"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".

- Papua New Guinea National Goals and Directive Principles

Sunday, 30 September 2012

What a Trapia

AFTER more than three months of challenging drilling in Papua New Guinea’s Southern Highlands, Oil Search will plug and abandon the failed Trapia exploration well.

The PNG LNG joint venture's logo

The associated sidetrack of this well was at a depth of 3800m after drilling through 460m this week.

“During the week, the well drilled through a fault zone and encountered a repeat section of Darai limestone,” Oil Search said.

“Preliminary petrophysical evaluation has been completed and indicates the Trapia 1 ST1 well did not intersect any prospective reservoir intervals. The forward plan is to plug and abandon the well and commence moving the rig to the Moran 16 development well.”

The well was managed by Oil Search on behalf of well operator ExxonMobil in petroleum retention licence 11.

Located 13km east of the Angore gas field and 23km east of the impressive Hides field, there were hopes it could have provided more resources for the ExxonMobil-led PNG LNG project.

Oil Search owns 52.5% of PRL11, while Exxon PNG subsidiary Esso Highlands owns 47.5%.

Thursday, 27 September 2012

Potape: What LNG Development?


IT is evident that the much anticipated multi-billion kina PNG LNG project would not be able to deliver benefits as expected, to the landowners in the Hela and Southern Highlands provinces. This is according to outspoken Komo Margarima MP Francis Potape. Mr Potape said this when visiting the project sites and the electorate during the recent 37th PNG Independence Anniversary weekend.

Mr Potape’s electorate hosts a bulk of the upstream segment of hydro-carbon projects in the LNG project with sites such as Moran central, northwest Moran, Angore, Hides PDL 1, Hides PDL 7, Juha, and facility areas like Benaria LNG pipeline routes, Komo LNG airport, Hides LNG conditioning plant, and Yuni LNG Technical College, among others.
Mr Potape said before the PNG LNG project was pursued by the State and developer ExxonMobil, there were many promises of improved infrastructures like better sealed roads, development of townships at Margarima, Komo, and so forth.

He said people and landowners expected the LNG project to bring with it better basic infrastructure and benefits like the rehabilitation of the Highlands Highway from Lae to Lake Kopiago. He said with the engineering, constructions and procurement (ECP) stages of the LNG project now nearing completion and the first LNG export likely to be shipped in 2014, frustration is building amongst landowners.

Monday, 24 September 2012

PNG PM pushes to rebuild struggling infrastructure

Jemima Garrett; Mon Sep 24, 2012 8:12am AEST, Port Moresby

Peter O'Neill speaks at a press conference in PNG      
Photo: Peter O'Neill says he hopes to overcome many of the mistakes that the country has made in the past (AFP: Ness Kerton, file photo)
Papua New Guinea's Prime Minister Peter O'Neill says his country has a golden opportunity to overhaul its crumbling infrastructure and improve services.
The Pacific's tiger economy has been growing at 8 per cent a year for a decade, but more than three quarters of its population still does not have access to electricity or roads.
Mr O'Neill has told Radio Australia's Pacific Beat with a loan from a Chinese bank and several major new resources projects coming on line, the time is right for change.
"I am trying to improve the quality of living standards of our people, where basic services have not reached the bulk of our population," he said.

"Eighty-five percent of our population live in the rural communities, they still lack basic educational services, they still lack decent health care, they lack the transportation to get their goods to market and law and order continues to become a major issue in some of those communities.

"Our government is very much focused on those areas that, we as a government, must make it priority that we deliver those services so that it will improve the standard of living for our people."
Some critics have raised concerned the $2.7 billion loan from China's Exim Bank is too big for an economy which is facing a $230 million deficit and weakening commodity prices.

Mr O'Neill says the loan is just a standby arrangement, and the ExxonMobil-led PNG LNG project, which is due to deliver first gas in 2014, and other major new resources projects will provide sufficient cash flow to finance the country's planned infrastructure overhaul.

