Gas Commercialisation

While exploring for oil in PNG, Oil Search has discovered very considerable quantities of gas and associated liquids, of over 950 million barrels of oil equivalent.  The commercialisation of these valuable resources is one of Oil Search's highest priorities.

The key project being pursued to commercialise these resources is the PNG LNG Project, a world scale LNG (Liquefied Natural Gas) development in PNG, operated by ExxonMobil. There is currently strong growth in demand for LNG, particularly in the Asia-Pacific region and PNG is well placed to capture a share of this market. Oil Search is involved in all parts of the value chain, ranging from upstream production of gas, transportation, liquefaction and marketing.

Oil Search is also reviewing a number of other potential projects including additional LNG trains, gas supply to export projects and a range of small domestic projects catering to the needs of local communities and industries.   

PNG LNG Project

In 2006, Oil Search undertook extensive studies into the potential of developing an LNG project based on the substantial reserves existing in PNG.  As a result of these investigations, it was clear that LNG offered by far the highest value opportunity to develop Oil Search's PNG gas resources.  In early 2007, Oil Search and its joint venture partners in the PNG Gas Project (to pipe gas to Australia)  took the decision to cease work on the proposed project and instead focus on LNG. 

In 2007, ExxonMobil, Oil Search and other field owners of the Hides, Angore and Juha gas/condensate fields and the Kutubu, Moran and Gobe Main oil fields commenced pre-FEED studies on the potential for an LNG development based on these fields. 

In the first half of 2008, the following milestones were achieved:

• An LNG marketing plan was established
• A Joint Marketing Agreement was signed, covering all commercial aspects of the Project, including gas supply arrangements, unitisation principles and voting arrangements, aligning all the participants behind the PNG LNG Project
• A Gas Areement was signed with the PNG Government, outlining the fiscal terms under which the Project will operate
• Front End Engineering and Design (FEED) commenced.   

FEED work is on-going with a Final Investment Decision (FID) expected to be made in late 2009.  First LNG sales are expected in late 2013/early 2014.  The indicative capital cost of the development to first production is around US$10-11 billion, of which Oil Search's share would be approximately 30%. 

There are a number of competing LNG projects in the region aiming to be in the market in a similar timeframe.  Gas from the PNG Highlands has a number of advantages over these projects:

• Substantial certified reserves base with a high liquids content and minimal impurities
• Onshore location with an existing infrastructure base from the oil developments
• Excellent location relative to the strongly growing Asian LNG markets
• Favourable fiscal regime with strong Government support

An LNG development in PNG would provide a major boost to the PNG economy, more than doubling the country's GDP, and create signficant employment opportunities. 

Click here to visit the PNG LNG website

Click here to download the PNG LNG Project brochure (PDF)

Other Gas Commercialisation

While the PNG LNG Project is the Company's highest priority, Oil Search is exploring a range of other gas initiatives to commercialise its substantial gas resources not dedicated to the LNG Project. This approach includes:

• The development of strategic gas hubs and corridors in PNG
• Exploration for new gas and appraisal of existing gas fields
• Studies into new infrastructure requirements

New gas business opportuntiies include additional non-PNG LNG Project LNG trains, the use of gas for other gas export projects such as petrochemicals and a range of domestic gas opportunities, for example, for use in mines and local power generation