Papua New Guinea

Esrey has assembled a world class portfolio of exploration acreage in Papua New Guinea ("PNG") and holds varying interests in approximately 2.4 million acres of prospective oil and natural gas properties comprising of three large licenses (see map).

The current Petroleum Prospecting Licenses ("PPL") are as follows:

  • PPL 486 approx. 530,000 acres (50.55% interest)
  • PPL 321 approx. 1.8 million acres (84.25% interest)
  • PRL 13 approx. 40,000 acres (60.00% interest) 


History

There had been little exploration activity in PPL 486 over the 20 years prior to its acquisition by Esrey, despite the prospective location of the licence. Beginning in 2009, Esrey Energy conducted an aggressive work program involving 5.5 million acres in PNG. In 2010 the company successfully completed the acquisition of a high resolution airborne magnetic and gravity data over substantially all of Esrey's holdings. Post acquisition magnetic and gravity data modelling, and reinterpretation of 2D seismic, identified a portfolio of exploration areas of interest for high grading including a large structure between PPL 486 and InterOil's PPL 237. This structure was subsequently confirmed by the 2010 2D Poroman seismic survey on the eastern boundary of PPL 486. The aeromagnetic/gravity survey and the reprocessing of the Base Resources 1988 Victory Junction seismic data identified another prospective area referred to by Esrey as the "Kikori Bend" area near the western part of PPL 486, on trend with the Gobe oil field.

In 2011, Esrey successfully completed a 148 km 2D seismic program over the Kikori Bend area known as the "Sling Survey". This survey was designed to further detail a large structure identified with the earlier Victory Junction Survey. This structure was named Tuyuwopi and lies in in the lowland area of the Papuan fold and thrust belt on-trend with several substantial oil and gas fields Oil Search's large Kutubu and Gobe producing oil fields. In March of 2013, Esrey undertook the acquisition of a 22 km strike line to further delineate the Tuyuwopi prospect and in April 2013 announced the closing of a farm-in agreement with wholly owned subsidiaries of Heritage Oil Plc ("Heritage"). In exchange for an 80% participating interest in the PPL 486 and PRL 13 licenses, Heritage made a cash payment to Telemu of US$4 million plus the reimbursement of costs associated the recently completed 22 km strike line. In addition to the cash payment, Heritage committed to funding the acquisition of a minimum of 100 km of seismic within the license areas and the drilling of one exploration well in PPL 486 to a depth sufficient to test identified exploration targets. In May 2014, Heritage completed the acquisition of a total of 234 km of 2D seismic under the farm-in agreement confirming the Tuyuwopi prospect along with several leads identified by earlier seismic and gravity-mag surveys. With the completion of the seismic program, Tuyuwopi was confirmed and preparations for drilling were commenced.

Geology

PPL 486 contains proven, mature Late Jurassic (Kimmeridgian) Lower Imburu formation source rocks that are presently generating hydrocarbons from local kitchen areas. It is believed that PPL 486 contains clastic reservoirs of Lower Cretaceous-Upper Jurassic age (Toro-Hedinia-Iagifu sandstones), particularly in the western part and the Kikori Bend area of the PPL 486 Licence. The Company believes the presence of source, seal, reservoir and structural traps on PPL 486 are extremely prospective in this proven hydrocarbon trend.

The extensional fault related prospects identified at Kikori Bend are early rift-related structures that exhibit little late stage structural movement. These preserved extensional traps have increased longevity and the proven Jurassic source rocks are in the oil window in this area. The traps are believed to have been charged early as oil was generated from the proven Jurassic source rocks in the area. Further, the traps have good top seals and are less likely to be affected by later stage uplift or subsequent gas charge. Esrey believes the reservoir will be oil charged and has undertaken a detailed analysis of the traps identified. As with many PNG discoveries, Esrey anticipates multiple pay zones in the sandstone reservoirs of Lower Cretaceous-Upper Jurassic age.

Operations

Logistically, PPL 486's Kikori Bend area is strategically placed in the lowlands with river, road and helicopter access. It is in close proximity to Oil Search's existing crude export pipeline and the Exxon LNG Gas line (www.pnglng.com) which traverse part of PPL 486. Also within PPL 486 is Kopi base, a hub for Exxon and Oil Searchs' oil and gas development activities. In a country where logistics often define economics, PPL 486 and specifically the Tuyuwopi prospect are favourably situated.

Recent Developments

In September 2015, Heritage notified Esrey that it would not be funding the drilling of the first exploration well on PPL 486 and would therefore not fulfil its final commitment under the Farm-in Agreement. Heritage has advised Esrey that Heritage wishes to retain its 40% participating interest in the Licenses and as a result will re-transfer the other 40% participating interest in the Licenses back to Esrey. Esrey will also assume operatorship of the Licenses.