Oil Search results hit by earthquake, guidance revised

Oil Search results hit by earthquake, guidance revisedImage courtesy of Oil Search

The Papua New Guinea-focused oil and gas producer and PNG LNG stakeholder, Oil Search, saw its first-quarter production slashed due to the shut-in following the February earthquake

Compared to the 7.59 million barrels of oil equivalent produced in the last quarter of 2017, first quarter 2018 production was at 4.84 mmboe, 36 percent lower, OilSearch said in a report.

Speaking of the company’s results, Oil Search’s managing director, Peter Botten said the first quarter was one of the most challenging in the company’s and Papua New Guinea’s history.

In weeks following the earthquake, numerous aftershocks took place, many of a magnitude greater than 5.

As a precautionary measure to ensure the safety of all staff and contractors, as well as assess any damage to facilities, production from Oil Search’s operated oil and gas fields in the Highlands was shut-in.

ExxonMobil, operator of the PNG LNG Project, also shut in the wells at Hides, the Hides Gas Conditioning Plant (HGCP) and the LNG trains at the LNG plant site near Port Moresby. The project has since restarted production and shipped its first cargo following the restart.

Before the production was shut in, the project shipped a total of 20 LNG cargoes, 18 being under long-term deals while two were sold on the spot market. this compares to 28 cargoes sold in the previous quarter.

The company has also revised its production guidance for 2018, as it is currently forecast to be in the range of 23 to 26 million barrels of oil equivalent, compared to the previous guidance of 28.5-30.5 mmboe, prior to the earthquake. However, Oil Search noted these estimates may change, subject to completion of remaining remedial work.

LNG expansion activities progress despite earthquake

While the PNG Highlands earthquake disrupted our production operations during the quarter, it had no impact on the progress of LNG expansion activities, which have accelerated following the achievement of broad alignment on the preferred downstream development concept between Oil Search, Total and ExxonMobil in early 2018, Botten said.

“The proposed development concept comprises the construction of three LNG trains, with total capacity of approximately 8 MTPA, on the existing PNG LNG plant site,” he said.

Two of these trains are expected to be dedicated to Papua LNG, supplied with gas from the Elk-Antelope fields, with the third expansion train underpinned by gas from the existing PNG LNG fields and the P’nyang field.

During the quarter, discussions on LNG expansion between the PNG LNG Project, P’nyang (PRL 3) and Papua LNG (PRL 15) joint ventures intensified in order to advance the technical concept, project financing and commercial agreements required to enable integration of the projects.

Oil Search expects to reach a decision on the front end engineering and design (FEED) phase in the second half of the year.

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