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PNG LNG partners hope for positive outcomes - Oil Search

25th February 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Oil and gas producer Oil Search on Tuesday told shareholders that it would work with its project partners on the Papua New Guinea liquefied natural gas (PNG LNG) project to re-engage the PNG government to lock down the P’nyang gas agreement.

The PNG government at the end of January suspended talks with the project partners around the P’nyang gas agreement, with Prime Minister James Marape saying that producer ExxonMobil had shown an "unwillingness to agree to reasonable terms in line with other international gas projects".

The cessation of talks placed a damper on the PNG LNG partner’s plans for a A$20-billion expansion of the LNG operation.

Oil Search MD Peter Botten on Tuesday said both ExxonMobil and joint venture partner Total had indicated their continued support for the existing three-train integrated development option, with the project proponents strongly believing that it was the optimal way of developing both the P’nyang field and the PNG LNG project.

“We are supportive of ongoing dialogue with the PNG government aimed at reaching the P’nyang gas agreement that is balanced and fair for the state and provincial governments, landowners and the people of PNG, while still allowing the developers to earn an appropriate return on our investment,” Botten said.

He noted that the lower capital and operating costs of an integrated three train LNG expansion provided efficiencies and synergies for the benefit of all stakeholders, adding that the company would focus on exploring options to reach a mutually acceptable agreement before giving any serious consideration to other development alternatives.

Meanwhile, Oil Search on Tuesday reported an 11% increase in production for the full year ended December, with the company producing 27.9-million barrels of oil equivalent, while sales volumes also increased by 11%, to 27.8-million barrels.

Total revenue for the full year was up by 3%, to $1.58-billion, while net profit after tax was down by 8%, to $312.4-million, and operating cash flow was down by 12%, to $752.4-million.

“Despite downtime while damage to the offshore liquids loading buoy was repaired and scheduled maintenance that took place at the PNG LNG plant site, total production was up 11% on the prior year, which was impacted by the Highlands earthquake,” said Botten.

“This was driven by an excellent performance from PNG LNG, which produced at the highest rate since the project came on stream in 2014.”

Botten noted that 111 LNG cargos were sold, compared with the 99 in 2018, of which 100 were sold under contract and the remainder in the spot market. A further 14 cargoes of Kutubu blend and 11 of naphtha were shipped during the year.

The higher output was offset by lower sales prices, which Botten said reflected the downturn in the global energy markets, with the average realised oil and concentrate price falling by 11% in the full year, while average realised LNG and gas prices fell by 5%.

For 2020, production is expected to reach between 27.5-million and 29.5-million barrels of oil equivalent, after planned maintenance at PNG LNG, which is scheduled for the second quarter.

Meanwhile, Oil Search on Tuesday also announced the appointment of Keiran Wulff as the new MD, taking over from Botten, who has been at the helm of the company for 25 years.

Botten has stepped down as CEO and from the board of Oil Search, and will depart the company on August 25.

Edited by Creamer Media Reporter

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