Despite a takeover of its Canadian parent by Spanish energy company, Respol, it’s business as usual for Talisman Energy PNG as it develops the Stanley gas field. Vice President and General Manager Grant Christie explains to Business Advantage PNG what 2015 holds.

Talisman Energy’s Grant Christie

Business Advantage PNG (BAPNG): What do you see will be the next phase of the project?

Grant Christie (GC):   We’ve got a drilling campaign starting up in mid-2015 going through to 2016, so that’s going to be focused on appraisal and additional exploration to add volume to aggregate to a critical mass of gas reserves.

There’s a second phase, which is the Stanley Gas Project, and we’re the operator of that project, so we’re focusing our efforts at the moment on getting that project back on track to produce an oil stream and a domestic gas stream as soon as possible.

BAPNG: Where are the potential markets for the Stanley gas and oil?

GC: The gas will go to the Ok Tedi mine, which has had its mine life extended to 2025. Gas is cheaper than their current diesel fuel source. The oil will probably be transported to Port Moresby, where it would go into the Napa Napa refinery.

BAPNG: Your strategy in PNG is centred around the aggregation of smaller fields to create one larger reserve. What’s the tipping point for you where you can say, okay we now have enough reserves to go to the next stage?

GC: I think the critical volume for a gas aggregation is between three and five trillion cubic feet (TCF). That’s sufficient volume to start into front-end engineering and start an LNG train design.

We’ve looked at schemes for smaller volume, but what we find in the Western Province is that the infrastructure requirements are not insignificant, and so it pushes you towards requiring larger volumes to economically justify the development.

BAPNG: What are the challenges in Western Province?

GC:      The biggest challenge is the logistics. It’s remote so it requires helicopter operations for everything. A rig move means about 400 separate heavy-lift helicopter moves, in addition to all the light helicopter people movement.

With the remoteness, the lack of infrastructure and industry also means you have to bring everything in that you need.

We’re now starting to see with the likes of Total and ExxonMobil coming to the party in more serious conversations about sharing infrastructure, and setting up infrastructure that is sustainable.

I think Exxon have talked about having spent US$400 million of exploration spend. We’ve spent in excess of one billion over five years. To do that requires a shipping transport, it requires camps, it requires a whole logistics company in order to support that activity.

BAPNG: You’re not a Total or an ExxonMobil, so how does a company the size of Talisman go about managing the cashflow while you do all this exploration?

GC:      There’re two parts to this.

A large part is bringing in new partners: managing our equity level, having some success bringing in partners, gaining some carry, and requiring less of our own money to achieve the end objectives.

The second part of managing the cash is getting the projects of the likes of Stanley up and running and ensuring they are a success. So, that was a key part of our decision to take over the operatorship, we are using our development experience to ensure Stanley is a success.

BAPNG: What opportunities are there to share infrastructure to take the gas to market?

GC:      Sharing logistics infrastructure—sharing rigs, helicopters, and, if you’re working in the same area, using the same base, using the same heavy-lift helicopters. There’re only a few of them in the world.

And, obviously, there are the synergies when you’re into a development phase of sharing pipeline and facilities infrastructure with ExxonMobil or Total, and that’s probably the key discussion.

BAPNG: And how are those discussions going?

GC:      It’s early days. Actually, it’s probably in the last six to twelve months that I think people have started to realise what we realised about three or four years ago, which is aggregation is the way to accelerate the activity, share resources, have a common pipeline, and develop these resources collectively, as opposed to each consortium running in their own direction.

BAPNG: Does that mean you’d have to pipe it up to the Highlands and then pipe it down the coast?

GC:      The pipeline from Hides down to the coast will carry enough gas for two trains. So, it’s likely at capacity currently. It’s also incredibly difficult to get up to Hides. So any pipeline through the Western Province will likely come down through the heart of the Western Province.

BAPNG: How do you manage the expectations of the local people because they’ve seen you around for a long time? What sort of strategy does Talisman have to handle expectations, but also to make those local relationships work for you?

GC:      We’re a very principle-based company. Our values are honest communication, respect, and safe operations. When we come into the communities, we sit down with them with our values, and we talk them all through it.

We’re very open and very transparent about what we’re doing; we bring landowners along very early on with an objective of them understanding. We’re completely open and transparent with them, and then they’re a lot more amenable, and it’s actually a big differentiator for us.

We also look for opportunities to help them participate.

In Yavo, which is our logistics base in the middle of the Western Province, we used to fly in about three and a half tonnes of vegetables a week.

Working with the local community, we developed a business for them to grow their own crops and then sell them to us, which then negated the need to helicopter in fruit, vegetables and supplies. It was all grown locally.

BAPNG: All things being equal, what’s your best expectation for when this project might be actually exporting gas?

GC:      That’s too early to tell. Exploration results will play into that. That’s a good question to ask me at the end of the next exploration campaign.

* The US$300 million (K837 million) Stanley project, a joint venture between Canada’s Talisman Energy (Operator) (40%), Australia’s Horizon Oil (30%), and Japan’s Osaka Gas (20%) and Mitsubishi Corp (10%), has a forecast production life of 20 to 25 years.