Oil Search: PNG LNG Project 70 Percent Complete

Oil Search of Papua New Guinea announced financial results for the year ended 31 December 2012.

Highlights

• At the end of 2012, the PNG LNG Project was approximately 70% complete and on track for first LNG sales in 2014. The estimated Project cost has increased to $19 billion while the Plant capacity has risen to 6.9 mmtpa.
• The PRL 3 JV has commenced development studies to assess potential design concepts for the P’nyang gas field, which may include a third PNG LNG train.
• Production in the fourth quarter was 1.79 mmboe, taking production for the 2012 full year to 6.38 mmboe, within the Company’s guidance range.
• Operating revenue for the quarter was US$218.2 million while revenue for the 2012 full year was US$724.6 million.
• A farm-down of Oil Search’s Gulf of Papua acreage to TOTAL S.A. was executed and documentation submitted for PNG Government approval.
• High potential oil drilling is underway. The Taza 1 well in Kurdistan, which proved oil in the first reservoir objective, the Jeribe Formation, is drilling ahead to the next objective, the Euphrates, and the Semda 1 well in Tunisia has recently spudded.
• The sale of the Company’s 40% interest in Block 3 in Yemen to TOTAL S.A. was completed.
• The refinancing of Oil Search’s corporate debt facility was finalised.

Commenting on the 2012 fourth quarter, Managing Director, Peter Botten, said:

“Oil Search finished the 2012 calendar year on a high note, with a strong fourth quarter production performance from our core PNG oil fields and good progress made on the PNG LNG Project and other growth opportunities, including gas expansion and material oil exploration.

“For the PNG LNG Project, a number of major pieces of project infrastructure are now at, or nearing, completion, with the remainder of works progressing generally in line with schedule. Importantly, runway pavement at the Komo airfield is progressing well and first cargo flights, which will bring in key items of equipment for the construction of the Hides Gas Conditioning Plant (HGCP), are planned to commence in early 2013. Oil Search’s Associated Gas and PL 2 Life Extension Projects are also advancing and remain on track to supply commissioning gas to the LNG Plant in 2013. The Operator, Esso Highlands Limited, has reconfirmed the Project remains on schedule for first LNG sales in 2014.

Following a cost and schedule review by the Operator in November, the capital cost estimate for the Project has increased from US$15.7 billion to US$19 billion. While this is disappointing, the economic impact is largely offset by a 5% increase in LNG plant capacity and considerably higher oil prices than when the Project was initially sanctioned. Project economics remain sound.

Oil Search continues to develop its options for LNG growth. During the quarter, design studies for the P’nyang gas resource in PRL 3 continued, with a range of options under consideration, including the potential for a third PNG LNG train. Our Gulf of Papua gas strategy also continues to move forward. As highlighted in the third quarter report, the farm-in, subject to Government approvals, by TOTAL S.A. into our Gulf of Papua licences early in the fourth quarter satisfies one of the Company’s core strategic objectives, which is to bring an experienced LNG operator into the licences, to share risks during the exploration phase. Assessment of the new 3D seismic data in the Gulf licences has been encouraging and planning for the offshore drilling programme, commencing in the first/second quarter of 2013, is well advanced.

In Middle East and North Africa (MENA) operations, the Taza well in Kurdistan has proved oil in the first reservoir objective, the Jeribe Formation, and has commenced drilling towards the second objective, the Euphrates Formation. With the potential to contain material volumes of oil, these early oil indications from Taza are promising. The Semda well in Tunisia, which has recently commenced drilling, is also a high potential opportunity.”

[mappress]
LNG World News Staff, January 29, 2013; Image: Oil Search