By Barry Fitzgerald of The Australia
OIL Search has revealed that early studies on the expansion of the yet-to-be-completed $US15.7 billion ExxonMobil-led LNG project in Papua New Guinea have formally begun.The company said in its September quarter report, released Tuesday, that while the two train LNG project was making good progress and remained on target for first LNG shipments in 2014, work was under way on development options for the P'nyang gas discovery to become a "foundation resource" for a third processing train.
Oil Search is a 29 per cent partner in the LNG project which has not been hit by the delays and cost overruns that have plagued gas export projects in Queensland and Western Australia.
Oil Search said P'nyang would now be moved into the front-end engineering and design phase, and that preliminary studies on potential design concepts and costs had started.
Oil Search's quarterly report showed its oil and gas production interests in PNG were affected by the shutdown of port loading facilities to determine the cause of what proved to be a "minor oil sheen" on the water surface in July.
The sheen, estimated to be four to eight litres, prompted a decision to suspend loading operations and carry out an inspection.
"The full integrity of the oil export system was confirmed, with no source of any leak found. "Loadings resumed in late August," Oil Search said.
Both production and sales revenue were hit.
Key producing fields were shut-in for much of August.
As a result September quarter production at 1.33 million barrels of oil equivalent was down 26 per cent on the 1.8 mmboe in the June quarter.
However, Oil Search said "production for the 2012 full year is still expected to be within the 6.2- 6.7 mmboe guidance range".
The company secured a $US500m revolving line of credit and has a cash balance of $US573.2m.
When cashflow from operations is added in, Oil Search believes it is in a strong position to fund all foreseeable expenditures ahead of production from the LNG project.