O I L S E A R C H L I M I T E D. Oil Search and the PNG Gas Project

Transcription

1 O I L S E A R C H L I M I T E D 1 Oil Search and the PNG Gas Project

2 PNG Gas Project - A Long Pipeline Project making inexorable progress towards Sanction (Final Investment Decision) Focus on final delivery of key requirements: Final customer mix Government / Landowner agreements Pipeline and Transportation arrangements Financing and optimal ownership structure Pursuing aggressive schedule to close Project being delivered in changed environment than when conceived 2

3 A New Business Environment Sustained high oil prices Unprecedented demand for gas (especially in Asia Pacific) delivering a new price environment for exports Increasing price disconnect between East Coast Australian market and West Coast exports Pressures on costs and timely delivery Essential to Manage Delivery in this Environment 3

4 Lessons from the Past PNG Gas Project has had a number of iterations: 1 st iteration Townsville supply from Pandora Too small a market Too little reserves 2 nd iteration Townsville and Gladstone markets Required : Kutubu and Hides reserves : Joint Venture alignment Competing JV interests Non alignment and delays 4

5 Lessons from the Past 3 rd iteration The Queensland Solution A pragmatic Joint Venture solution Strong alignment with governments 150 into 120 doesn t go Too much too soon 4 th iteration Upstream integration and recalculation A few days in the sun Time ran out The Birth of Queensland CSG 5

6 Lessons from the Past 5th iteration Alignment of interests as the Gas World changes Revised Development Plan Diverse market requirements Maximum liquids value Rigorous engineering and cost analysis Focus on alignment of partners in the value chain : AGL STO Government / landowners 6

7 A Generational Change in Supply Gas Supply fundamentals for the East Coast Markets are being set for the next 20 plus years The Cooper Transition Mature assets Importance of the Moomba Hub A Healthy and Growing CSG Supply Significant growth in past 5 years A major supply source from PNG, with new pipeline network The Coal Factor 7

8 The Impact of Changes Gas pricing in East Coast Market will remain highly competitive Ensures gas market growth and large pie for us all Delivers gas across many markets NT to Sydney to SA. Gas on gas competition and supply diversity Underscores the East West Disconnect on pricing 8

9 Catalyst for Change Major changes in supply arrangements Growth of integrated upstream, midstream and downstream companies Project facilitation (singular alignment) Selective value extraction along the complete chain LNG Model look alike Catalyst for change in Pipeline Ownership New mergers New models New investors 9

10 Oil Search Gas Commercialisation Startegy Oil Search has over 1 billion boe of proven and probable uncontracted gas and associated liquids Resource is of considerable potential value, as world prices continue to climb Approximately 40% of resource dedicated to PNG Gas Project low Australian gas prices an anomaly in the developed world Considerable new interest in PNG s static gas resources Strategic approach designed to capture phased value in new market regime 10

11 Gas Resources in PNG (Gross) Recoverable Gas (bcf) 30,000 25,000 20,000 15,000 10,000 5,000 Recoverable Gas (bcf) Yet to Find Elevala Ketu Pandora Uramu Kimu Barikewa P'nyang Angore Juha Hides SE Gobe Gobe Main Moran 0 1P 2P 3P Agogo SE Mananda Kutubu 11 Current 3P gas resources approximately 25 TCF Yet to Find potential a further 25 TCF from multiple basins (estimate only) Maturing the resource ahead of market demand will require a prudent mix of appraisal and exploration

12 PNG Gas Project 12 Sale of gas from PNG Highlands to Australia through over 4,000 km of pipeline Conditional & firm contracts signed for total gas sales of PJ pa Pipeline in Australia to be constructed by APC (JV between AGL and Petronas). Pipeline route being optimised along with final cost base Likely interests: Oil Search 37.18% ExxonMobil (op) 25.67% PNG Govt/landowners 14.27% Nippon Oil 3.39% AGL 10.00% Santos 9.49% Estimated CAPEX for PNG component: US$2.5 billion based on initial capacity of approx 250 PJ pa, capable of expansion

13 PNG Gas Project Status Markets are largely underwritten. Likely to be close to/at initial build plant capacity. Government/landowner agreements - substantial activities in PNG to finalise regulatory and landowner agreements with unanimous support from all parties AGL (APC) reviewing pipeline costs, optimal route and ownership structure to deliver strategic objectives Bankable finance plan IM released and Roadshow underway Environmental management plan well advanced Agreement with Santos progressing Project Sanction second half 2006, project participants pushing ahead with aggressive schedule Still targeting late 2009 for first gas 13

14 Australian East Coast Gas Supply / Demand PJ CSG PNG OPPORTUNITY VOLUME GIPPSLAND OTWAY COOPER BASIN The market always ensures that commercially available reserves will be deployed to meet demand 14 SOURCE: Origin Energy Presentation Australia & PNG Gas Conference Dec 2005

15 Gas Commercialisation Phase 2 PNG Gas Project commercialises significant volume of reserves and delivers major infrastructure spine Opens way for further gas development in PNG, for in-country projects and LNG New initiative recognising world market realities substantial price differentials, strong demand Significant interest for petrochemicals, GtL, fertiliser and new LNG developments Targeting higher returns and reviewing opportunities to get involved in more points of value chain Requires resource conversion to contractable gas Major political sensitivity on in country development 15

16 16 Phase 2 Gas Strategy Aiming for 150 PJ pa initial market load in Port Moresby, growing to over 300 PJ pa FEED on pipeline from Kopi to Port Moresby Flexible gas supply options but to include potential development of: Juha (OSH 31.5%) Barikewa (OSH 42.6%) Kimu (OSH 44.6%) Uramu (OSH 49.5%) Subject to further appraisal success - accelerated appraisal programme seeking to convert 4-8 tcf into contractable status in 3 years

17 Current Oil Production and PNG Gas Project 17

18 P nyang Honinabi Juha Angore Current Oil Production and PNG Gas Project Mogulu North Mogulu South Kimu Iehi Uramu Including Phase 2 Gas Barikewa Pandora 18

19 Project fundamentals PNG Gas Project A Long Pipeline Simple upstream design configuration optimises facilities and accelerates liquids production Robust cost and schedule estimates Established market threshold, with long term growth potential Economics impacted by higher oil prices balanced by cost pressures Materiality of project helps contractor focus 19

20 PNG Gas Project A Long Pipeline Learning lessons from the past Project being driven by motivated stakeholders Upstream alignment Key stakeholders with upstream, midstream and downstream alignment Important corporate drivers to succeed Clear government and landowner motivation to succeed Strong support from financial institutions Project will drive generational change in upstream and downstream industries for East Coast market 20

21 O I L S E A R C H L I M I T E D PNG Gas Project A Catalyst for Change in the East Coast Energy Market 21