By Ann Diamant, Group Manager, Investor Relations, Oil Search
OIL SEARCH has added nearly 50 million barrels of oil reserves to its existing fields over the last three years and recently celebrated production of the 500 millionth barrel of oil from the Highlands.
However, it is the Company’s impressive gas portfolio that is having the greatest impact on its outlook at present.
Since its start-up a year ago, the PNG LNG Project, in which Oil Search has a 29% interest, has produced more than seven million tonnes of LNG and recently delivered its hundredth LNG cargo to customers in nearby Asian markets. The PNG LNG Project’s performance has exceeded all expectations, with both LNG trains consistently producing at or above nameplate capacity with opportunities for further production optimisation and debottlenecking.
Together with a solid performance from the Company’s oilfields, first contributions from the PNG LNG Project took Oil Search’s 2014 total production to 19.3 million barrels of oil equivalent, nearly three times higher than in 2013 and an all-time record for the company.
This helped drive a healthy 72% increase in net profit after tax, to US$353.2 million.
The Company expects that its production will rise further in 2015, to between 26 million and 28 million barrels of oil equivalent, based on a full year’s production contribution from the PNG LNG Project. Together with continued strong production from the oilfields, this provides a very solid platform for future growth.
With interests in two of the region’s most attractive potential new LNG projects – the proposed PNG LNG expansion and Elk/Antelope development – Oil Search believes the best is still to come.
ExxonMobil PNG Limited, Oil Search and the other PNG LNG Project participants are assessing the potential construction of a third LNG train using gas from the P’nyang field in the Highlands. Gas from P’nyang will also underpin a range of domestic power projects, allowing the provision of competitively priced, reliable power in Port Moresby and in the Highlands.
The second major growth initiative on the Company’s horizon is the potential development of the Elk/Antelope gas fields, in which it has a 22.8% interest, alongside joint venture partners, Total SA and InterOil.
Elk/Antelope is the largest undeveloped gas resource in PNG and has been described by some as ‘the next PNG LNG Project’, with the potential to add materially to Oil Search’s production base early in the next decade.
In April, InterOil announced that a comprehensive testing program had commenced on Antelope 5. The testing, together with the drilling of a sidetrack of the Antelope 4 well and the Antelope 6 well on the eastern flank of the field, will help delineate the size, reservoir connectivity and productivity of the Elk/Antelope gas field.
Results from drilling to date have been encouraging and support the joint venture’s view that these gas resources have the potential to underpin a major, commercially attractive new LNG development, comprising at least one, and possibly two, LNG trains.
Multiple exploration opportunities also remain in both the Highlands and around the Elk/Antelope fields, with internal and external assessments indicating that only around half of PNG’s full resource potential has been discovered to date. While Oil Search’s 2015 drilling activities have focused on appraisal of the existing known resources, 2016 will see a return to an active exploration program, designed to drive further long term growth.
With solid progress now being made on both the potential expansion of the PNG LNG Project and the development of the Elk/Antelope resource, Oil Search has the potential to double production by early in the next decade. This all adds up to a very exciting future for the company.