Petroleum Prospecting License 337


Kina was awarded a 100% working interest in PPL 337 on 2nd September, 2009

Location and Infrastructure

PPL 337 covers an area of 5,508 km2 on shore in the Ramu Sub-Basin of the North New Guinea Basin. PPL 337 is located close to Madang with easy access by road from the Madang to Lae Highway. There is an excellent network of all-weather logging roads and tracks throughout PPL 337, running to the Sogeram River in the north. The logging haul roads are adequate for rig transport vehicles.

Geology

The Ramu Sub-Basin is a deep rhomboid trough bounded by the Gogol and the Ramu Markham Faults. Deposition occurred throughout the Miocene, Pliocene and Pleistocene. Late Pleistocene compression resulted in large fault bounded anticlines of which the Banam Anticline is the largest.

The Banam Anticline is a sizeable juvenile structure covered by thick tropical jungle with steep hills varying from 100 metres to 500 metres above sea level. It is covered by numerous gas seeps the analysis of which indicates a composition of 98% methane and 2% ethane. This composition indicated a biogenic rather than thermogenic origin.

Outcrop and river gravel debris support the presence of the Mio-Pliocene carbonates. Samples taken from the Sogeram River have been collected for age dating. Seismic data in the north of the licence support the presence of large reef like anomalies.

History and Previous Exploration

Exploration began north of PPL 337 in 1910 with identification of oil seeps but with 9 exploration and 12 shallow stratigraphic wells drilled to date remains under-explored.

A seismic program was undertaken by Coastal Papua New Guinea Exploration in 1982. Coastal drilled Tsumba 1 in 1984 and the seismic tie from Tsumba 1 was carried into the north of PPL 337.

Modern seismic was acquired at Banam Anticline by Woodside Petroleum Limited (WPL) and OSH in 1997 when the PPL 337 was held by Ramu Niugini Limited. OSH and WPL withdrew and the licence became PPL 248 held by SriGas Limited and was later reissued to Kina as PPL 337 in 2009.

Proposed Exploration

The strategic objective in relation to PPL 337 is to assess the possibility of defining a sizeable gas resource that may be economically developed either for the existing and growing domestic demand or transported and sold as LNG.

Three play types are recognised in the PPL 337:

The Pleistocene sandstone, Banam Footwall target – Kwila 1
The Pliocene sandstone, Banam Hanging wall target
The Plio-Miocene reef targets – Raintree 1

Heritage Joint Venture

Heritage Oil farmed in to PPL 337 in October 2013. Kina is being carried through an uncapped, two-well drilling program. In the event of success at either location, Kina will be carried through a follow-up seismic program of at least 100 line km and a minimum US$8m cost.

This activity is a significant milestone for Kina being the first exploration drilling to be undertaken by Kina outside of PRL 21. Furthermore, the Raintree and Kwila wells represent the first drilling activity in the North New Guinea Basin for over 20 years.

Upon completion of the drilling and subsequent seismic program Heritage will have earned a 70% interest and operatorship in the licence and Kina’s retained equity will be 30%.

The first well was to have been Raintree-1 testing a carbonate reef, similar to the reservoir encountered in Elk-Antelope. The site has been built and boarded. A severe wet season in the north of PNG, however, has isolated the Raintree-1 rig site. The road is presently impassable into Raintree.

Heritage is looking at options to commence drilling activity sooner. The option of drilling Kwila-1 first may achieve this, and the site construction has been fast-tracked. Kwila is a flank test of Pleistocene and Miocene sandstone reservoirs. A flat spot anomaly on seismic data down-dip of active surface seeps high grades Kwila above Raintree in terms of likelihood of success.

Full wireline evaluation of reservoir intervals will be conducted, with pressure and fluid sampling programmed. Both wells are targeting dry gas. Source risk is considered low as there are numerous seeps within the licence. There are numerous potential offtake partners in and around Madang, including the mining operations at Ramu NiCo and Yanderra. Power generation for Madang itself is another option. In the event of a large discovery, there is scope for an LNG project with deep water access at Astrolabe Bay. Subject to encouragement from Kwila-1 or Raintree 1, an appraisal seismic program will infill the existing three lines over Banam Anticline and/or Raintree.