Oil Search exits Middle East, will focus on Papua New Guinea

Sydney and Port Moresby-based Oil Search Ltd. has relinquished its interest in the Taza production-sharing contract in the Kurdistan section of Iraq. The company also is close to completion of the sale of its interest in Block 7 onshore Yemen to Sydney-based Petsec Energy Ltd. That deal is expected to close early this year.

These deals mark Oil Search’s exit from the Middle East after a 16-year presence in the area that included, at various times, interests in Iraq, Yemen, Egypt, and Tunisia.

Although an oil discovery was made in Kurdistan, Oil Search decided the resource had remaining uncertainties and the initial discovery is not commercial at prevailing world oil prices.

Consequently, all operational sites have been remediated and are in the process of being returned to the landowners. The Oil Search office in Kurdistan has been closed.

The relinquishment means that about 20 million bbl of oil and 6 bcf of natural gas resources will be debooked from the Oil Search reserves and resources statement.

In Papua New Guinea, the company said there is a likely upgrade in the Papua New Guinea-LNG (PNG-LNG) project reserves. This—together with resources in the Elk-Antelope, P’nyang, and the recent Muruk discovery near Hides—will support the company’s view that there is more than sufficient discovered gas resource in Papua New Guinea to supply not only the proved expanded capacity of PNG-LNG Trains 1 and 2, but also at least two and possibly three expansion trains.

Oil Search is continuing discussions with key stakeholders, including ExxonMobil Corp., Total SA, and the Papua New Guinea government about how to deliver the most cost-effective LNG expansion within the country. This is expected to be achieved, in part, be eliminating duplication of infrastructure to deliver maximum value to all participants.

A key element to facilitating a cooperative and coordinated development agenda is the entry of ExxonMobil in the Elk-Antelope (PRL 15) joint venture through the proposed takeover of InterOil Corp. This deal was stalled by an adverse ruling from the Court of Appeal in Yukon. In December, however, ExxonMobil made a revised offer to purchase InterOil. Shareholders are scheduled to vote on this new bid on Feb. 14.

If the vote is positive and there is a successful completion to the deal, Oil Search believes that formal talks regarding cooperation and integration of the next phase of LNG development will begin on an accelerated basis in the next few months.

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