OSH Oil Search Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Oil Search Ltd. (OSH.AU) Managing Director Peter Botten has committed to stewarding growth projects that could double the oil and gas company's production in the coming years before looking to step down from the Papua New Guinea-focused company he has helmed for more than two decades.

Oil Search and bigger partners Exxon Mobil Corp. (XOM) and Total SA (TOT) are working on plans to sharply increase Papua New Guinea's gas-export capacity, building three new liquefied natural gas production lines on Exxon's existing infrastructure footprint. The company is also drilling in Alaska's North Slope, seeking to bolster the estimated oil reserve for its Pikka project.

Mr. Botten in an interview with The Wall Street Journal said he has told Oil Search's board he would remain managing director at least until there was a clear view to final investment decisions on the projects, which could double the company's output from the mid-2020s.

Since late 1994, Mr. Botten has run the Port Moresby-based company which operates all of Papua New Guinea's oil fields and has a 29% interest in the PNG LNG gas-export venture operated by Exxon that came on stream in 2014. He has been an central figure in talks between Papua New Guinea's government and the partners in the two LNG ventures that are negotiating sharing infrastructure on their projects.

A critical gas agreement for the Total-led Papua LNG project is due to be signed by the end of March between the companies and the government, and a similar deal for the expansion of the P'nyang field that would supply an additional production line for the PNG LNG project is targeted for soon after, Mr. Botten said.

The agreements would allow the companies to move into the engineering and design phase on the projects, which together could produce an additional 8 million metric tons a year of the fuel, and to then ramp-up marketing efforts to sell cargoes.

Good interest had already been received from potential LNG buyers, Mr. Botten said.

"Under reasonable scenarios, we can handle financing (for each of the projects) out of liquidity and cash flows," he said.

Oil Search, which on Tuesday reported a 13% rise in net profit rose to US$341.2 million in 2018 as stronger oil and gas prices more than offset a 17% fall in production with a devastating earthquake in Papua New Guinea's Highlands region, ended last year with US$601 million in cash and access to US$900 million in untapped credit.

The company has forecast a return to pre-earthquake output levels this year, with production costs about 15%-20% lower. It affirmed a target set last month for production in 2019 of between 28 million and 31.5 million barrels of oil equivalent, up from 25.2 million last year.

Mr. Botten said that while several other LNG developments had recently entered the engineering stage or made a final investment decision, including Royal Dutch Shell PLC's (RDSA) investment commitment last October on the Kitimat project in British Columbia, there was still strong demand in Asia for fuel from Papua New Guinea. The country benefits from its close location and the high heating-value of the gas, and there was reassurance for buyers that the expansion projects were being built on an existing "brownfields" site, he said.

In Alaska, one year after completing a deal to buy stake in oil fields in the North Slope, Mr. Botten said the company was pushing ahead with a drilling campaign that has the potential to add 250 million barrels to the current estimate of 500 million barrels for the Pikka project. Oil Search has an option to increase its control over the Alaska assets, and Mr. Botten said talks continued to sell part of the company's interest to a new partner.

-Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

February 19, 2019 00:43 ET (05:43 GMT)

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