Oil Search says Papua New Guinea LNG delayed maintenance is going ahead amid expansion progress

Monday, 26 April 2021
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Oil Search, the Australian-listed company, said the Papua New Guinea LNG export plant was scheduled to undergo a long-delayed maintenance in the second quarter as output and cargo deliveries slipped in the first quarter.

Production at PNG LNG, operated by ExxonMobil and in which Oil Search has a stake, averaged 8.5 million tonnes per annum in the quarter, impacted by an unplanned Hides gas plant shutdown.

Oil Search, based in the PNG capital Port Moresby, said a total of 26 LNG cargoes were delivered to customers in Asia during the first quarter compared to 29 shipments in the fourth quarter of 2020.

“These cargoes comprised 24 sold under contract, including three under mid-term sale and purchase agreements and two on the spot market,” said Oil Search in its quarterly activities report.

“Two DES cargoes were on the water at the end of the period, the same as at the end of the fourth quarter 2020,” it added.

The company’s first-quarter operating revenues came to US$301.5 from LNG, gas, oil and condensate sales, up 16.4 percent on the fourth quarter’s US$259.5M, though 16 percent lower than the US$359.4M posted in the same quarter of 2020.

“Despite lower sales volumes, the higher revenue was driven by an increase in the average realised LNG and oil and condensate prices,” said Oil Search.

Four full Kutubu Blend crude oil cargoes were sold during the quarter, the same as in the prior period and two naphtha cargoes were delivered.

“The scheduled service programs for the PNG LNG plant for Train one (deferred from 2020) and Train two are still expected to proceed in the second quarter of 2021,” stated Oil Search.

“A major maintenance shutdown in our operated facilities has been deferred from 2021 to 2022 due to Covid-19 restrictions impacting resourcing. The Hides GTE plant continues to be offline due to the ongoing shut-in of the Porgera gold mine,” explained the company.

Oil Search said the average realised LNG and gas price increased 19 percent during the first three months of the year to average US$7.10 per million British thermal units, due to strengthening oil prices and improving North Asian LNG spot market prices.

On the PNG LNG expansion plan, Oil Search said significant progress was made during the quarter.

In early February 2021, the PNG Government and the Papua LNG project participants executed the Papua LNG Fiscal Stability Agreement.

Additionally, the holders of the Petroleum Retention Licence PRL 15 for the onshore Elk and Antelope gas fields were offered a five-year extension of the retention licence.

The Papua LNG joint venture was continuing with the technical and commercial work through the first quarter in preparation for pre-front-end-engineering activities.

Oil Search Managing Director Keiran Wulff said the company was also advancing with the Pikka oil project in Alaska.

“In Alaska, following the significant improvement and reduction in capital costs and breakeven prices for the Pikka project, the Joint Venture entered FEED during the quarter with strong alignment from all stakeholders,” added Wolff.

“The project is on track to be ready for a Final Investment Decision (FID) in late 2021 subject to market conditions,” he said.

Oil Search was seeking to sell-down part of its stake in the Pikka project, targeting a final equity interest in the development of 36 percent.

“In addition, we have commenced a project funding program with our financial advisor,” added Wulff.

“Due to the halving of the initial capital required, low breakeven prices and the ability of the project to self-fund expansion, we are well positioned for engagement with potential financiers,” he stated.

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