The ExxonMobil-led joint venture which holds the P'nyang gas field in Western province is conducting pre front-end engineering and design studies to use the newly-discovered resource as the basis for an expansion of the PNG LNG project, partner Oil Search said Tuesday.
"The PRL 3 joint venture has agreed to move forward into the pre-FEED concept selection stage, with the primary option being to utilise P'nyang as a foundation resource for train three (at the PNG LNG project)," Oil Search said in its latest quarterly report.
"Preliminary studies on potential design concepts and costs have now commenced."
The work is expected to continue through to the end of 2012, Oil Search added.
The PRL 3 permit containing P'nyang is held 38.5% by Oil Search, 49% by operator ExxonMobil and 12.5% by JX Nippon.
ExxonMobil is also the operator of the $15.7 billion PNG LNG project, which is currently two years into a four-year construction schedule and is on track to start up in 2014.
The liquefaction facilities will comprise two LNG production trains with total capacity of 6.6 million mt/year.
Oil Search, which operates all of PNG's producing oil and gas fields, posted net output for third-quarter 2012 of 1.33 million boe, at an average of 14,466 boe/d.
Output was 26% lower than the second quarter's 1.8 million boe due to an initial curtailment and then a full shutdown of production for nearly four weeks while investigations were undertaken to identify the source of a minor oil sheen on the sea surface close to the Kumul marine terminal.
No source of any leak in the oil export system was found and loadings resumed in late August with no reappearance of the sheen, the company said.
"Once production resumed, there were some delays in establishing optimal plant operations," Oil Search added.
"In addition, major flooding in PNG during the quarter had an impact on logistical and operational activities."
Oil Search managing director Peter Botten said strong oil production had been recorded since operations resumed and despite the shutdown, output for full-year 2012 was still expected to be within the company's 6.2 million to 6.7 million boe guidance range.
Oil Search's operating revenue for the third quarter of 2012 was $107.8 million from oil sales of 680,000 barrels.
Sales were substantially lower than in the second quarter due to the suspension of liftings during August, partly offset by higher oil prices.
Shortly after the end of the quarter, French major Total farmed into Oil Search's exploration acreage in the PNG Gulf area.
"Total has extensive experience in developing major LNG projects and has similar aspirations to Oil Search in assessing and, in the event of success, developing an LNG project in the Gulf of Papua," Botten said.