Oil Search revenue declines as LNG expansion plans gather momentum
Oil Search remained upbeat over its slight drop in revenue in the first quarter as the company saw momentum building behind the LNG expansion plans in Papua New Guinea.
The company’s revenue reached $343.7 million in the first three months of 2017, in comparison to $345.6 million in the previous quarter.
Despite a 9 percent drop in total sales which was a result of the timing of liftings, with three LNG cargoes on the water at the end of the quarter, revenue declined only 1 percent as the realized prices recovered.
Compared to the previous quarter levels, the average realized LNG and gas price was up 9 percent, reaching $7.4 mmBtu, Oil Search said in its quarterly report.
Commenting on the results, Oil Search managing director, Peter Botten said that the “first quarter production of 7.57 mmboe was one of the highest quarterly outputs ever achieved by the company.”
He added that the ExxonMobil-operated PNG LNG project, in which Oil Search holds a 29 percent stake, recorded an annualized operation rate of 8.3 mtpa, 20 percent above the nameplate capacity of 6.9 mtpa.
The report shows that the PNG LNG project sold 26 cargoes during the quarter, of which 23 were sold under long-term contract and three on the spot market, with three cargoes on the water at the end of the quarter.
PNG LNG recertification opens doors for expansion
Recent recertification of the resources in all the PNG LNG fields carried out by Netherland, Sewell and Associates during 2016, resulted in a 50 percent increase in the company’s 1P PNG LNG gas reserves compared to the 2015 reserve booking (equivalent to a 2.8 tcf increase on a gross basis) and a 12 percent increase in the 2P gas reserves.
Botten noted that this confirms “there is more than sufficient gas available” to support the project’s higher level of production.
He added that this will enable the project to place additional volumes in either term contracts, for uncommitted production above 6.6 mtpa, or in the spot market.
ExxonMobil recently commenced marketing up to 1.3 mtpa from the project. Consistent production above the nameplate capacity, allows the project to enter into additional term or spot sales.
In addition to the resource recertification, the completion of appraisal drilling and a technical reassessment of the Elk-Antelope fields in PRL 15 increased Oil Search’s 2C contingent resources by 21 percent. Combined with resources at P’nyang this could underpin at least two additional PNG LNG-sized trains, the report reads.
Following the completion of its acquisition of InterOil Corporation during the quarter, ExxonMobil became an equity partner in PRL 15.
“Discussions have now commenced between Total SA, the operator of PRL 15, ExxonMobil and Oil Search on how to optimally develop the Elk-Antelope gas fields,” Botten said.
Oil Search anticipates that this will be undertaken in conjunction with the development of the P’nyang gas field and will utilize the existing downstream infrastructure of the world class PNG LNG project.
Talks regarding the next phase of LNG development are expected to continue during 2017 with binding commercial agreements targeted before the end of the year.
The PRL 15 joint venture is targeting to enter front end engineering and design (FEED) in late 2017 or early 2018 and take a final investment decision in late 2018 or early 2019, according to Botten.
Botten also said the company expects that the new government, to be formed in August, will have the LNG expansion talks high on its agenda.
LNG World News Staff