"We expect our economy to double by 2014, [and] our infrastructure in the country is declining to a state where some infrastructures are not able to cope with the demands of our people and our economy," he said.

"So when you look at this what solutions do you have?
"[To] our critics we say this: 'Do you want us to allow our infrastructure to continue declining? Do you want us to allow the economy to slow down and that there is no economic growth in the country? Do you want us to allow the unemployment figures to continue to rise?'
"Because when the economy does not grow the unemployment increases, all the other social sectors will decline, [and] that is not a responsibility this government is prepared to accept."
Mr O'Neill was returned as prime minister after protracted political instability over the country's leadership and a drawn out election process.

He says that costly delay, and an expansion of the government payroll in some provinces, has put PNG's economy under pressure.
But Mr O'Neill says he hopes putting that instability behind them will allow the new government to avoid the pitfalls of previous economic booms.
"I think if we continue to provide good stable leadership at the political level and also improve on the performance of the public service, establishing laws that will protect the revenue stream of our country including, as I said, the Sovereign Wealth Fund, and making sure that we have prudent management of our economy, I think we will be able to overcome many of the mistakes that we have made in the past," he said.

"I strongly believe that this is the golden opportunity for our country to make sure that we correct the mistakes of the past."

The Undeniable Case for a COI into the Tumbi Landslide & ExxonMobil’s Quarry

From the Garamut Blog

The International State Crime Initiative (ISCI) last week released a report it drafted appertaining to January’s Tumbi Landslide in the Southern Highlands. The Tumbi Landslide is one of PNG’s worst ever landslide disasters and is believed to have claimed up to 60 lives.

The short but succinct report highlights disturbing concerns ISCI considers to be important enough to warrant a Commission of Inquiry into the landslide.

And I agree.

ISCI identifies four key areas needing to be investigated:
  • The cause of the landslide;
  • Government oversight of safety at the LNG project;
  • The response of the National Disaster Centre to the landslide; and,
  • Allegations of impropriety and collusion on the part of ExxonMobil via their subsidiary Esso Highlands Limited.

Commission of Inquiries vary in terms of objectives, but generally speaking, their roles are to collect information – coupled with expert opinion – and resolve conflict with the underlying theme of restoring public confidence.

When an inquiry is launched to determine facts in retrospect – most often used for accidents or tragedies – it is widely viewed that the purpose or focus of a Commission should not be the determination of individual blame, but rather, the purpose or focus should be on what information is needed to educate the public and provide context to justify the impending recommendations.

Sunday, 23 September 2012

LNG operator has spent K5billion in PNG

Online Editor; 3:48 pm GMT+12, 21/09/2012, Papua New Guinea

Operator of the multi-billion Liquefied Natural Gas Project, Esso Highlands Limited, have spent almost K5 billion (US$2.4 billion) in PNG to date.

The money was in the form of project related spending with landowner companies (Lanco) and non-lanco suppliers.

This was according to the PNG LNG Quarterly Environmental and Social Report for the second quarter.
The report stated that the work of the Enterprise Centre at the Institute of Business Management (IBBM) and the project’s business development team has played an important role in promoting local participation in the project with approximately K183 million (US$85.7 million) in project related spend with Lancos in the second quarter of this year and K1 billion to date.

Meanwhile, at Thursday’s PNG LNG Media update workshop, hosted by EHL, Lead Media and Communications Adviser Rebecca Arnold said work progress on the project sites are going well.

Arnold said the 407 kilometre offshore pipeline installation was completed.

She said more than 800metres of runway length at the Komo Airfield was completed.

She said the outer shells and roof installation for the two LNG tanks have been completed.

The 2. 4 kilometres jetty trestle outside Port Moresby that will transport the LNG out to the tankers have also been completed.

The US$15.7 billion project involves the construction of gas production and processing facilities in the Southern Highlands, Hela and Western Provinces of PNG.

It encompasses liquefaction and storage facilities (outside Port Moresby) with a capacity of 6.6 million tonnes per year.

