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PORT MORESBY, Papua New Guinea (PNG Post Courier, September 3) – With the PNG Gas Project not making any progress at the moment, Oil Search Limited is moving forward with its plans to develop its vast gas reserves in the country.

The company announced yesterday that it had signed a memorandum of understanding (MOU) with BG International Limited (BG), a wholly owned subsidiary of BG Group, to investigate the opportunity to develop a liquefier natural gas project in Papua New Guinea. The MOU is effective as of today.

Oil Search managing director Peter Botten said the studies would concentrate on areas outside the licences that contain the gas currently dedicated to the PNG Gas Project.

"We are delighted to have entered into this MOU with BG, and look forward to working jointly on exploring the opportunities to commercialise PNG gas by way of an LNG development," Mr Botten said. "BG has extensive global experience, and a proven track record, in the upstream development of gas fields, the construction and operation of large scale LNG plants and in LNG marketing. We see this initial investigation into LNG as highly complementary to our other gas commercialisation projects in PNG."

A spokeswoman for Oil Search said the company had a total of 1 billion barrels of oil equivalent in gas and associated condensate resources, of which 40 per cent was committed to the PNG-Australia pipeline project. The LNG project studies would focus on fields such as Juha, which are still at the early stages of appraisal, she added. Oil Search said on August 21 that LNG represented a robust option for gas commercialisation in the 2012-2013 timeframe.

Meanwhile Oil Search also announced yesterday that it had acquired 20 per cent shareholding in A & T Petroleum Company Ltd, a wholly owned subsidiary of Petoil Petroleum and Petroleum Products International Exploration and Production Inc, based in Ankara, Turkey. A & T Petroleum holds a 50 per cent interest in, and operatorship of, the Bina Bawi Exploration and Production Sharing Agreement (EPSA) located in the Kurdistan region of northern Iraq. Mr Botten said under the agreements signed between Oil Search and Petoil, Oil Search had the option in one year to convert its 20 per cent shareholding in A & T Petroleum into a 10 per cent direct interest in the Bina Bawi EPSA.

The remaining 50 per cent interest in the Bina Bawi EPSA is held by Hawler Energy Ltd, a wholly owned subsidiary of US based independent exploration and production company Prime Natural Resources. Mr Botten said the company’s participation in this opportunity was consistent with their strategy to grow their Middle East portfolio with high quality assets which have the potential to yield material reserves through near term drilling opportunities.

The Kurdistan region is a relatively stable part of Iraq which, based on Oil Search Limited’s risk assessment, has an acceptable business and security environment, reflected in the increasing levels of foreign investment in the region. "We regard our relatively small investment in A and T Petroleum as an early positioning strategy in Iraq’s re-emerging oil and gas industry, balanced against the ongoing political issues and challenges within greater Iraq," Mr Botten said.

September 4, 2006

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