LNG future in PNG

Oil Search CEO Peter Botten says investors should look past yesterday’s below-expectation profit figures and instead focus on the Papua New Guinea LNG producer’s growth potential.
The company expects to step up discussions with its various joint venture partners in PNG, including oil and gas giant ExxonMobil, over the course of 2017 to explore an expansion of the big PNG LNG project. Those plans took a key step forward yesterday, with a US court signing off on Exxon’s $US3.8 billion ($4.96bn) acquisition of InterOil, which owns a big stake in the large Elk and Antelope gasfields in PNG.
Mr Botten is pushing for those fields to feed into an expansion of PNG LNG, along with gas from the recently discovered Muruk field and other resources owned by the PNG LNG venture.
While the partners in Elk and Antelope — which include Oil Search — still need to agree to join PNG LNG, Mr Botten said he was confident the various fields would all come together. “I’ve been in Oil Search now for 24 years and frankly I’ve never seen us with a better platform for growth. When you combine that with a better outlook for LNG markets … we’re in really good shape,” Mr Botten told The Australian.
Oil Search reported a net profit for 2016 of $US89.8 million ($117m), reversing the writedown-affected $US39.4m loss in 2015.
But the underlying profit better illustrated the impact that weaker oil and gas prices had on Oil Search last year, with the $US106.7m result down 70 per cent from a year earlier.
The 3.5c total dividend was down from 10c a year earlier but still represented the top end of its policy to pay out between 35 per cent and 50 per cent of core profit.
The underlying profit came in short of consensus expectations, with Mr Botten blaming the miss on confusion among some analysts over Oil Search’s tax treatment. It appeared to weigh on Oil Search shares yesterday, with the stock falling more than 2 per cent on a day when most of its peers posted gains.
Mr Botten said any adjustments around the profit were minor compared to the opportunity available under an expansion of PNG LNG. “At the end of the day, I know profit is important but this is a story very much about the future of the organisation and our ability to build our business in what is a pretty competitive market,” he said.
He said there was a “very strong desire” among the various project partners and stakeholders to optimise the developments of the fields, and that Oil Search was already seeing customer interest in gas from an expanded project despite the current oversupply in global LNG markets.
“By the time you get to mid-2020s, if you’re not sanctioning LNG projects now there will be a shortage,” he said. “The major customers certainly in Asia understand there have to be new projects getting across the line in the next two or three years to avoid a shortfall in that time frame.’’