More than 700 kilometres of pipeline will connect the facilities.

The project will progress in development phases, with the first LNG deliveries scheduled to begin in 2014.

During the life of the project, it was anticipated that over 250 billion cubic meters of gas will be produced and sold.

LNG will be sold to China, Japan and Taiwan.

The report said the project remains on target for the 2014 first shipment of LNG.

ExxonMobil fails to find gas in Papau New Guinea

Ross Kelly; Sept. 20, 2012, 1:45 a.m. EDT

SYDNEY--Plans for a possible expansion of ExxonMobil Corp's  XOM +0.44% US$15.7 billion PNG LNG project in Papua New Guinea suffered a slight setback after an exploration well failed to discover any natural gas.

The Trapia-1 well did not intersect any prospective reservoir intervals before reaching its total depth of 3,800 meters, the U.S. company's joint venture partner Oil Search Ltd. said in a statement Thursday.

Hopes that the partners will find enough natural gas to expand the project two three LNG production units from the two currently under construction were recently buoyed by a large gas discovery at the P'nyang prospect. The venture is also exploring for more gas at the Hides prospect and analysts remain optimistic that a third production unit, or train, will eventually be constructed.

In a note Tuesday, Commonwealth Bank of Australia analyst Luke Smith said the Trapia-1 well was high risk and the market's focus is on the Hides development well as that field has the potential to contain more than 10 trillion cubic feet of natural gas resources--enough to support at least a third train.

Wednesday, 19 September 2012

Gulf LNG announcement looms: source

Blair Price

Wednesday, 19 September 2012

INTEROIL is gearing up for an important announcement this Thursday according to an industry source. PNGIndustryNews.net receives contrasting views from the source and from InterOil chief financial officer Collin Visaggio.

The source is well connected in Papua New Guinea and has provided some concrete leads before.

Most recently it resulted in our story on Friday in which Visaggio confirmed that more than one supermajor was involved in the bidding process for an operating stake of the Gulf LNG project and its Elk-Antelope field in PNG.

Yesterday the source told PNGIndustryNews.net that InterOil was attempting to sell half of the project to the PNG government at what it deemed to be a “commercial price”.

He then expects the government to try and market the stake, especially to get its share of development costs carried by another party.

The source further expects the deal with the government to be on similar terms as InterOil’s complex joint venture agreement with Pacific Rubiales Energy – the Colombian oil producer which agreed to buy a 10% stake of InterOil’s licence that hosts its Triceratops discovery for up to $US345 million.

“They are gearing up for some big announcement on Thursday which they will clearly try to dress up and say that the state will buy the gas at the same terms PRE paid, which the state may well try and hawk around for a carry on those terms but it will never get it,” the source said.

He also believed InterOil was most concerned about carrying out the modular LNG plans to monetise half of the EA field resources through Energy World Corporation.

He even said InterOil struck a deal to sell this modular LNG project to China National Offshore Oil Company three years ago.

InterOil responds

Visaggio is legally restricted on what he can say but told PNGIndustryNews.net that InterOil aimed to sell 25% of the Gulf LNG project as its optimal target for an operating stake.

“We always said we would sell more if it was hugely accretive to shareholders,” Visaggio said.

Based on a deal that a 25% stake is sold to a new partner, Visaggio said InterOil would have 40%, its long-time partner Liquid Niugini Gas would own 12.5% while the PNG government and landowners would collectively own 22.5%.

While his comments are at odds with what the source said, Visaggio could not comment on what was raised about CNOOC for legal reasons.

It should be noted that Prime Minister Peter O’Neill has recently returned from a trip to China.

In regards to the resources on offer, the source claims that five significant players have calculated estimates that vary from 4.8 to 5.5 trillion cubic feet of gas.

Visaggio said the certified resources were 9.4Tcf equivalent.

