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By Brian Gomez

PORT MORESBY, Papua New Guinea (The National, May 7) – Oil Search managing director Peter Botten has disclosed the expected cost of ExxonMobil’s proposed 6.3 million tons a year liquefied natural gas plant in Papua New Guinea, with export shipments commencing in 2013.

He told the company’s annual general meeting in Port Moresby last Friday the project would cost US$9.5 billion (PGK29 billion)—with upstream production facilities and the natural gas pipeline to Port Moresby costing US$5 billion [PGK15 billion].

Construction of the plant, which would require 7.7 TCF over 20 years, would require an additional US$4.5 billion.

Project partners in this venture include ExxonMobil, Oil Search and Santos, the main owners of the Hides, Angore and Juha gas fields.

Mr. Botten said Oil Search was also involved in a separate liquefied natural gas study with British Gas for 3.5 million tons a year liquefied natural gas plant plus expansion, based on gas resources in the Kutubu, Moran and Gobe fields.

The ExxonMobil joint venture intended to commence front-end engineering and design (FEED) either late this year or early next year with financial closure at the end of next year.

The British Gas joint venture is presently reviewing the resource base, likely capital expenditures and an ideal project structure.

Botten’s comments made it appear likely Oil Search could be in favor of separate liquefied natural gas projects with ExxonMobil and British Gas.

He said British Gas would be an excellent partner with a development track record and strong marketing capabilities.

The Oil Search-British Gas venture was aiming for initial exports in 2012, one year ahead of ExxonMobil.

"The first mover advantage in liquefied natural gas is extremely important," Botten said.

These two projects are in competition with a separate InterOil liquefied natural gas proposal based on its Elk discovery in Gulf province and a newly announced plan by Liquefied Natural Gas Ltd to build a mid-sized liquefied natural gas plant based on resources in Papua New Guinea’s Forelands.

Botten said Oil Search had set itself a target of doubling in size by 2010 with the liquefied natural gas studies progressing in parallel with plans for two petrochemical plants in Port Moresby that would require supply of 90 to 136 petajoules of gas annually.

Although the recent Juha-5 well had been disappointing with reserves there probably halved to around two trillion cubic feet, sale of petroleum liquids prior to the proposed liquefied natural gas development was still possible depending on the success of the current Juha-4 well.

Oil Search will spend a record US$120 million (PGK368 million) on oil and gas exploration in Papua New Guinea this year and is expediting appraisal of gas Juha, Kumu, Korobosea and Barikewa.

Work was also underway to ensure that Papua New Guinea’s oil production would remain at the current level of 50,000 b/d over the next three years.

He said the Kutubu-2 exploration well was expected to reach total depth in the middle of this month. It was targeting a prospect capable of holding 30 million to 50 million barrels.

Oil Search also intended to shoot more seismic programs for oil and gas areas this year in the Highlands, Forelands and offshore Papua New Guinea.

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