LNG

Australian LNG plant operator Santos, which has plant and project stakes in Queensland and in the Northern Territory as well as in Papua New Guinea, said new proved plus probable reserves increased by 80 percent in the year due to the merger with Oil Search and the final investment decision on the Barossa gas field.

Oil Search, the Papua New Guinea and Australian listed company with LNG interests and an oil project in Alaska, said Managing Director and Chief Executive Keiran Wulff has resigned for health reasons and been replaced by Peter Fredricson, named as Acting CEO.

Oil Search, the Australian-listed company based in Papua New Guinea, said that discussions were continuing between PNG LNG plant operator ExxonMobil and the Oceania nation’s government on the LNG expansion project as cargo deliveries increased in the third quarter.

Oil Search, the Australian-listed Papua New Guinea LNG shareholder with a stake in the expansion project, plans to write off up to $US400 million, mostly on exploration assets and a gas-to-power project in PNG due to the outlook for oil and gas prices.

The PNG-focused oil and gas company will record a non-cash, pre-tax charge of between $US360M ($A518 million) and $US400M ($A576M) in its half-year results that would not impact its cash earnings, according to a statement to the Australian Securities Exchange.

Oil Search said that a strategic review found that a number of assets in PNG were now of low priority either due to lower prospectivity or less than optimum project economics and as a result, would not be currently pursued.

The LNG plant, located northwest of the capital Port Moresby, produced at an annualised rate of 8.7 million tonnes per annum in the first three months of 2020, Oil Search noted in its first quarter earnings.

“Oil Search has assessed the carrying value of the company’s assets for impairment as at 30 June 2020, in accordance with the relevant accounting standards and after taking into account the potential longer-term impact of prevailing economic conditions and the outlook for oil and gas prices,” said the company.

“The impairments that are expected to be recognised largely relate to PNG exploration licences,” explained the PNG-based company whose other main assets are in Alaska.

“As part of the Strategic Review currently underway and in line with the company’s commitment to prioritising capital allocation, a number of exploration and evaluation assets in PNG have been identified as being of reduced priority due to lower prospectivity or sub-optimal economics,” explained the report signed by Oil Search Managing Director Keiran Wulff.

“As there is no current intention to pursue activities on these assets, the full value of these exploration assets is expected to be written down,” he stated.

“An immaterial impairment relating to exploration leases in Alaska, which are scheduled to be relinquished, also is anticipated,” he explained.

Oil Search has previously said it was well placed to withstand a prolonged period of oil price weakness and advance its growth projects when market conditions improve.

The company noted in its previous earnings that formal negotiations had been suspended in January 2020 on the LNG expansion between ExxonMobil, on behalf of the P'nyang co-venturers, of which it is part, and the PNG Government.

“Given the ongoing gas supply uncertainties resulting from the recent suspension of mining activities at the Porgera Project (gold mine), the carrying value of the Hides Gas-to-Electricity Project is also expected to be fully impaired,” said Wulff.

“The expected impairment expense is a non-cash item and will not impact cash earnings or cashflow,” he added.
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“The final impairment expense to be recognised is subject to the finalisation of the half-year accounts and completion of the half-year review by the company’s auditor,” stated Wulff.

The two existing LNG Trains at the PNG plant have a nameplate capacity of 6.9 MTPA, though have consistently produced more and will be the site of any future expansion.

Three new liquefaction Trains are proposed in the delayed expansion plan.

The five Trains when operational would have capacity of nearly 20 MTPA and would give PNG a more substantial role as a regional producer.

The P’nyang gas field licence, controlled by PNG LNG plant operator ExxonMobil, also includes Australian-listed Santos as well as Oil Search.

The separate Papua Gas Agreement for other feed-gas resources has already been approved and signed.

This comprises holders of the onshore PNG Elk-Antelope gas field licence, led by Total and also including shareholders in the P’nyang field lease, ExxonMobil as well as Oil Search.

Elk-Antelope onshore gas fields are covered by petroleum retention licence PRL15 and by the Papua Gas Agreement and the P’nyang onshore gas fields are in the PRL3 licence area of PNG.

Oil Search, the Australian-listed company with a stake in the Papua New LNG export plant and its expansion project, said there had been no disruption of operations during the coronavirus crisis, while it has helped in the fight against the pandemic in PNG and Alaska.

Oil Search, the Papua New Guinea-focused oil and gas company listed in Australia, said its overall production increased by 5 percent, supported by a continued strong performance from the PNG LNG plant as talks continued on building three new processing Trains.

The LNG plant, located northwest of the capital Port Moresby, produced at an annualised rate of 8.7 million tonnes per annum in the first three months of 2020.

Total revenue from Oil Search’s overall operations from PNG to Alaska dropped 20 percent to US$395.4 million from US$446.7 in the previous quarter, impacted by a 13 percent fall in sales due to timing of shipments and the oil price drop.

Oil Search, headquartered in PNG and listed on the Australian Securities Exchange, said it was well placed to withstand a prolonged period of oil price weakness and advance its growth projects when market conditions improve.

The company noted that formal negotiations had been suspended in January on the LNG expansion between ExxonMobil, on behalf of the P'nyang co-venturers, of which it is part, and the PNG Government.

“Discussions have resumed with the State, aimed at reaching an agreement that is fair and balanced for all stakeholders,” said Oil Search.

“This agreement is required before the LNG expansion project can move into the front-end engineering and design phase,” it explained.

“Oil Search remains committed to progressing the three-Train integrated expansion project, a highly cost-effective development, at the appropriate time,” stated Oil Search.

The two existing LNG Trains at the plant northwest of Port Moresby have a nameplate capacity of 6.9 MTPA, though have consistently produced more and will be the site of any future expansion.

Three new liquefaction Trains are proposed in the delayed plan. The five Trains when operational would have capacity of nearly 20 MTPA and would give PNG a more substantial role as a regional producer.

The P’nyang gas field licence, controlled by PNG LNG plant operator ExxonMobil, also includes Australian-listed Santos as well as Oil Search.

The separate Papua Gas Agreement for other feed-gas resources has already been approved and signed.This comprises holders of the onshore PNG Elk-Antelope gas field licence, led by Total and also including shareholders in the P’nyang field lease, ExxonMobil as well as Oil Search.

Elk-Antelope onshore gas fields are covered by petroleum retention licence PRL15 and by the Papua Gas Agreement and the P’nyang onshore gas fields are in the PRL3 licence area of PNG.

“The first quarter of 2020 has been one of the most volatile periods in history for Oil Search and the global oil and gas industry in general,” said new Managing Director Keiran Wulff, who succeed Peter Botten.

“The company has taken swift steps to ensure that we are in the strongest position possible to weather a potentially protracted period of global disruption,” he added.

In its North American operations oil discovered at the Mitquq and Stirrup fields in Alaska, with flow rates above expectations

The Papua New Guinea LNG export plant has achieved record production as talks continued in January on the expansion project to reach an “equitable” solution for both the government and the energy companies.

Oil Search, the Papua New Guinea company said its LNG business was moving forward as it enters into a joint venture in Alaska in January prior to buying some or all of the assets of US independent Armstrong Oil and Gas (AOG), developer of the Alaskan North Fork natural gas field on the Kenai Peninsula in 2007 and holder of North Slope interests.