Oil Search, the oil and gas company with LNG and oil stakes in Papua New Guinea and oil interests in Alaska, said momentum was gathering in 2021 for progress on the Papua LNG expansion project as Oil Search also planned to commercialise its world-class resources and leverage the oil price upside.
The company outlined its hopes and plans for 2021 and beyond as its earnings report showed a net loss for 2020 and lower revenues.
Oil Search reported a full-year net loss of US$320.7 million compared with a profit of US$312.4M in the previous year.
The PNG-based company listed on the Australian Securities Exchange reported a 32 percent drop in revenues to US$1.07 billion versus US$1.58Bln in 2019.
“The financial results reflect significantly lower realised hydrocarbon prices in 2020 compared to 2019,” said Oil Search.
The 2020 loss included a post-tax impairment charge of US$260.2 million that had been recognised in the interim financial results.
“We have worked constructively with our PNG stakeholders which culminated in signing the Fiscal Stability Agreement for the Papua LNG project with the Independent State of Papua New Guinea earlier this month,” said Oil Search.
“In addition, the Papua LNG joint venture has been offered a second five-year extension of its Petroleum Retention Licence (PRL 15), to progress the project to the final investment decision (FID),” explained the company.
“This is a clear demonstration of the increasing alignment between the PNG Government and the Papua LNG joint venture,” stated Oil Search.
In the company’s view, the current position of the LNG expansion plan means that the Papua LNG Operator, French major Total, was targeting entering the front-end engineering and design (FEED) phase in 2022.
“We are excited for the opportunities and benefits the project will bring to all stakeholders, including the people of PNG, and the Papua LNG project development schedule is targeting the delivery of LNG volumes into the market window when additional supply is forecast to be required,” explained Oil Search.
In Alaska, the Pikka project has already entered the FEED phase of development.
“Our Alaska asset delivered further exploration success and a material resource upgrade in 2020, contributing to a 94 percent increase to the 2C contingent resource base since acquisition,” explained Oil Search.
“We are aligned with our working interest partner on the phased development concept for the Pikka project and were pleased to announce that the joint venture has approved FEED entry,” added Oil Search.
The company said the project partners were targeting first oil production for Pikka Phase 1 in 2025 at 80,000 barrels per day from a single well-pad.
Oil Search said that in 2020, the partners had redesigned the development plan to halve the initial development costs for Pikka and lower the breakeven cost of supply to under US$40 per barrel, inclusive of a 10 percent return.
“Oil Search emerged from 2020 stronger and more resilient as a result of its response to the Covid-19 pandemic, demand collapse and oil price downturn,” said Managing Director Keiran Wulff.
“Despite the material challenges, Oil Search achieved three important records for the year,” he added.
“The first is the strongest safety performance in PNG since becoming operator of the PNG oil fields in 2003. The second is the strongest production reliability from our operations in PNG since the 2018 earthquake and, lastly, the delivery of record annual production from the PNG LNG project,” stated Wulff.