InterOil Delays Drilling plans In Eastern Papuan Basin

The Papua New Guinea based InterOil group has delayed the drilling of its Eastern Papuan Basin exploration project while it concentrates on the development of an oil refinery near Port Moresby and searches for drilling partners, an executive said today.

The executive, the general manager of finance and administration Ian Phair, said that the timing of the drilling program depends on the company's success in negotiating with potential future partners in the project.

The company was planning to undertake a drilling program this calendar half, he said, but “obviously that isn't going to happen,” Phair said. The company is hoping there “won't be much slippage,” and that drilling will start “by the end of the third quarter,” he told the Dow Jones Newswires. He was commenting after the PNG Prime Minister Sir Mekere Morauta formally began on Saturday a twenty month construction period for InterOil's 32,500 barrel a day refinery. “The company is very excited and eager about that drilling program, however, it is important we do it with strategic partners so that the refinery is always protected from a funding perspective,” he said.

Phair would not disclose who the company is negotiating with to join the drilling program, although InterOil will work with anyone competent and qualified to participate. "Majors are quite interested," he said, with the company talking with "the usual suspects" for the drilling project.

InterOil announced in January that the discovery of a possible new crude oil system, with the potential to be a new oil field, was discovered in the Eastern Papuan Basin. It flagged plans then for a major exploration campaign to prove that what it hopes will be oil fields holding in excess of three hundred million barrels in the basin.

InterOil drilled two shallow wells in the basin late last year, intersecting three hundred and seventy five meters of reservoir quality sandstones, in which hydrocarbons were observed in the sandstone pore spaces throughout most of the column.

The company wants to retain control of the drilling program, he said. “We're keen to diversify our risk on it certainly,” he said, but control is important to the company as well, he said.

“The primary focus is to make absolutely certain that the refinery is built on time and on schedule,” he said.

Clough Limited, an Australian engineering and construction contracting company in mid April secured an eighty three million dollar contract to build the $204 million refinery.

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