Tuesday, 18 September 2012

The Forgotten Disaster: Outstanding Issues Arising from the Tumbi Landslide

International State Crime Initiative, www.statecrime.org

On 24 January 2012, a landslide in the Southern Highlands of Papua New Guinea buried the villages of Tumbi and Tumbiago. PNG Red Cross has estimated that between 25 and 60 people were killed, although no official death toll exists.
In the landslide’s aftermath, local landowners, village leaders, victim’s families, officers from the National Disaster Centre, and international landslide experts, raised concerns over the role played by a local limestone quarry which serviced ExxonMobil’s Liquefied Natural Gas project. When an arms-length inquiry into the disaster failed to materialize, local landowners disrupted efforts to clear a road essential to ExxonMobil’s construction work. With officers from the Royal Papua New Guinea Mobile Squads and the Papua New Guinea Defence Force on site, protesting landowners were allegedly threatened, and then offered cash incentives, to remove the blockade. The blockade was lifted, and construction work resumed.
To date no inquiry has been held into the cause of the landslide – despite promises by senior members of Cabinet– while the displaced have been forced to live in tents in close proximity to the landslide site. This report demands that a Commission of Inquiry investigate a) the cause of the landslide; b) government oversight of safety at the LNG project; c) the response of the NDC to the landslide; and d) allegations of impropriety and collusion on the past of ExxonMobil via their subsidiary Esso Highlands Limited.
To download a full copy of ISCI’s report click here.

Sunday, 16 September 2012

Esso Highlands commences LNG drilling at Hides

16 September 2012 Comtex News Network

ESSO HIGHLANDS LIMITED has commenced drilling operations of the PNG LNG project at the Hides natural gas field in the Southern Highlands Province. The drill wells will produce approximately 9 trillion cubic feet of natural gas over the life of the project.

"The PNG LNG Project is unique and important for Papua New Guinea. The start of our drilling program is a key step in meeting our goal of first LNG deliveries in 2014," said drilling manager Jim McDermott. A Nabors Rig 702 is being used to drill the initial well. The rig has been designed to withstand earthquakes and includes containment equipment and facilities to protect the environment. A second rig to be used in the PNG LNG Project drilling program has arrived in PNG and is currently being transported to the Hides area.

 "We have an exceptional team, including Papua New Guinean drilling engineers who recently returned from Melbourne where they spent a year-and-a-half learning about ExxonMobil's drilling operations. They are now putting their training into practice," said Mr. McDermott.

Wednesday, 12 September 2012

Severe flooding hits PNG highlands

Radio Australia News: Updated 12 September 2012, 12:00 AEST

 Heavy rain in the highlands in Papua New Guinea has caused flooding and landslides, with a number reported killed and roads and bridges washed away. The PNG National Disaster Centre says nearly 200,000 people are being affected in Southern Highlands province. The Kagua-Erave district is said to have been the worst hit, with half a dozen bridges destroyed as well as a number of properties. So far, the damage bill has been put at around six million dollars.

Presenter:Firmin Nanol Speaker: Martin Mose, director of the PNG National Disaster Centre

MOSE: One that was severely affected was over the Yellow River, that bridge was completely cut off and disappeared. The others they're either tilting or the base are just being eroded through heavy flooding, so I guess they're in a pretty bad way as well. But they need to be quickly strengthened by way of emergency back-filling and other structural work that needs to be carried out to save the bridge.

NANOL: Now have any lives been lost?

MOSE: Well according to reports at this stage around about two lives, but again we just need to get more confirmation on that. But I think according to the report it's the infrastructure that is causing greatest concern right now because of what actually happened to them, they're being destroyed. There's not been any reports of that they have properly established how many communities have been affected, and that's where humanitarian effort comes in. And of course just looking at the report that has just come through just before 12 from the Southern Highlands provincial disaster coordinator, it seems to me that we may need to send in an assessment team to further investigate that and probably have some aerial assessment as well as land assessment on the situation just to confirm that. I don't think there's been more than the number recorded so far claimed to have lost, and that basically the two lives they say that have been lost. We still have to confirm in what region in particular to substantiate it.

