1. PNG’S PETROLEUM INDUSTRY “An Exciting Opportunity”
PAPUA NEW GUINEA

2. INDEX Wells, fields and activity, Recent developments and
PNG in Context
Why explore PNG?
Regional geology
Wells, fields and activity,
Recent developments and
Opportunities
New investment initiatives – Government support
Licensing Process

3. PNG – IN CONTEXT PNG is a democracy with a population of 5.2 million
Government is based on the Westminster system
PNG lies on the northern margin of the Australian Continental plate
Land area of 462,243 km2 Total 3,120,000 km2 (EEZ inclusive)
5 sedimentary basins with total area of 594,260 km2
Diverse tectonic settings from passive margin continental shelf, thrust belts, back arc to rift basins
Current 2P reserves are 500 mmbo & 15 Tcf Gas
Very supportive Government focused on encouraging activity in the country
World class oil and gas fiscal terms

4. A Major Hydrocarbon Province
PNG lies on the northern margin of the Australian Continental plate, and contains comparable reserve potential and play systems to Papua Province (Indonesia), & Timor Sea area of Australia

5. PNG SEDIMENTARY BASINS

6. INDEX Wells, fields and activity, Recent developments and
PNG in Context
Why explore PNG?
Regional geology
Wells, fields and activity,
Recent developments and
Opportunities
New investment initiatives – Government support
Licensing Process

7. Why invest in PNG? Favourable Economics:
Finding costs are modest:- Kutubu <US$1.50/bbl, Gobe <US$1.50/bbl, Moran <US$1.00/bbl, Hides <US$0.20/bbloe
Development costs are modest: Kutubu <US$4.00/bbl, Gobe <US$3.50/bbl, Moran <US$3.50/bbl
Competitive & stable fiscal terms
State take compares well with neighbouring countries
World class Gas legislation focussed on encouraging the development of the Country’s Gas reserves

8. PAPUAN BASIN SUMMARY Fold belt Foreland Area 100,000 km2
54 exploration wells drilled
only 10 wells seismically constrained
10 oil fields (6 producing fields)
7 gas/condensate fields
500 mmbo oil (2P) & 13 Tcf Gas (2P)
345 mmbo produced since 1992 to June 2003
Current production approx 50kbopd
Foreland
Area 180,000 km2
48 wells drilled
41 wells seismically constrained
1 oil discovery
No production
Port Moresby
45km

9. Why invest in PNG? Impressive exploration success rate
Commercial Success rate 1 in 7 in Fold belt
15 wells drilled in Foreland post gas/condensate discoveries & 1 oil discovery
Recent encouragement in Aure Fold belt (potentially a new petroleum system)
Sparsely explored and restricted focus of activity
96 exploration wells in an area 280,000 km2
Focus of activity dominantly on the fold belt “drilling the bumps”
Seismic now opening up new areas
Fiscal terms encouraging activity in foreland and frontier areas
Exploration potential ranks high in the region
oil prospects generally >100mmbo
large gas prospects untested with focus on options for developing gas

10. ACTIVITY LEVEL
Close correlation between exploration activity & reserves growth 14
86-91 Kutubu & Hides discoveries
93-98 Gobe-Moran discoveries
98-02 Post oil price collapse Majors inactive in PNG
4000
Wells
Cumulative Reserves
3500 12
3000 10
2500 8
Introduction of heli-rigs
Exploration Wells
2000
Cummulative Reserves BOE
Introduction of Fold belt seismic 6
1500 4
1000 2
500
Year
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
PNG Exploration History and Cummulative Reserves

11. INFRASTRUCTURE SUMMARY
Hides Gas Plant
Gobe/SE Gobe Facility
Kumul Marine Terminal
Kutubu Oil Facility

12. INDEX Wells, fields and activity, Recent developments and
PNG in Context
Why explore PNG?
Regional geology
Wells, fields and activity,
Recent developments and
Opportunities
New investment initiatives – Government support
Licensing Process

13. Under-explored frontier Carnarvon Basin Australia
PAPUAN BASIN
Under-explored frontier
Carnarvon Basin Australia
Fold Belt PNG
Foreland Basin PNG
Area (km2)
100,000
180,000
Exploration Wells Drilled
650 54 48
Average Area per Exploration Well (km2)
154
1,852
3,750
Commercial Oil Discoveries (BBO)
1.1
0.5
Gas Discoveries (TCF)
39.6 13 3
Risked Oil Exploration Potential (BBO)
0.2 1
0.1
Risked Gas Exploration Potential (TCF)
6.0 5 2
Source for Australia Data: United States Geological Survey’s (USGS) World Energy Resources Program

14. PAPUAN BASIN GEOLOGY
Effectively a continuation of the Australian plate. Key elements:
reservoir:
Prolific Late Jurassic to E. Cretaceous sandstones (Production rates >10,000bopd)
Miocene reefs 12.2mmcfgd) & Plio-Pleistocene turbidites (untested)
source rock:
Proven Jurassic and Cretaceous source (Type I & II) – HI’s > 500mgHC/gTOC
Tertiary shales (oil seeps)
seal:
Intra Jurassic & Cretaceous shales
Plio-Pleistocence mudstones
traps:
thrusted anticlines, carbonate reef build ups, Jurassic rift basins with horsts and rotated fault blocks

