lng opportunities - oil search...• lng project advantage gained through competitive cost of supply...

Oil Search Limited ARBN 055 079 868

PNG Chamber of Mines and Petroleum – 28 November 2017

LNG Opportunities

An Oil Search Perspective

LNG Opportunities – An Oil Search Perspective 2

Strong long-term global LNG market

fundamentals

• Whilst oil prices continue to be depressed, the future of LNG is bright with

strong market fundamentals

• LNG importing countries/LNG buyers expected to grow to >100 by 2020:

• Strong demand growth in Asian markets (1H16-1H17):

– China (+37%), South Korea (+14%), Taiwan (+12%), Japan (+9%)

• Global demand expected to reach >460 MTPA by 2030

• Key North Asian markets prioritising LNG over coal and nuclear.

• >70 MTPA of contracts expected to expire between 2017-2025

• LNG usage expanding (eg merchant shipping)

• FSRUs supporting demand growth, enabling faster delivery to markets

• Rapidly changing and dynamic LNG market

204 243

364

2017 2020 2030

ASIAN DEMAND (MTPA)

Source: FGE Online Data System - August 2017

Market for global LNG supply from 2023, possibly

earlier

3

• Entering into period when LNG capacity

exceeds demand

• However, only 7.2 MTPA of new LNG

capacity sanctioned in 2016 and 2017

• Window of opening demand in early/mid

20’s and potentially moving earlier

• LNG expansion from PNG ideally placed

to secure premium Asian buyers

• Geographical proximity and competitive

cost brownfield expansion

• High heating value gas

• PNG represents geographical supply

diversification 0

200

400

600

2010 2015 2020 2025 2030 2035

MT

PA

Operational LNG Projects

Under Construction LNG Projects

Global LNG Demand

GLOBAL LNG SUPPLY DEMAND BALANCE

New supply required

2023 and possibly earlier

on seasonal basis

Source: WoodMac – June 2017

LNG Opportunities – An Oil Search Perspective

4

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Drilling

2017 2018 2019

Seismic

P’nyang South 2

Muruk 2

Kimu 2 Barikewa 3

Gas exploration* Gas exploration* Oil exploration*

Gas exploration*

Oil exploration* Gas exploration*

Gas appraisal* Gas exploration* Gas appraisal*

Expln 1* Uramu 2*

Greater Juha (Phase 1)

Eastern Fold Belt (Phase 1)

Iehi / Gobe FW*

GoP AGG + magnetics

Deepwater 3D*

Eastern Fold Belt (Phase 2)* PPL339*

Kimu / Barikewa*

Greater Juha (Phase 2)* Mananda*

Airborne

* Contingent

Oil exploration*

With collaboration significant future investment

in gas exploration and appraisal possible


Robust platform for future LNG projects

5

• >10 tcf undeveloped gas from

Elk-Antelope and P’nyang plus

potential additional low cost gas

from Foundation Project fields

• Gas from these fields able to

feed >8 MTPA of LNG capacity

• Longer term production

optionality from the Muruk

discovery with potentially 1-3 Tcf,

(subject to appraisal) circa 21km

from existing infrastructure

• Potential for circa 1 to 1.5 Tcf

from Kimu, Barikewa and Uramu,

subject to appraisal

Hides

Gobe

Kutubu

Muruk

P’nyang (>3.5tcf 2C,

~1.1tcf 1C)

Elk-Antelope (>6.5tcf 2C,

~5.2tcf 1C) Juha

On-trend

prospects

Kimu

Barikewa

Uramu


Construction of spur instead

of new jetty & sharing of

shipping channel

Infrastructure

(laydown, roads,

camps, buildings)

Reduction of overall

tank storage

requirements

Sharing of utilities,

power generation,

metering, controls

Sharing of

flare

• LNG project advantage gained through competitive cost of supply – PNG projects have a massive opportunity

• OSL estimates $2-3bn in capital savings and >$125M in annual opex savings

Savings on site preparation

and surveys

6

Opportunity for LNG expansion to

capitalise on material synergy benefits


LNG Expansion projects can kick-start material

in-country investment in the near term

• Entry into FEED on expansion projects signals the start of major in-country investment

• Quality investors ready to spend billions of Kina in the coming years

• In-country investment in expansion creates jobs, potential long-term capability build through national

content and long term GDP growth for the country

– Early works on the ground (Job creation from construction)

– Major investment flowing into PNG – GDP growth as per the base project

– FX support with the flow of funds into PNG

7

Major New Investment

(multi-billion Kina)

FID Construction FEED and Early Works Start-up


8

• Power underpins activities which raise the living

standards

- Health, Education, Safety

• Fundamental to development, economic growth

• Port Moresby Power Station will provide materially

lower cost of electricity than other thermal generation

in PNG

• Using gas enables government’s sulphur and

greenhouse gas reduction strategies

• Oil Search and Kumul have created a capable PNG

owned power generator (“NiuPower”)

• NiuPower’s Port Moresby Power Station is a great

start providing lowest cost reliable electricity

• Additional effort now required to implement consumer

connections to support the goals of the medium term

development plan

PNG gas used to sustainably power PNG


Source: ANZ Powering PNG into the Asian Century

Sustainable and balanced approach to domestic

gas and LNG an opportunity for future growth

9

• Gas provides clean, scalable and capitally

efficient energy

• Provides initial market scale for larger

renewable projects in future

• Domestic gas may provide competition

with imported fuels and provide alternative

to dirty heavy sulphur fuel oils

• Needs of the country must be balanced

with project viability for developers

• Thoughtful policy, industry collaboration

and smart partnering required

• NiuEnergy (OSL and Kumul) looking for

sustainable options


LNG opportunities realised through collaboration and

partnership between industry and country

• LNG opportunities are capable of driving economy and underpinning growth

for PNG over the next 20+ years

– Ability to double production

– Very strong resource discovered base

– 2 world class operators and good local company partnership

– Good platform of infrastructure

– Potential to sustainably use PNG’s gas for power

• Very competitive market, low oil and gas prices but PNG likely competitive

• Key to delivery is through collaboration. Industry and government must

balance the needs of the country with stable and sustainable policy and

investment environment

• Industry must bring Government, Landowners and country along

– Fair value for all

– Participation in key country development agenda

10 LNG Opportunities – An Oil Search Perspective

Oil Search Limited ARBN 055 079 868

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lng opportunities - oil search...• lng project advantage gained through competitive cost of supply...

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