Oil Search Expects LNG Project Agreement by Year End

Oil Search Ltd., Papua New Guinea's biggest oil producer, expects to reach agreements with the government and partners by the year-end allowing a decision to start designing a $10b liquefied natural gas project. The economic viability of the Exxon Mobil Corp.-led LNG project has been ``fully tested'' and talks are underway with the government on fiscal terms, Port Moresby-based Oil Search said in a presentation lodged with the Australian Stock Exchange, according to a Bloomberg report. Oil Search may own between 28 percent and 32 percent of the venture, once the state and landowners take up stakes. The group is studying tapping gas from the Hides, Angore, Juha fields and nearby areas in the Highlands of Papua New Guinea to feed a 6.3 million metric tons-a-year LNG plant, targeting the start of deliveries in 2013. Santos Ltd., AGL Energy Ltd. and Japan PNG Petroleum have stakes in the venture. Oil Search reiterated a forecast for production of between 9.5 million and 10 million barrels of oil equivalent this year, down from 10.2 million in 2006. Field and corporate costs are expected to be ``slightly'' higher in the second half than in the first, it said. Exploration spending is set to be at the upper end of the $230m to $240m range forecast in August, while spending on development will probably be ``a little lower'' than $100m, the company reportedly said. Next year, exploration spending should be about $120m, as forecast, while development and production expenditure may be higher than the $125m estimated in August, it said. [Source: Bloomberg]