"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 GuineaNational Goals and Directive Principles
Monday, 12 November 2012
Oil Search slides as PNG project cost balloons
Shares in Oil Search, a partner in Exxon Mobil's Papua New Guinea LNG project, have fallen 5 per cent after the costs of the massive gas export development were revised sharply higher.
In a letter published on Monday, Exxon told its partners costs would rise 21 per cent to $US19 billion due to foreign exchange impacts and delays from work stoppages and land access issues.
Shares in Oil Search fell as low as $6.96 and last traded down 5.2 per cent to $6.98, while shares in Santos, another partner in the project, fell 2.4 per cent in a broader market down 0.3 per cent.
The PNG LNG project, the country's largest resources project, is being operated by Esso Highlands Limited, a subsidiary of Exxon Mobil Corporation, and Oil Search has a 29 per stake partner.
Santos, Japan's JX Nippon Oil and Gas Exploration, a unit of JX Holdings, and the Papua New Guinea government are also stakeholders.
Esso has indicated the cost estimate for the project has risen from $US15.7 billion to $US19 billion, due mainly to foreign exchange factors, Oil Search said this morning.
Delays from work stoppages and land access issues, and adverse weather conditions have also added to the cost of the PNG LNG project, it said.
The increased cost is expected to be met in line with the project's existing financing terms, Oil Search said, and it expects to contribute an additional $US300 million in equity.
Santos expects to contribute an additional $US130 million in equity.
"The increase in the estimated final costs of the project is disappointing," Oil Search managing director Peter Botten said in a statement.
"The extent of the change is considerably beyond the upper end of what might have been expected from cash drawdowns and project progress to date.
"In addition, the estimated foreign exchange impacts and the amount allowed for additional contingency is higher than we would have anticipated.
"Oil Search intends to fully review the revised estimates and is committed to working with the operator to seek to mitigate these estimated cost increases." But Mr Botten and Santos chief financial officer Andrew Seaton each said the PNG LNG project remained a "highly robust economic project".
The project remains on track for first production in 2014.