PNG LNG project 75 percent complete: Botten


Wed 27 Feb 2013

Papua New Guinea
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PORT MORESBY, PNG ---- The PNG LNG project operated by Esso Highlands Ltd was 75% complete at the end of last year and is on target for first LNG sales in 2014, Oil Search Ltd managing director Peter Botten said.

He said much of the heavy construction on the process trains, tanks, flare and jetty at the LNG plant near Port Moresby were complete.

Botten says the focus has moved onto pipework, instrumentation and electrical work.

“Runway paving at the Komo airfield has progressed significantly and Antonov operations, bringing in key items of heavy and sensitive equipment for construction of the Hides gas conditioning plant (HGCP), are expected to begin in April, meeting the required timing of the overall project schedule,” he said.

“We are confident that the operator will be able to deliver the project within the revised cost outlook announced in November 2012, of US$19 billion.”

“As previously indicated, the capital cost increase is expected to be funded 70% by debt and 30% by equity.

“Discussions are currently underway to secure the US$1.5 billion of supplemental debt that is provided for under the existing project finance agreement, to fund the 70% debt component.

Botten said major progress was also made on associated gas and life extension activities in the oil fields in preparation for gas supply and liquids handling for the LNG project.

Meanwhile, OIL Search Ltd (OSL) recorded a net profit of US$175.8 million last year, down 13% from the US$202.5 million earned in 2011.

Managing director Peter Botten said this was largely driven by the higher exploration expense of US$144 million as against US$60.6 in 2011.

Oil Search’s production was affected by the shutdown of the Kumul marine terminal in Gulf in late July after oil sheen was spotted on the surface of the water.

However, Oil Search still delivered solid financial results for last year.

Botten said strong oil prices continued through last year with total revenue from operations similar to 2011 of US$724.6 million.

“The company’s growth strategy remains firmly on track, with significant progress made on the PNG LNG project, gas expansion in PNG and the exploration activities in the Middle East,” he said.

“Total oil and gas production last year was 6.38 million barrels of oil equivalent (mmboe) despite several shut downs during the year.”

While total revenue was similar to 2011, the reported net profit was 13% lower at US%175.8 million.

Botten said this was a good result given the unexpected facility shutdown in the third quarter for the Kumul marine terminal inspection.

“I am pleased to say that this is progressively being reflected in the value of the company and its share price, with consistent top quartile performance over the past five years, and with more to come,” he said.

“This was based on production of 6.4 million barrels of oil equivalent, which was in line with guidance, though marginally down in 2011.

“Higher levels of exploration expenditure saw US$144 million in exploration expenses.

“At year end, Oil Search’s balance sheet remained healthy, with US$480 million in cash along with an undrawn line of credit of up to US$500 million.”

Oil Search Ltd’s highlights in the last financial year:

  • Sales volume for the year was 6.13mmboe, 8% down on 2011;

  • The average realised oil price was US$ 113.97/bbl compared to US$ 116.09/bbl in 2011;

  • Total revenue from operations was similar to 2011 at US$724.6 million;

  • Liquidity remains strong, with US$488.3 million in cash (including JV balances) and an undrawn revolving facility of US$500 at year end’

  • A 2012 final dividend of US$0.02 per share was announced, taking the 2012 full year dividend to US$0.04 per share, consistent with 2011; and

  • A strong reserves and resource base has been confirmed with proven and probable reserves increasing, fully replacing production.

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