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Oil Search Shows Strong Performance

by PNG Business News - February 26, 2021

Oil Search has brought a strong financial year in 2020 with a core net profit after tax of US$22.0million (K77m), also reported to a full-year production of 29.0 mmboe and the strongest safety performance since assuming operatorship in 2003.

The financial results were significantly lower realised hydrocarbon prices in 2020 as compared to 2019, which resulted in a full-year net loss of US$320.7 million (K1.1bn). This includes a post-tax impairment charge of US$260.2 million (K908.7m) that had been recognised in the interim financial results.

For managing director Dr Keiran Wulff, “Oil Search emerged from 2020 stronger and more resilient as a result of its response to the Covid-19 pandemic, demand collapse and oil price downturn. Despite the material challenges, Oil Search achieved three important records for the year. The first is the strongest safety performance in PNG since becoming the operator of the PNG oil fields in 2003, with a total recordable incident rate of 0.78 per million hours worked, and no Tier 1 process safety events.”

According to Wulff, the second is the strongest production reliability from its operations in PNG since the 2018 earthquake and, the delivery of record annual production from the PNG LNG project.

He said that the company brought down some decisive actions.

“We also undertook a major strategic review to prioritise activities and capital spend for a low carbon future,” he said. “This resulted in streamlining our portfolio and incurring a non-recurring, post-tax impairment charge of US$260.2 million (K908.7m). We are a more focused, leaner and lower cost resilient business in a strong position to commercialise our world-class resource base and leverage the oil price. We will continue to focus on maximising operating cash flow and delivering material growth projects which will be underpinned by resilient operations and disciplined capital management. We have set up a dedicated transformation team to embed a high-performance culture across the business.”



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Total senior management team will be in the country this week to talk about the next steps in the Papua LNG Project.According to Petroleum Minister Kerenga Kua, the meeting between the government and the developer of this project had been planned last week but there were delays on clearances and protocols. They are to arrive this week.The announcements for this project will be made on December 17. Meanwhile, Prime Minister James Marape said that other groups such as the Oil Search Ltd and the ExxonMobil PNG would be attending the discussion to further the project into the next segment. Marape said that the meeting between the government and Total was for the latter to “to tell us the exact timeline of the Papua LNG project”.“The economy should be happy and excited that Papua LNG hasn’t been scraped off as far as direct foreign investment is concerned,” he said.To start the project next year, Kumul Petroleum Holdings Ltd also hopes to work with the developer of the Papua LNG Project. According to managing director Wapu Sonk, they would like to start work on the front-end engineering design work and the financing and marketing work of the liquefied natural gas.

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PNG Business News - December 03, 2020

Kua Provides Updates on Oil & Gas Projects

Petroleum Minister Kerengua Kua said that there will be an announcement next month if the Papua LNG will be a stand-alone project towards the design phase next year. He added that the Total senior management and the delegation of the government will be meeting on Thursday, December 10. “If the decision is made, it will be positive for PNG because we will begin to see some early work going on,” Kua said. “There will be cash flow for the country and it could have an impact on the gross domestic product for us. It’s a positive thing to look forward to so we will wait for the decision on Dec 10 or 11. We will make the announcement on whether we will delink Papua and P’nyang and make them separate stand-alone projects.”Kua noted that this was the status of P’nyang and that there was still time to negotiate.“The fact that we delink the two projects, it will not disadvantage P’nyang because whether you link it or delink it, the construction phase of P’nyang is still four to five years away down the track,” he said. “We have all the lead time here to negotiate a good contract, no need to rush because we don’t need a gas agreement for P’nyang for another four to five years yet. The construction for Papua has to start and complete before P’nyang connects so we still have a lot of time.” Kua said the dialogue with Exxon showed opportunities for negotiations and that there could be good deals. “There is still some promise there so we will continue to work on that,” he said.Kua said that Pasca was the only small project with less volume of oil and gas. He said that the construction is estimated to cost around K6.9 billion (US$2 billion) on a scale of PNG LNG which is K65bil (US$19bil) and Papua LNG which is K34.5bil (US$10bil). “In PNG US$2bil (K6.9bil) is a lot of money and negotiation is at a very advanced stage,” he said. “We will announce a gas agreement as soon as we can. Our concentration on the negotiations has been compromised by the disturbance of politics but we are monitoring it.”Kua said that investors are not leaving, adding that the state has wanted to reform legislation.

