OSL to expand asset base

 By GYNNIE KERO

OIL Search is committed to developing its options for growth beyond the foundation PNG LNG project, chairman Richard Lee told shareholders at the company’s annual general meeting in Port Moresby last Friday.

The estimated costs of the PNG LNG blew out to US$19 billion last year, with Oil Search’s share between now and first liquefied natural gas (LNG) sales being US$500 million.

Lee said a key strategic objective for the company was to capitalise on the asset base being built by PNG LNG by adding a third, and possibly fourth, LNG train used to liquefy the natural gas.

“An expansion of PNG LNG is regarded as the highest-value opportunity in our growth portfolio,’’ he told shareholders.

“The discovery of a sizeable gas accumulation at P’nyang South in early 2012 has brought us a step closer to underpinning an expansion, with further material gas resource upside in the (PNG) highlands being tested over the next 18 months by an extensive seismic and drilling programme.’’

The company expects production in 2013 to be similar to last year – in the range of 6.2-6.7 million barrels of oil equivalent.

 Lee added that the project’s co-venture partners are also in the process of raising an additional US$1.5 billion to fund 70% of the cost increase.

“Discussions with prospective lenders are going well and the additional commitments are expected to be in place in the second half of this year.

“Oil Search’s equity share of projects costs, from now until first LNG sales, is estimated to be approximately US$500 million. 

“We have more than sufficient liquidity to fund these remaining costs, with a cash position at the end of March of US$439 million, and undrawn US$500 million corporate debt facility, as well as strong cash flow generation from our producing assets in PNG.”