Earthquake in Highlands forces review of production forecast

production guidance for Oil Search has been adjusted from the post-earthquake forecast of 28.5-30.5 million barrels to 23-26 million barrels.
This was subject to change depending on the recovery of operations following the Highlands earthquake in February this year, according to the company’s quarterly report.
“Production costs on a unit basis are expected to increase to US$10.50 – 13.50 per boe, reflecting the high proportion of fixed costs in the context of the lower production outlook, as well as the costs of remediation, net of insurance recoveries, following the earthquake” the report said.
The guidance includes the cost of purchasing an LNG cargo to keep the LNG trains cool prior to restart.
“We expect to narrow the guidance range once there is more certainty about the production outlook for the year,” the report said.
“Exploration and evaluation cost guidance has remained broadly unchanged, with lower costs associated with the delay in drilling the
Muruk 2 appraisal well offset by higher drilling costs associated with the Kimu 2 and Barikewa 3 wells.”
Oil Search managing-director Peter Botten said the company undertook an extensive review of all Oil Search-operated facilities and infrastructure after the earthquake to “to assess what, if any, remedial work would be required to ensure the integrity of the assets and the safe resumption of production”.
“While substantial damage was sustained to several of the company’s camps, the refinery at Kutubu and some roads, the operating facilities generally withstood the earthquake well, with no loss of oil or gas containment identified” Botten said.