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PNG Business News - February 01, 2021

Oil Search Boosts Performance

Because of its focus on performance, capital and cost allocation, Oil Search has resulted in a firm production. Managing director Keiran Wulff said the developments of Oil Search had regained momentum with the passing of the government in Parliament the remaining amendments to Acts for Papua LNG fiscal stability.He said that assurance reviews for the Pikka Unit Development were already finished and that the project is ready for design and front-end engineering in early 2021. “Despite the material challenges of 2020, PNG LNG continued to outperform in the fourth quarter, ending the year with its highest ever annual production of 8.8 MT,” he said. “The North West Moran oil field was also brought back online during the quarter following a shut-in due to the 2018 earthquake.”Wulff said that the continuation of production was a collective effort by everyone and brought about by a gross contribution of around 2500 bopd.“At our investor briefing in November, we shared our renewed purpose and ambition and laid out our new strategy to focus on delivering full value and enhancing our appeal to stakeholders through building resilience to lower and uncertain commodity prices,” he said.“We expect that 2021 will continue to be another challenging year and the company is focused on maintaining the operational discipline that resulted in excellent results in 2020, despite the difficult conditions. Oil Search is increasingly well-positioned to manage through uncertainty and deliver our projects in 2021 and beyond.”

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PNG Business News - April 08, 2021

Price of Oil Recovers in Spite of COVID

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PNG Business News - April 08, 2021

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With the outstanding amount of government debt owed to the sector, pending landowner fees, and rising law and order woes, businesses are concerned about 2022. According to Chey Scovell, chief executive officer of the PNG Manufacturers Board, conversations within the business community revealed that the government owed companies more than K2 billion. “I don’t have an updated list, but from general conversations with business and what is being raised with the various chambers, it would exceed K2 billion,” he said. “We hear that contractors for the Department of Works have claims for this amount alone, so the number could be as high as K3 billion. No doubt they may have paid some, technically a K1 payment would be paying at least some. The Budget hasn’t been able to be implemented properly at all. Recurrent expenditure, monthly bills for things like water, power, security, rent, are not being paid in full or in many cases at all. We’ve suggested that the Government put up an online portal/list, for all creditors to register for the Government to show full or progressive payments.” Scovell compared what the government was doing to the private community to what would happen if everybody started paying taxes for one to five years but continued to use government programs. “They wouldn’t be able to survive, so how is it that they expect businesses to carry on?” he said. “It is also a bit of a cop-out that Treasury is taking a long time and in many instances taking extensive reviews of claims to see if they will pay them and by how much.” Scovell argued that the government was required to behave in good faith and to set a precedent, but that forcing or intimidating companies to make substantial reductions in compensation due for goods and services rendered was bad form. “We note there are many dodgy claims, but there seems to be little evidence that hires car firms, public works contractors and catering firms (reported as problematic areas) are having the same scrutiny,” he said. “BOC Gas waited years to be paid for medical gases such as oxygen supplied to PMGH (Port Moresby General Hospital), it was reviewed twice that I know of and not paid. The other item of note is that debt carried is a growing debt. The older it gets the more it has cost the businesses.” He added, “Also, our currency has been depreciating, many businesses based their fees on the foreign exchange rates at that time, some even had loans Just like our tax penalties, the longer they are overdue, the higher they should become. This Government isn’t doing to others as it does for itself. We still have micro, small and medium enterprises that have suffered duress due to non-payment of bills going all the way back to our 40th Independence, same goes for the 2015 Pacific Games, we hear from the regional chambers that there are many outstanding claims for the past two elections. Again, if we had a publicly available list, the Government wouldn’t be able to hide behind confusion and people could whistleblow on dubious claims.”

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