LNG in picture for Oil Search

PAPUA New Guinea's gas developer, Oil Search, will ramp up development of a liquefied natural gas plant backed by ExxonMobil and British Gas, as doubt mounts over a proposed pipeline to pump reserves to Australia.
Oil Search chief executive Peter Botten said yesterday that he wanted to develop liquid natural gas in partnership with Exxon and British Gas.
While wanting to keep hopes alive for the pipeline project, Mr Botten said there were "other options" for developing PNG's gas reserves. "We are back into exploration for gas in PNG," he told ABC Television.
The $5 billion pipeline plan, which has been in development for almost a decade, suffered a severe setback last month when the Australian Gas Light Co pulled out of the international consortium funding the project.
The 3500km pipeline will take gas from the Highlands of PNG down the east coast of Australia.
AGL has backed a staged development, which the consortium is considering.
Mr Botten said AGL's decision had been "disturbing" for the project.
"We have a number of other options for development of gas. And if the pipeline doesn't work, we'll move forward with petrochemicals and in the medium term we'll move forward with LNG."
He said the petrochemical and LNG plants were "worth as much as, if not more in the 2010 time frame than, the pipeline".
Oil Search and British Gas moved to formalise their partnership in the region earlier this month with a memorandum of understanding regarding the LNG plant.
Mr Botten said the partnership was likely to persist in the "long term".
"We've got a very good relationship with British Gas and they have, frankly, a very good track record of developing LNG.
"The reality is that we see them as a very good strategic partner in the long term. We are really keen on developing LNG, both with ExxonMobil and also with British Gas."
An announcement would be made on the pipeline's future within weeks, Mr Botten said, adding that Oil Search wanted the pipeline, petrochemical and LNG sequence.
He said there was a lot of interest from potential investors and he was confident the project was viable.
"The pipeline configuration and ownership structure ... is being progressed now," he said.
"So all of that has taken a little bit of time to get together and we're probably a couple of weeks away from finalising that and seeing the viabilities enhanced."
Oil Search's partners in the PNG pipeline are Exxon, Nippon Oil Exploration and MRDC, which represents PNG landowners.
Mr Botten signalled that Oil Search was no longer counting on Santos - which pulled out of the consortium several years ago - to rejoin the project.
"They haven't bought gas from this project as yet and they haven't confirmed that they are necessarily in the upstream project," he said.
"There are obviously a range of stakeholders who have their own interactions, their own agendas."
But he also kept hopes alive for the pipeline.
"I'm pleased to say that in our last round of discussions with various candidates to be a pipeliner, there is a lot of interest out there.
"Clearly there have been a couple of speed bumps in the last couple of months and that has required us to look again at the projects but fundamentally the economics look sound," Mr Botten said.
A spokeswoman for federal Industry Minister Ian Macfarlane said yesterday that the Government was still supportive of the project. "It's whether or not it is commercial," she said.
A spokeswoman for Exxon said the group was committed to developing the region's gas reserves, which it operated.
She said Exxon was still considering the implications for gas development "of not having a downstream pipeline".