NANOL: Mr Mose there were reports of three people buried alive in another separate location from a mudslide?

MOSE: No, not at this stage and I think those are the things that we just need to confirm on.

 NANOL: What is the total cost of infrastructure that has been damaged stand at now?

 MOSE: Well it could be well over 20 million, if they need to rehabilitate bridges to their normal standard and status again. But I think what is immediately needed from the national government now, the funds that are immediately needed to immediately secure and of course open up an access that the people can use and the … well I think we're looking at close to about ten million at the most.

NANOL: How many people are being cut off from the main town of Mendi in the Southern Highlands, any estimate of how many exactly are being affected?

MOSE: What has been reported, it could be a little over 200-thousand, probably if that is broken up then you'll know exactly how many from the Kagua-Erave and others from the surrounding areas within the province itself. But work is underway there, roads that had been closed which have been opened up, what needs to be properly recuperated so that it can reduce travelling time around or cut down on travel timing. They still have to make do with what will now be upgraded a little while waiting for.

NANOL: What about the multi-billion dollar PNG LNG Project? Has that been directly affected?

 MOSE: Well I don't think so, I don't think so. Looking at the way the report has been presented the access direct, but otherwise I think the road condition to the other side needs upgrading so that it can improve the access.

Tuesday, 11 September 2012

Report says Papua New Guinea LNG expansion ‘a virtual certainty’

Latest Oil and Gas News: September 10, 2012

Compiled By: Larry Persily (Platts; Sept. 6) - Competition from lower-cost LNG in North America and East Africa will favor the expansion of existing LNG projects in and around Australia over costly new developments, Bernstein Research analysts said Sept. 6.

"Costs and competition will favor brownfield LNG expansions over greenfield projects going forward," the analysts said. Oil Search is the most likely Australian LNG producer to expand its initial project, located in neighboring Papua New Guinea, the analysts said.

Partner ExxonMobil started drilling operations late July at the Hides gas field onshore. In addition to Exxon (33.2 percent) and Oil Search (29 percent), the other partners are the National Petroleum Company of Papua New Guinea, Australia's Santos, Japan's JX Nippon Oil & Gas Exploration and PNG landowner group Mineral Resources Development Co.

The $15.7 billion project is two years into a four-year construction schedule and is on track to start up in 2014. The liquefaction facilities will comprise two production trains with total capacity averaging almost 900 million cubic feet of gas per day. Additional drilling "makes PNG LNG Train 3 a virtual certainty," the analysts said, adding that they expect front-end engineering design studies on Train 3 to commence next year, with a final investment decision by early 2014. Additional expansions could follow, they said.

Monday, 10 September 2012

Papua New Guinea makes LNG project agreement pending

Source - TEX Report Limited

The United States InterOil Corporation, which has developed LNG production project in Papua New Guinea Gulf LNG Project, announced on August 29th 2012 that the government of Papua New Guinea decided to make the LNG Project Agreement pending. The government once notified its intention to cancel the project. The agreement was signed between Liquid Niugini Gas Limited, jointly owned by InterOil and Pacific LNG Operations Limited and PNG government.

 However, the government notified InterOil of its intention to cancel the project. Regarding this matter, InterOil, which was given a six month consultation period, has had constructive meetings with a number of PNG state departments and received confirmation from the Minister of Petroleum and Energy William Duma that the government has suspended its notice of intention to cancel the project.

The cancellation of the project was said to have been caused by the difference in the development plan between the government and InterOil. InterOil is scheduled to produce total 5 million tonnes per year of LNG, consisting of 3 million tonnes per annum at an onshore plant and 2 million tonnes per annum at an offshore plant. For the onshore plant, it is planned that Energy World Corporation's modular technology was adopted so that production could be expanded step by step.

