Oil Search: US$1.3bil equity in LNG project
OIL and gas producer Oil Search Ltd said it expects to put in up to US$1.3 billion (K3.4 billion) in equity and US$2.9 billion (K7.6 billion) in debt to help fund the development of the liquefied natural gas (LNG) project in the country.
Announcing the results of a strategic review, the Papua New Guinea-based company said despite the global credit crunch, there was more than sufficient capacity to meet the project’s total debt requirement of around US$9.9 billion (K26 billlion).
It also said it was looking to sell some assets in the Middle East to focus on other key assets.
Oil Search is a partner in an Exxon Mobil proposed local LNG project.
It said last week partners in the project had reached a commercial agreement on sharing of the development costs.
The project now needs a gas agreement with the Government to clear the way for a final decision to go ahead with engineering and development for the project, possibly in April.
The proposed project will have a production capacity of 6.3 million tonnes a year. The venture partners are targeting to have first delivery by 2014.
Other partners in the project are Santos, AGL Energy, Nippon Oilp and PNG landowners.
Last month, Oil Search reported a 32% decline in 2007 profit, its first fall in five years, due to higher exploration costs and tax rates.
It forecast 2008 production to be between 9 and 9.5 million barrels of oil equivalent.
Oil production is key to giving Oil Search the cash flow it needs to help finance development of the LNG project.
It said on Wednesday it aims to maintain oil output at around 40,000 to 50,000 barrels per day until 2011.
Looking to focus capital on key assets, the company said it was considering selling some exploration and production assets in Yemen, Egypt and possibly Libya, while reducing its stake in acreage in Tunisia.
“The exploration activity over the last 12 months or so has been rather disappointing,” managing director Peter Botten told analysts, referring to the Middle East.
Shares in Oil Search hit a record high of A$5.10 (K13.93) in January on soaring oil prices, and were trading up 4.5% at A$4.86 (K13.28) yesterday.
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