPORT AND APPRE- CIATE ALL THE EFFORTS U TOOK IN COMPILING INFO THEREIN, AND ARE PLSD TO INFORM U THAT WE HAVE NO COMMENT ON THE DOCUMENT. WOULD LIKE TO SEIZE THIS OPPORTUNITY TO EXPRESS OPEC FUND'S APPRECIA- TION FOR THE WORLD BANK'S ADMINISTRATION OF THE FUND'S LOAN FOR THIS PROJECT AND LOOK FORWARD TO STRENGTHENING OUR COOPERATION IN THE FUTURE. BEST REGARDS HASSAN OSHAFU OPERATIONS OFFICER OPEC FUND 131734 FUND A 197688 WORLDBANK =08210B25 NNNN 므