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SEISMIC NEWS
HISTORIC OIL DEAL, SIR MOI SAYS OIL SEARCH TAKEOVER SET PNG FOR
INDUSTRIALISATION By BRIAN GOMEZ and
YEHIURA HRIEHWAZI (The National 19/5/03)
A HISTORIC deal has been forged under which Oil
Search Ltd will become operator of the nation's multi-billion kina oil industry
in October. "It is a privilege and unique for a Papua New Guinea company to take
a leadership role in the oil industry," Oil Search managing director Peter
Botten told The National yesterday. He said that after 74 years of operating in
PNG, Oil Search was now repositioning itself as a significant operator with
output of 55,000 to 60,000 barrels of oil a day. Petroleum Minister Sir Moi Avei
who is already ecstatic about progress for a methanol plant in PNG was even more
euphoric when this newspaper contacted him yesterday. "I've been advocating that
this is the right way to go. We must support PNG-focused companies to drive the
national agenda. "It's a great vote of confidence for Papua New Guinea and it is
consistent with the national government's strategy to grow PNG-focused companies
to get into down-stream processing," said Sir Moi. He said after 70-odd years,
Oil Search has now helped to realize the national dream. "This means we are now
setting the foundation for industrialization," Sir Moi said. The Minister said
Oil Search would go into partnership with Japanese firms Mitsubishi and Itochu
to develop the methanol plant and other gas processing facilities in PNG that
will create employment opportunities. He said there was more "good news" coming
for PNG. The company has undergone dramatic change in the past two to three
years and would become an oil field operator in its own right in October, making
a transition from its role as an oil explorer and producer. Mr Botten said that
with the assimilation of staff from ChevronTexaco the number of employees in Oil
Search would rise from just over 200 people to around 800. Oil Search began to
position itself for a bigger role even before the formal withdrawal announcement
by ChevronTexaco to sell its equity interests and give up its operator role, a
move that had been signaled in this newspaper since last year. It has seconded
eight technical staff into Chevron Texaco's offices in Perth and PNG as part of
Asset Value Optimisation Teams. "Both ChevronTexaco and Oil Search are fully
committed to ensuring a seamless transfer of responsibilities," Mr Botten said
in his statement. In its announcement yesterday, Oil Search said it had been
elected to succeed ChevronTexaco as operator of the following licence areas:
- PDL2/PL2 - Kutubu, Moran and South East
Manada (52.58 per cent stake)
- SE Gobe Unit (44.96 per cent stake)
- PDL4 - Gobe Main, SE Gobe and Saunders
(57.33 per cent stake)
- Moran Unit (51.96 per cent stake) and
- PL219 - NW Moran/SE Moran and Manada
prospects (47.52 to 66.25 per cent stake)
In the meantime Esso Highlands, a subsidiary of
ExxonMobil Corp, was elected operator of retention licences PRL2 and PRL3, which
contain the Juha and P'nyang discoveries respectively. The recent Oil Search
annual report said cost savings of about US$15 million to US$20 million would
result from the transfer in operatorship. Mr Botten said a key focus would be on
greatly reduced drilling costs because this could pave the way for production
increases and improved profitability. New initiatives have already seen output
from Kutubu and Gobe rise in the first quarter of this year and Oil Search
expects its share of total oil production - more than 50 per cent of PNG output
- to increase to between 8.3 million and 8.8 million barrels this year and to
between 9.2 million to 9.8 million barrels in 2004 and 2005. "This represents
our worldwide oil production and our focus will be on driving profits and
maximizing value of the assets," Mr Botten said, adding that this will attract
even more investments into PNG.
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OIL SEARCH IN 'INTENSE’ TALKS
(Post-Courier 13/5/03)
PERTH: Intense marketing efforts are continuing
in a bid to secure customers for the multi-billion dollar Papua New Guinea gas
project. Oil Search Ltd chief executive Peter Botten said yesterday discussions
were being held with a number of potential customers. But he would not indicate
when they were likely to be concluded. “We don’t put out timetables because a
lot of the issues we are dealing with are not in our control,” he told AAP after
addressing the Australian Upstream Gas and its Markets conference in Perth.
“There are some key customers which we are having very intense negotiations with
now and the results of those will become known whenever they are (finalised).”
Oil Search has about 37 per cent equity interest in the pipeline project if the
PNG Government exercises its ownership option, and 45 per cent otherwise. The
project, which has been on the drawing board since 1996, was dealt a severe blow
in December with the withdrawal of foundation customer Australian Gas Light Co
as its primary initial customer. Mr Botten said yesterday it had customers
committed to 60-70 petajoules of gas per year, but reports had suggested it
required a commitment of 100-150 petajoules a year to proceed to the Front End
Engineering Design (FEED) stage. Mr Botten said the project was not far off
moving into the FEED but would not be specific on its requirement to move into
that stage, saying it depended on customer mix. “Because there is potential to
have a range of customers both in the Northern Territory and in Queensland
together, and in the southern states . . . we have to look at what the final
project will look like.” However, he said it was important additional customers
were bedded down in the short term to make the project operational by around
2007-08. If the partners missed that “window of opportunity”, another may not
open until around 2010. “The project will never go away, what we are looking at
is a market window where there are four or five or six customers who need gas in
that time frame.” Meanwhile, Mr Botten told the conference he did not believe
risk associated with Papua New Guinea and the PNG Government would derail the
project. “If I had to rate the chance of PNG falling over because of PNG
Government issues, I would say extremely low,” Mr Botten said. He said at close
to full production, the PNG gas project would represent almost 50 per cent of
the country’s GDP. “If you spend $US2.4 billion in a country like PNG, it tends
to have bit of an impact and it tends to get people’s attention,” he said.
