Oil Search signs multibillion-dollar PNG gas deal

By Cole Latimer - The Sydney Morning Herald 

Oil Search has signed an agreement with the Papua New Guinean government to develop a $US15 billion ($21 billion) gas field in the country.

The agreement allows Oil Search, and joint-venture partners Total, Papua New Guinean (PNG) national oil company Kumul Petroleum and ExxonMobil, to develop the Elk-Antelope and P’nyang gas fields off the country’s shores.

It could also support the construction of three more LNG processing trains to transform the extracted gas for export. Oil Search said the Elk-Antelope project could produce about 5.4 million tonnes of LNG a year.

The deal allows the development to progress to front-end engineering and design of its infrastructure.

A final investment decision for Elk-Antelope is slated for 2020, with first production expected by around 2024.

“This is a major milestone for the Papua LNG project,” Oil Search chief executive Peter Botten said.

The agreement also gives the PNG government a 22.5 per cent share in the project, with about 2 per cent being held by local landowners.

“We believe the fiscal and other terms of the gas agreement equitably allocate project benefits and returns to the state,” he said.

A key point of the deal was securing domestic supply for PNG, to help the nation achieve its target of supplying 70 per cent of the country with electricity by 2030.

Kumul Petroleum said the agreement could also allow the new project to share infrastructure with the existing PNG LNG project, operated by ExxonMobil, Total, Oil Search and Santos.

“This will avoid any unnecessary duplication in construction as recently seen in Gladstone on the Australian east coast, where three identical independent downstream facilities were built next to each other, vastly increasing their overall cost and reducing the tax revenues,” Kumul said in a company statement.

Oil Search’s share price jumped 2.5 per cent to $8.16 by 3.50 pm Sydney time.

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Oil Search CEO focuses on mending fences as tenure ends

By Cole Latimer - The Sydney Moring Herald

Energy company Oil Search chief executive Peter Botten says the industry must support social projects in Papua New Guinea as the country faces high unemployment and political turmoil.

His comments came as the PNG-based company says it is "well advanced" to find a replacement for Mr Botten, who has led the 90-year-old company for 25 years.

Speaking at Oil Search's annual general meeting in Port Moresby, PNG on Friday, Mr Botten said PNG is facing the combination of a young population - up to two-thirds under 20 in some regions - and high unemployment.

Oil Search chairman Rick Lee said the hunt for a new CEO was “well advanced”.

“A management reorganisation and corporate restructure has commenced...to deliver our ambitious growth objectives,” Mr Lee said.

“As part of this process, the board is well advanced on managing the succession plan for managing director, Peter Botten, who has led Oil Search very successfully for more than 25 years.”

While the company has not named potential successors, analysts said Keiran Wulff, Oil Search’s Alaskan project head, was the most likely replacement.

Mr Wulff worked for Oil Search between 1993 and 2008, as the chief operating officer. He rejoined the company in 2015 and was appointed the president of its Alaskan operations in 2018.

The change in management at the comes as the Papua New Guinean government has also faced major upheaval after an attempt to oust sitting PNG Prime Minister Peter O’Neill.

Oil Search's Alaskan asset president Keiran Wulff has been tipped as likely to replace Mr Botten.CREDIT:NINE

During the meeting, Mr Lee outlined Oil Search’s progression of its $US15 billion Elk-Antelope and P’nyang gas fields off the country’s shores.

He said the development of these projects was moving swiftly towards a final investment decision by 2024, following the signing of an agreement with the PNG government.

However, concerns for the future of these gas developments were raised earlier this month as a potential regime change loomed in the country.

Rebel MPs, led by former PNG Finance Minister James Marape, attempted to oust Mr O’Neill over claims of financial mismanagement and called for changes to resource laws, which could negate the deal signed with Oil Search.

“A key focus area is on ensuring that there is transparency around the millions of dollars in royalties, taxes, levies and other fees and charges we pay to governments,” Mr Lee said.

He said the company was pushing the PNG government for greater transparency on the payment of royalties to traditional landowners.

“While there is still room for improvement, we have been very pleased with PNG’s progress towards compliance over the past few years.”

At Oil Search’s previous AGM in 2018, Mr Botten blamed the government for failing to distribute royalties to landowners.

Lowy Institute think tank's PNG analyst Shane McLeod said Mr Marape had raised the issue of royalties and benefits multiple times on social media, focusing on the Hela Province.

However, he downplayed concerns over the future of Oil Search's projects if there were a change of government.

"Oil Search is probably better than anyone else there in its relationships with landowners, they make a big effort to be engaged," Mr McLeod said.

"While politics may raise fears, their relationship is in good health with local landowners."

Oil Search's share price closed trading up 0.2 l per cent to $7.59 on Friday.

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