Oil Search in talks to build LNG plant to sell gas to UK -

OIL Search, Papua New Guinea's biggest oil producer, said it might sign an initial accord with BG Group in the first quarter next year for a liquefied natural gas project.
The partners could start LNG production in 2013, using gas from the Hides, Angore and Juha fields, Oil Search said in a presentation lodged yesterday with the Australian Stock Exchange.
ExxonMobil, Oil Search's partner in a proposed gas pipeline from Papua New Guinea to Australia, is also studying the potential for LNG production in the country, it said.
Papua New Guinea has about 14 trillion cubic feet of proven and probable gas reserves, with the potential for as much as 50 trillion cubic feet, says Oil Search.
An LNG project would require at least 6 trillion cubic feet of gas, it said. Oil Search said on August 31 it had agreed to work with BG to study the feasibility of an LNG plant.
Oil Search and BG, the UK's third-biggest gas company, were midway through the evaluation of a potential project in Papua New Guinea and work "is progressing well", Oil Search said.
BG offered the strength in LNG marketing "to assist early project development", it said.
Shares in Oil Search fell 6c to $3.30 yesterday.
Exxon Mobil, Oil Search and the partners in the pipeline project continue to study a revised plan for the project, after the then-named Australian Gas Light Co, which led a venture selected to build the Australian part of the pipeline, stopped work on the project in August.
By the end of the year the partners aimed to complete updated estimates of the capital cost of the pipeline, confirm customers for the gas, complete draft transportation agreements and complete the study on the economics of the revised project, Oil Search said.
The venture planned a "major review of progress" on the project in January, it said.
Oil Search's capital expenditure on exploration and development will probably increase to about $US300 million ($388 million) next year, with an additional $US50 million to be spent on securing drilling rigs.
That compares with this year's expenditure of about $US90 million on exploration, $US40 million on natural gas expenditure and about $US150 million on development and production.
Next year's exploration program, the biggest in the company's history, includes wells in Papua New Guinea, Yemen, Egypt, Kurdistan and possibly Libya.
Production in 2007 will probably be about 11 million barrels of oil equivalent, up from 10.5-10.8 million forecast for this year.
The venture in Egypt could be producing in 2007.
Bloomberg