On the other hand, the PNG government, which wants to have global scale LNG project, seems to be unsatisfied with such a project plan. It can be inferred that the reason why the government made its request to attract a world class project operator is because it is considered to be impossible to start up the desirable large-sized project with leadership of InterOil. InterOil claims that mutual agreement through discussion with the government could result in reviewing the cancellation of the project. In accordance with the intention of PNG government, InterOil is working on selection of the operator. Partly due to the promise with the government, Gulf LNG Project is likely to be significantly reviewed in the future.

Tuesday, 4 September 2012

Divident-Paying Aussie E&P Company With Aggressive Growth Story

David Dittman; August 28th, 2012 Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Oil Search Ltd (OISHF.PK) has been paying a dividend since May 2003, but it would be stretching things to describe it as an "income play." Make no mistake: This is an aggressive growth story with a modest income component. After the great global fear brought on by the silly downgrade of US credit by Standard & Poor's, Oil Search bounced again, and although the stock has trended down with the price of crude this year it has held a higher level because of the long-term promise of its PNG LNG project. Since October 2008 the stock has been on a strong uptrend, broken for a short time by the fall 2011 slide, characterized by a bullish technical indicator, "higher lows." In other words, buyers are coming in sooner on dips as time passes. In light of its recent operating results, including successes in its drilling and exploration programs that suggest PNG LNG could be even more prolific than forecast, I anticipate it will soon make "higher highs" as well. In late April 2012 the stock traded as high as AUD7.52 on a closing basis, due in part to a significant gas discovery at a sidetrack to its key P'nyang South 1 site in Western Province of Papua New Guinea. The well, P'nyang South ST1, extended the size of the known gas column at P'nyang South. Based on the preliminary interpretation of data collected in both P'nyang South 1 and P'nyang South 1 ST1, the gas zone is interpreted to extend approximately 200 meters deeper than the lowest known gas in P'nyang South 1, indicating an increase in the total gas column to approximately 380 meters. During the second quarter Oil Search completed drilling the P'nyang South 1 ST1 well. A substantial gas accumulation was discovered in the primary reservoir objective, which is expected to result in a material increase in estimated gas resources at P'nyang. Seismic interpretation and structural mapping suggests additional "up-dip" potential above P'nyang South 1 and indicates a potential vertical gas column in the P'nyang South field of over 650 meters. ("Up-dip" is a term used in a hydrocarbon reservoir that isn't flat, for example a dipping formation. In such a formation, gas is found up-dip from the oil.) Participants in P'nyang South 1 ST1 include Oil Search (which owns 38.5 percent), ExxonMobil affiliates (49 percent) and JX Nippon (12.5 percent). Oil Search is drilling the P'nyang South well under contract with the operator, Esso PNG P'nyang Ltd. The recent P'nyang discoveries are subject to further evaluation, but it looks like these could be the sources for expansion of PNG LNG to include third and fourth trains in addition to the two that comprise the original plan. Studies of the appraisal wells seem likely to extend the 1 trillion cubic feet (tcf) existing P'nyang discovery up to the 2 tcf to 3 tcf. P'nyang is the first in a series of potentially high-impact areas to be drilled in PNG and overseas over the next 18 months. At the same time, expansion of Oil Search's Hides gas resource could be the most cost-effective feedstock for a third train for Oil Search's key Papua New Guinea LNG project. Esso Highlands Ltd, a subsidiary of Exxon Mobil Corp (XOM), announced Jul. 30, 2012, that drilling operations for PNG LNG had begun at the Hides field, located in the Southern Highlands Province of Papua New Guinea. The drill wells will produce approximately 9 tcf over the life of the project. PNG LNG is a high-quality project contracted to good counterparties. It's operated by the very competent Exxon and with ample project finance a reasonable level of cost overruns can be covered, were they to happen. And the project remains on time and within a revised budget announced in December 2011. Oil Search owns 29 percent of the project. Operator Exxon Mobil has the largest stake at 33.2 percent, the government of Papua New Guinea maintains a 19.6 percent stake, Santos Ltd (STOSF.PK) owns 13.5 percent and JX Nippon Oil & Energy Corp holds 4.7 percent. LNG from the project is fully contracted to four key buyers, including TEPCO (1.8 million metric tons per annum) and Osaka Gas (1.5 Mmtpa) from Japan, CPC from Taiwan (1.2 Mmtpa) and China's Sinopec (2.0 Mmtpa). Based on recent gas discoveries via Oil Search's drilling program in the area it's also "probable," according to Santos CEO David Knox, that a third train will be added the project, increasing its 6.3 Mmtpa capacity. To date 505 million barrels of oil equivalent of proven and probable