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CHEVRON PULLS PIN (Post-Courier
14/4/03)
CHEVRONTEXACO’s decision to withdraw from Papua
New Guinea within the next six months has been received calmly by the National
Government and by locally-engaged Chevron Niugini staff. Petroleum and Energy
Minister Sir Moi Avei said the oil company’s decision was based on
understandable commercial realities and was not unexpected.
The move opens the door for a new operator
whose plans and capacity might be a better fit with PNG’s own priorities at this
time, the Minister said.
ChevronTexaco announced on Friday that it had
placed its PNG assets on the market and informed its Joint Venture Participants
that it would be resigning as operator of the Kutubu, Gobe and Moran projects.
The company said this was part of its drive to
focus on assets more aligned with its strategic growth objectives.
The news of the withdrawal of PNG’s major oil
and gas operator did not come as a surprise to the industry, or to the
Government.
Although it is very large energy company
globally, ChevronTexaco holds only 14 per cent of PNG’s current oil production,
and a 9.7 per cent share in the PNG Gas Project.
ChevronTexaco has been at the forefront of oil
exploration and development in Papua New Guinea for 20 years, and industry
observers said the giant corporation had large targets in other developing oil
and gas fields and believed that a company with more focus on PNG could carry on
the very high standards that ChevronTexaco had established in PNG.
Staff in the field operations and in Port
Moresby were the first to be informed of the decision and took the news well,
Chevron Niugini management said.
Senior Papua New Guinean on the management team
Wilmott Uberawa said the PNG oil and gas industry would enter a new phase of
opportunity following the change of operatorship and that PNG staff had been
very well trained by ChevronTexaco to meet the challenges and take the industry
forward.
“We constitute a well-trained and highly
experienced workforce, and I see this as an opportunity for us to take the
industry forward,” Mr Uberawa said.
“It’s business as usual, and continued safe
operations for us, while a new operator is decided upon.” Sir Moi said the
decision by ChevronTexaco to withdraw should not have any negative impact on the
PNG Gas Project.
“Oil Search and Exxon-Mobil remain as the
largest owners of the gas project and they are committed to signing customers
and commercialising this very large PNG resource,” Sir Moi said. “The Government
and its partners in the industry also have in place several alternative
strategies for gas commercialisation, which can complement the PNG Gas Project,
or be done as stand alone projects.”
Commenting on the announcement, Peter
Robertson, vice chairman of ChevronTexaco Corp said: “The decision to conclude
our business in PNG was a very difficult one given the outstanding relationship
the company has been privileged to enjoy over two decades with the people and
government of Papua New Guinea. During this time, Chevron Niugini and its Joint
Venture Participants have invested more than (US) $2.9 billion in PNG
exploration, development and production.
“Our decision was a result of the company’s
ongoing review of its global portfolio following the merger of Chevron and
Texaco in October 2001. We believe the associated gas reserves from the
operating oil fields make this sale particularly attractive to companies
interested in future gas projects in PNG, in addition to the production of oil.
“We will leave an operation in the rainforests
of PNG that we believe is unsurpassed in its environmental record and its
approach to sustainable development and we’ve been delighted with the results
achieved through our unique partnership with the World Wide Fund for Nature.
“We take great pride in this performance and in
the recognition we’ve received both from within the industry and from
environmental organisations.”
Mike Casey, Chevron Niugini’s asset manager in
PNG, said the company was committed to working with all concerned — joint
venture participants, employees, contractors, landowners, local communities,
government officials and the new operator — to help ensure a safe and smooth
transition of operations, environmental stewardship and community support.
“I’m particularly proud of the highly skilled,
dedicated and hard-working employees and contractors who have made this venture
a success for all stakeholders,” said Mr Casey.
“My message to any new participant or operator
is that this workforce has been a vital part of the success of this venture.”
Mr Casey said he was also proud that Chevron
Niugini and its joint venture participants had contributed significantly to the
economic and social development of PNG.
Chevron Niugini was instrumental in
establishing the Community Development Initiatives (CDI) Foundation through
which the company and its joint venture participants support community health
and education, environmental sustainability and agricultural activities in the
Southern Highlands and Gulf provinces.
Through the Tax Credit Program, the company
supports community infrastructure projects. ChevronTexaco first discovered oil
in commercial quantities in the Kutubu region in 1985, with production beginning
in 1992.
Since then, more than 300 million barrels of
oil have been produced.
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