Oil Search production rebounds in Q2

The Papua New Guinea-focused oil and gas producer, Oil Search, saw its production figures rebound in the second quarter as the ExxonMobil-operated PNG LNG project restarted. 

Total production in the second quarter of 2018 was 5.40 million barrels of oil equivalent (mmboe), 12 percent above the 4.84 mmboe recorded in the first quarter, Oil Search said in its quarterly report.

However, the earthquake that shook the Papua New Guinea Highlands in February slashed Oil Search production figures by 31 percent for the first six months of the year, from 14.81 mmboe in 2017 to 10.24 mmboe in 2018.

Oil Search’s managing director, Peter Botten said that total hydrocarbon sales declined 9 percent, due to the rebuilding of inventory, which had been run down following the earthquake, and the timing of shipments, with three LNG cargoes on the water at the end of the quarter.

Gas production from the Hides Gas Conditioning Plant (HGCP) and LNG production from the PNG LNG plant site recommenced in mid-April, he reminded, adding that during May and June, the PNG LNG project operated at above pre-earthquake levels, achieving an annualised production rate of 8.5 mtpa, and reached its highest-ever daily annualised rate, of over 9 mtpa, in May.

While most of the facilities are back online, due to the proximity to the earthquake’s epicenter, the APF and the and the Moran and Agogo fields sustained the most damage from the earthquake and the fields remain offline.

Repair work at the APF is nearing completion and the facility is expected to restart operations shortly, with a progressive ramp-up in production anticipated over the rest of the year.

During the quarter, 20,313 billion Btu of LNG was sold, 9 percent lower than sales volumes in the first quarter of 2018 due to the build-up of inventory following the earthquake and timing of shipments, with three LNG cargoes on the water at the end of the quarter.

Eighteen LNG cargoes were sold during the period, compared to 20 cargoes in the first quarter, of which 11 were spot sales.

The average price realized for LNG and gas sales was $8.83 per mmBtu, 4 percent lower than in the first quarter due to a higher proportion of cargoes sold on the spot market following the earthquake.

Total sales revenue from LNG, gas, oil and condensate for the quarter declined 11 percent to $252.3 million, primarily reflecting the reduced number of delivered LNG cargoes.

Despite the effects of the earthquake, Oil Search, based on the current estimates, expects its 2018 production to be at the upper end of the 23 – 26 mmboe guidance range.

Discussions on additional LNG developments gain momentum

During the quarter, discussions continued between the PNG LNG Foundation Project and the P’nyang (PRL 3) and Papua LNG (PRL 15) joint ventures on further LNG developments. Formal negotiations are ongoing between Papua LNG and PNG LNG on the terms for access to the PNG LNG plant site, Botten said.

The PNG Government has established a State Negotiation Team (SNT), responsible for negotiating gas agreements with the Papua LNG and P’nyang joint ventures, respectively.

ExxonMobil, on behalf of PNG LNG participants, continued negotiations over the quarter with a number of shortlisted parties for potential LNG supply deals, with contract terms of up to five years and up to 1.3 mtpa in aggregate.

In addition, Oil Search commenced market engagement with potential LNG buyers for offtake from its equity share of LNG from the proposed Papua LNG project.