reserves have been booked to Oil Search's reserves base. When the project peaks Oil Search's share of annual production will be approximately 18 million barrels of oil equivalent. PNG LNG remains on track to deliver strong and stable long-term cash flow for Oil Search beginning in 2014. The LNG plant site can accommodate future LNG trains, and Oil Search will maintain its role as the operator of the oil fields producing associated gas and the liquids export system. Other growth avenues and potential catalysts for share-price upside include an appraisal well near the Mananda-5 discovery, which is planned for early 2013. Trapia-1 spudded in June and should reach "TD," or "total depth," by late in the third quarter of 2012. ("TD" is the planned end of the well, measured by the length of pipe required to reach the bottom.) The well is targeting a gas structure on trend with the Hides and Angore PNG LNG gas fields. And the Kurdistan Taza-1 well in Iraq, in which Oil Search has a 60 percent interest, recently spudded, with results expected within a couple months. Oil Search pegs the chance of success of a 300 million barrel to 500 million barrel find is around 1-in-2 due to nearby/on trend discoveries. Taza is prospective for oil and gas. The Australian company is also negotiating farm-out arrangements for assets in the Gulf of Papua, with talks expected to conclude soon. In late 2012 Oil Search plans to drill two firm plus two optional wells in the Gulf. Oil Search posted total crude and gas production of 3.56 million barrels of oil equivalent for the six months ending Jun. 30, 2012, an 8.4 percent decline from the prior corresponding period. But output in the second quarter was actually up, by 24 percent sequentially to 1.8 million barrels of oil equivalent, and this was its best production performance since the fourth quarter of 2010. Total oil and gas production for the first quarter was 1.46 million barrels of oil equivalent, down from 1.64 million barrels of oil equivalent for the three months ended Dec. 31, 2011. Management noted during its presentation of final 2011 results, on Feb. 21, 2012, that output during the first three months of 2012 would be impacted by a 16-day planned facilities shutdown for work related to PNG LNG. This is the last of the major shutdowns, with two shorter shutdowns at a processing facility planned for the second and fourth quarters of 2012. Management maintained its full-year production guidance at 6.2 million to 6.7 million barrels of oil equivalent. Total operating revenue for the quarter was USD211.3 million, up 13 percent from the first quarter's USD187.2 million, reflecting higher production offset by lower oil prices. Second-quarter revenue declined 2.98 percent year over year due to declining oil prices. Total operating revenue in the first half of 2012 was USD398.5 million, up 7 percent from the prior corresponding period. Total oil sales for the quarter were 1.61 million barrels, compared to oil production of 1.54 million barrels. Crude inventory awaiting sale at the end of June 2012 was 0.06 million barrels. Oil Search realized an average oil price in the second quarter of USD108.73 per barrel, 12 percent lower than the first quarter's USD124.14 per barrel due to a decline in global oil prices. The average realized price for the first half was USD115.48 per barrel, compared to USD116.89 per barrel in the prior corresponding period. Good progress was made on PNG LNG construction activities during the second quarter, including the completion of the offshore pipeline lay and the raising of both LNG storage tank roofs at the LNG plant site near Port Moresby. Management also noted that it's close to deciding on partner or partners for its natural gas exploration assets in Papua New Guinea. Managing Director Peter Botten, in search of joint venture partners experienced with LNG operations, has identified Exxon Mobil and Royal Dutch Shell Plc (London: RDSA, NYSE: RDS/A) as backers. "In the Gulf of Papua, bids were received and negotiations are continuing with potential farm-in (joint venture) partners, with completion of a farm-out expected to conclude shortly," the company said in a statement. As of Jun. 30, 2012, Oil Search had USD852.2 million in cash, excluding joint venture balances, while its revolving oil facility, with a commitment limit of USD217.5 million, remained undrawn, providing total liquidity of USD1.07 billion. USD2.35 billion had been drawn down from the PNG LNG project finance facility at the end of the quarter. According to its second-quarter earnings announcement Oil Search has started negotiating with "a range of banks" about refinancing of its undrawn corporate facility, which expires in late 2013. The company has received commitments "from a number of these banks" and expects to complete negotiations in the second half of 2012 Oil Search spent USD73.8 million on exploration and evaluation activities, USD421.2 million on PNG LNG and USD17.9 million on oil field development work. Among the 17 analysts who cover the stock, 15 rate it a "buy" according to Bloomberg's standardization of brokerage house recommendation terminology. There is one "hold" and one "sell" rating on the stock at present. For more on energy investing, check out the free report, Profiting from the Shale Gas Revolution.

