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Oil Search Sees ‘Metamorphosis’ Over Next Five Years

Oil Search Ltd., a partner in Exxon Mobil Corp.’s $15 billion liquefied natural gas project in Papua New Guinea, expects to undergo “a complete metamorphosis” in the next five years after a review of expansion opportunities.

Oil Search, aiming to increase reserves to support two more processing units at the gas venture, is advancing “as expected” with construction in Papua New Guinea, Managing Director Peter Botten said in an interview today. The partners initially plan two units capable of producing 6.6 million metric tons of LNG a year, with first exports scheduled in 2014.

“Delivery of PNG LNG is our number one priority,” he said in Sydney. “We’ll be a significant LNG producer in 2014 and hopefully have a series of other projects being progressed at that time.”

The Exxon-operated project is among more than a dozen in Australia and the South Pacific nation targeting Asian demand for cleaner-burning fuel. Port Moresby based Oil Search has “substantial” gas resources in Papua New Guinea that aren’t committed to the LNG project, Botten said. InterOil Corp. of Canada and Talisman Energy Inc. have plans for rival LNG projects in the country.

“We also have a range of exploration opportunities which undoubtedly we’ll address over the next two or three years,” Botten said.

Shares Rise

Oil Search has dropped 4.7 percent in Sydney trading this year, compared with an 8.4 percent slump in the benchmark S&P/ASX 200 Index. Oil Search rose 1.2 percent to A$5.84 by the market’s 4:10 p.m. close, the biggest gain since Aug. 2.

Exxon and its partners in the Papua New Guinea venture may be considering “bringing forward” drilling at the country’s Hides field so they can proceed with a third processing unit, JPMorgan Chase & Co.’s Sydney-based analyst Benjamin Wilson said in an Aug. 4 report.

Oil Search is “looking at that,” Botten said today. “Discussions are ongoing.”

JPMorgan’s Wilson said the project has faced “small delays in the very early stages.”

“Things are going reasonably well and as expected,” Botten said. “What has happened so far has been anticipated and the operator has done a fine job of managing it.”

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