CANADA’S High Arctic Energy Services has announced that it has agreed to terms with Oil Search Limited for a three year contract renewal for its primary contracts in Papua New Guinea covering the Drilling Rigs 103 and 104 and the drilling support services related to the supply of personnel and rental equipment to support the related drilling operations.

The renewal is effective from August 1, 2018 for a three year term and includes options to further extend on the same terms and conditions.

The two parties have agreed to suspend any further discussions on the formation of a joint owned drilling company but have not ruled out revisiting discussions on a commercial arrangement regarding the ownership and operations management of the OSL drilling rigs in PNG again in the future.
Bill Easson, general manager Drilling, for Oil Search said the renewal of the contracts follows a long period of joint review of the best commercial mechanisms to most cost effectively deliver high quality drilling services in Papua New Guinea.

“Over the last decade, our companies have forged a strong partnership that continues to set the benchmark for safe and efficient well construction in the challenging PNG environment. This contract commitment reflects Oil Search’s recognition of, and confidence in, High Arctic’s quality service delivery in Papua New Guinea.”

High Arctic said that with the PNG-LNG facility returning to full production it now anticipates the announcement of a decision to expand this facility and develop the Papua LNG project.

Mike Maguire, president – International for High Arctic, said that with a new three year agreement in place, the company is well positioned to deliver the services required by Oil Search to continue both its exploration-appraisal and development programme that will contribute to the expansion of the PNG-LNG facility.

It is anticipated that Rig 104 will soon recommence moving to the Muruk-2 well site, where it will test the extent of the field discovered last year with the drilling of Muruk-1.

“We have been working with OSL continuously since first arriving in Papua New Guinea in 2007 and have been committed from day one to being their partner of choice in accomplishing their goals in Papua New Guinea,” Mr Maguire said.

“We are pleased when reflecting back on the growth of our two organisations during the past ten years together. Oil Search has a deep commitment to PNG and invests heavily in the communities it works in. They led from the front during the recent earthquake on recovery and support and we were pleased to be able to help them. Our joint focus on safety and the wellbeing of those in our community underpins this commitment. We are proud to be Oil Searchs’s drilling service company of choice, helping them to deliver on their commitments to the country, their communities, workers and shareholders.”

Mr Maguire said the terms of the extensions are substantially similar to the previous contracts with some inflationary provisions in the drilling rig day rates applying annually through the term, and some increased flexibility in scaling the operation and reducing costs to both parties. This cornerstone contract is flexible and scalable with activity and positions High Arctic well to respond quickly to the future drilling opportunities.

In other news, High Arctic reports that the company’s Rig 405 405 has been demobilised to the port for inspection and export anticipated to occur in the third quarter.

This follows a decision to invoke Force Majeure on the drilling activity involving Rig 405 following his year’s big earthquake. After assessment of Rig 405 wellsite the customer decided to defer the well.

High Arctic had elected to add fast-moving land based rig, Rig 405, to its PNG drilling fleet in late 2017 to complete a short-term drilling project Due to the duration of this project, the rig was leased from a non-PNG third-party contractor. Following damage to the well site from the earthquake, the customer decided to terminate operations and Rig 405 has been moved to the port for inspection and is anticipated to return to Australia during the third quarter.

While the earthquake negatively affected a lot of High Arctic’s business during the first half, the company has reported an increase in PNG rental activity due to an increase in equipment being utilised in recovery work after the earthquake.