Monday, 3 September 2012

Oil Search extends PNG's only gas sales deal


Hides: Oil Search has extended an arrangement supplying gas from the Hides field to the Porgera gold mine in Papua New Guinea

 Russell Searancke; 03 September 2012 03:05 GMT
Papua New Guinea's Oil Search has signed an extension of the country's only gas sales agreement between itself and the owners of the Porgera gold mine.
Oil Search has been supplying an average of 12.8 million cubic feet per day of gas for 20 years from the Hides field to the Porgera facility.
PNG has significant gas reserves, but this is the only gas sales arrangement in the country because it does not have a developed domestic gas market.
Oil Search said today the extension covered 56 billion cubic feet of gas (including associated liquids) until the earlier of December 2021 or when the maximum sales volume has been reached.
Oil Search said it had signed a parallel agreement with the owners of the Hides field to access the extra 56 bcf.
The Hides field will be the main feedstock for the PNG liquefied natural gas project which is under construction.

"LNG Watch is trying to find out who is the owner of Hides field and does Oil Search share the benefit with Exxon or not. If not, what infrastructure development has Oil Search brought to the local landowners at Hides for the last twenty years."

Sunday, 2 September 2012

PNG Government Suspends Notice

PR Newswire
PORT MORESBY, Papua New Guinea and HOUSTON, Aug. 29, 2012

PORT MORESBY, Papua New Guinea and HOUSTON, Aug. 29, 2012 /PRNewswire/ -- InterOil Corporation (NYSE:IOC) (POMSoX:IOC) is pleased to announce that it has received confirmation that the Independent State of Papua New Guinea has suspended the May 14, 2012 notice of intention to cancel the LNG Project Agreement between Liquid Niugini Gas Limited and the Independent State of Papua New Guinea. This suspension was previously announced by the Minister of Petroleum and Energy, the Honourable William Duma. The notice triggered a six month consultation period during which the parties were to explore steps to deal with or remedy the State's concerns.
Since the notice was received, InterOil has had constructive meetings with a number of PNG State departments, including the Department of Petroleum and Energy, the Department of Treasury and the Department of Justice. The Government has reached the stage where it has agreed on a basis for suspension of the notice.  Negotiations between the Government and InterOil will continue with a view to finalizing detailed specifications of the proposed LNG Project satisfactory to the State. The suspension of the notice will remain in place until the National Executive Council has approved the final concept of the LNG project.
InterOil is very appreciative of the cooperation and assistance it has received from Minister Duma and his department in reaching this important stage, and looks forward to working with them to bring this project to fruition for the mutual benefit of Papua New Guinea, InterOil, its shareholders and partners.

About InterOil
InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region.  InterOil's assets consist of petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea.  In addition, InterOil is a shareholder in a joint venture established to construct an LNG plant in Papua New Guinea.
InterOil's common shares trade on the NYSE in US dollars