Oil Search predicts ample gas demand

Oil Search Limited (OSH) today predicted that ample demand for gas in Australia would support the success of the PNG Gas Project over this coming year. At their annual general meeting today, the company said its focus would be to ensure there is no difficulty in obtaining key agreements with the PNG government and landowners.

Chairman Brian Horwood said that the recent strategic sale of interests in a number of fields to AGL Energy not only realised a good price for the assets, but also ensured that AGL will buy a large volume of gas that goes a significant way to underwriting the sales volumes required to see the project proceed.

“Along with other customers such as Alcan, QAL, Comalco and CS Energy, and we hope soon Santos, there appears ample demand for gas in Australia that should see this project move through to project sanction later this year,” Mr Horwood added.


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The company warned that securing agreements with the government and landholders would be difficult to achieve, however said it was confident of the support of Government and the landowner groups who wish to see the project move to reality.

Mr Horwood agreed that the energy company has set an aggressive schedule to see these agreements finalised, working towards completing financing of the project by the end of the year, with first gas deliveries by the end of 2009.

As well as emphasis on the PNG Gas Project, Oil Search said it would continue to focus on commercialising its discovered gas resources in the country.

“We will promote in-country and export gas based developments that will bring additional benefits to us and the country. PNG has substantial discovered gas resources and high potential for further significant gas discoveries,” explained Mr Horwood.

Oil Search also announced that as a result of the AGL sale, the company is debt free with just under US$500 million in cash.

“A significant proportion of this cash is designated for development of the PNG Gas Project. However, with continued good oil production and high oil prices delivering strong cash flows, the company is in an excellent position to pursue other major developments outside the PNG Gas Project,” he said.

In tandem with the PNG Gas Project, Oil Search has developed a portfolio of assets in the Middle East and North Africa.

The company explained the assets complement core PNG activities, providing lower cost, lower risk exploration and production opportunities, albeit with generally less attractive fiscal terms.

The group said possible expansion includes the development of Juha and other fields to service their growing gas business, as well as pursuing an active exploration programme in PNG and the Middle East.

Shares in Oil Search closed 4c lower at $4.54.