Oil Search's Crude Production Dips, LNG Project Cost Rises

Oil Search revealed Tuesday that it expects its full year cash costs, ended Dec. 31, 2012, to be in the higher end of its previously advised guidance range of up to $25 per barrel of oil equivalent (boe), after posting a fall in both annual production and sales figures

In 2012, Oil Search produced a total of 6.38 million boe, down 4.6 percent from a year ago. Operating revenue for last year was $724.6 million, down 1.13 percent from its 2011 figure.

Commenting on the company's performance, Oil Search's Managing Director Peter Botten said: "Costs in the second half have been higher than the first, due to an increased level of work-over activity, completion of several key work programs and one-off costs associated with the oil sheen investigation and severe weather damage repairs."

Oil Search was forced to stop oil production at the Kumul Marine offloading terminal in August of last year, due to a minor spill which took place during the loading of a tanker. During the same period, Oil Search was also battling stormy conditions at the offloading terminal.

Botten also disclosed that the Papua New Guinea (PNG) liquefied natural gas (LNG) project’s capital cost will be revised upwards to $19 billion. The project was initially forecasted to cost $15.7 billion.

"While this is disappointing, the economic impact is largely offset by a five percent increase in LNG plant capacity and considerably higher oil prices than when the project was initially sanctioned. Project economics remain sound," Botten said.

The PNG LNG project is entering into its development and production phase in 2013/2014. A runway pavement at the Komo airfield is in the midst of construction, and first cargo flights which will bring in equipment for the construction of the Hides Gas Conditioning Plant will start this year.

Esso Highlands, a subsidiary of ExxonMobil, has also confirmed that construction works for gas production and processing facilities in the Southern Highlands and Western Provinces of PNG are progressing well, with first gas from the 6.9 million tonnes per annum project expected by 2014.

Oil Search is PNG's largest oil and gas producer and the company operates all of PNG's producing oil and gas fields. The company holds a 29 percent interest in the ExxonMobil-operated PNG LNG project.


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