The outstanding performance of the PNG LNG Project has established PNG as a reliable producer of high heating value gas that provides buyers with geographic diversification. PNG has substantial undeveloped gas resources, a stable fiscal regime, a supportive Government and world class operators, which, when combined with Oil Search’s 87 years of in-country experience, create an ideal environment for LNG expansion. As well as continuing to optimise the performance of the PNG LNG Project, a key objective for Oil Search is to develop a timely, globally competitive LNG expansion underpinned by our substantial discovered, undeveloped gas resources.

Cooperative LNG Expansion

At present, there is approximately 10 tcf of discovered, undeveloped 2C contingent resource within the Elk-Antelope fields in PRL 15 and the P’nyang field in PRL 3, sufficient to support two additional 4 million tonnes per annum (MTPA) LNG trains. Subject to its successful appraisal, the recent Muruk discovery, which is located along trend from the Hides field, approximately 21 kilometres from the nearest PNG LNG infrastructure, could increase the options for development and improve expansion economics.

Oil Search is committed to ensuring that the next phase of LNG development in PNG is undertaken in a capital efficient manner, which will benefit not only the Company and its partners but also the PNG Government, landowners and the people of PNG. We estimate that US$2-3 billion in capital costs and approximately USS$125 million per annum in operating costs could be saved by locating new LNG trains at the PNG LNG plant site. ExxonMobil, operator of the PNG LNG Project and the P’nyang gas field, and Total, operator of the Elk-Antelope field, have expressed their willingness to evaluate options leading to optimal cooperative outcomes for LNG development. The recent completion of the acquisition of InterOil by ExxonMobil and the resulting entry of ExxonMobil into PRL 15 has seen formal discussions commence, which will allow the participants to move to the project planning stage.

PNG LNG Project growth

Since the start-up of PNG LNG in 2014, the focus of the operator, ExxonMobil has been on steadily increasing production rates at the HGCP and the LNG plant. The increase in capacity has resulted from a systematic approach to examining operating data and optimising process controls. The operator has indicated it will continue to evaluate plant capacity and opportunities to maximise production from the Project.

During 2016, an independent certification of the resources in all the PNG LNG fields was undertaken, resulting in a 50% increase in the Company’s 1P PNG LNG gas reserves compared to the 2009 certification. This material uplift means the gas fields currently dedicated to the PNG LNG Project can support the plant’s current production rates, as well as support the improved rates of production achieved through plant optimisation.