Reuters | 25 February 2020
Oil Search Ltd is pressing to revive talks between Exxon Mobil Corp and the Papua New Guinea government over a $13 billion plan to double the country’s natural gas exports, the company’s new boss said on Tuesday.
Oil Search’s new Chief Executive Officer Keiran Wulff said he hoped negotiations could resume “within weeks” between its partner Exxon and the state.
The government ditched talks in January with Exxon on terms for developing the P’nyang gas field to feed an expansion of Exxon’s PNG liquefied natural gas (LNG) plant, amid a push to reap more benefits from resources projects for the impoverished South Pacific nation.
Oil Search’s veteran boss Peter Botten, who just retired as CEO but is still working for the company, is sounding out the government this week on what it would need to resume talks, Wulff said.
“We would hope to see some sort of formal negotiations recommence between Exxon and the state negotiating team within a reasonable period of time,” Wulff told Reuters in an interview after the company released earnings earlier on Tuesday.
“We’re hopeful that it’s weeks. We don’t think it’ll be months,” he said.
Oil Search reported an 8% fall in annual net profit to $312.4 million, hit by weaker oil and LNG prices, missing analysts’ forecasts of around $339 million, according to Refinitiv IBES estimates.
Oil Search’s growth prospects are largely tied to a combined plan to develop P’nyang and Papua LNG, led by France’s Total SA, to feed three new processing units, called trains, at Exxon’s PNG LNG plant.
All the partners want a three-train development, Oil Search said, as sharing infrastructure would be the most efficient way to develop P’nyang and Papua LNG.
“For us we’re strongly behind the operator to pursue a three-train development, which is as much in the joint venture’s interest as it is in the state’s,” Wulff said.
He said they would only consider a two-train development without P’nyang “after all options were exhausted”.
Exxon Mobil had no immediate comment, but Chief Executive Darren Woods said earlier this month the company hoped to revive talks on P’nyang to get to a “win-win proposition”.
The coronavirus has dampened demand for LNG from China, but Oil Search said it expected that only to be a short term issue.
“We are confident in our ability to secure LNG offtake agreements once we resume discussions with potential Asian buyers, due to the attractiveness of LNG from PNG,” Botten said in a statement.
If an agreement is reached on P’nyang and early engineering work on a three-train development begins in 2020, Oil Search expects its capital spending this year will be in the range of $710 million to $845 million.