15. NORTH NEW GUINEA BASIN Area 113,000 km2 11 wells drilled
8 wells seismically constrained
No discovery
Numerous oil and gas seeps
Last explored 2001

16. NORTH NEW GUINEA BASIN GEOLOGY
Fore-arc basin with clastic shelf sands and Tertiary reefs. Potential Petroleum systems include:
Reservoir:
Miocene reefs (analogous to Salawati “Birds Neck” Papua Province, Indonesia)
Plio-Pleistocence clastics (120m net quartzose sand penetrated in Tsumba-1)
Late to Early Cretaceous turbidites
Source rock:
Tertiary shales/carbonates/coal
Seal:
Plio-Pleistocene mudstone and shales
Traps:
Thrusted anticlines, carbonate reef build ups, stratigraphic traps

17. CAPE VOGEL, NEW IRELAND & BOUGAINVILLE BASINS
UNEXPLORED FRONTIER BASINS
4 wells drilled
Water depth m+
200,000 km2 area
Back-arc and forearc basins
reservoir: Late Mio-E. Plio carbonates
source rock: Mid-Late Mio. shales
seal: Late Miocene to E. Pliocene shales
traps: anticlines and carbonate build ups

18. FOLD BELT SEISMIC 1988 seismic 1999 seismic
Iagifu Field
Technological advances & cost improvements –Unlocking potential in the fold belt
1988 seismic
Iagifu Field
1999 seismic

19. INDEX Wells, fields and activity, Recent developments and
PNG in Context
Why explore PNG?
Regional geology
Wells, fields and activity,
Recent developments and
Opportunities
New investment initiatives – Government support
Licensing Process

20. FISCAL SUMMARY Terms Standard Fiscal Incentives 2003-2007 Exploration
Oil Tax/Royalty
Old rate 50% CT
2001 rate 45% CT
APT
2% Royalty
30% CT
No APT
Gas
20%/25% APT
Depreciation
Exploration Costs (EC) – lessor of 4 years or project life
EC – lessor of 4 years or project life
Capital Costs (CC) – project life 10 years +, 1/10, 10 years -, 25%
CC – project life 10 years +, 1/10, 10 years -, 25%

21. COMPARISON OF FISCAL TERMS
AUSTRALIA : OFFSHORE
PNG : GAS
PNG : INCENTIVE RATES
2003 TO 2007 EXPLORATION
PNG : STANDARD OIL
MALAYSIA
INDONESIA : FRONTIER
INDONESIA : STANDARD 10 20 30 40 50 60 70 80 90
Total State Take %

22. RECENT DEVELOPMENTS Improved Fiscal terms for new licenses
Corporate tax reduced from 50% to 30%
Gas development options include:
Gas to Australia pipeline project inevitable
Gas recycling and liquids stripping
LNG, methanol, ammonia, and/or fertiliser
Intra-country development options (LPG sales, CNG, gas pipeline to Port Moresby)
Companies now focussed on cost reduction programs
Developing continuous drilling programs
New licenses and new operators
Slim hole drilling program E. Papuan Basin underway
Government now focussed on new generation
Sixteen new applications for PPLs

23. INDEX Wells, fields and activity, Recent developments and
PNG in Context
Why explore PNG?
Regional geology
Wells, fields and activity,
Recent developments and
Opportunities
New investment initiatives – Government support
Licensing Process

24. LICENSING PROCESS Licenses may be acquired through direct negotiation
~ 50% of the Papuan basin licensed
10% of North New Guinea basin licensed
0% of eastern basins under license
Licensing period includes:
1st Period 3 x 2 year period (6 yrs)
2nd Period 5 year extension option
Development period – 25 yrs
All open file data are accessible & can be acquired for cost of copying only
Licence holders have full access to all relevant data

25. LICENSING PROCESS 1. Types of Licences issued
Petroleum Prospecting Licence
Petroleum Retention Licence
Petroleum Development Licence
Petroleum Pipeline Licence
Petroleum Processing Facility Licence
2.  Licensing Requirements
Name and particulars of applicant
Details of financial assets & technical resources
Previous exploration experience
Work and expenditure program
Other relevant information + application fee of K10,000 (US$2,500) for Petroleum Prospecting Licence
3. Turn-around time 8 weeks from application to grant of licence

26. LICENSING PROCESS APPLICANT LODGES APPLICATION APPL INCLUDES:
FINANCIAL & TECHNICAL CAPACITY
WORK PROGRAMS
K 10, 000 APPLICATION FEE
ONE MONTH
APPLICATION (APPL) IS PUBLISHED IN
THE NATIONAL GAZETTE FOR ONE MONTH
PETROLEUM ADVISORY BOARD (PAB):
CONSIDERS APPL, REPORTS TO MINISTER
TWO WEEKS
MINISTER CONSIDERS REPORT FROM PAB:
OFFERS TO GRANT PPL OR
REFUSES TO GRANT PPL
MINISTERS OFFER TO GRANT PPL HAS:
DRAFT LICENCE CONDITIONS
ANNUAL RENTAL
K 100, 000 SECURITY
GRANTING
APPROXIMATELY
TWO WEEKS
MINISTER
AWARDS PPLFOR AN INITIAL 6 YEAR TERM

27. PNG’S PETROLEUM INDUSTRY “An Exciting Opportunity”
PAPUA NEW GUINEA
DEPARTMENT OF PETROLEUM AND ENERGY