New York-listed InterOil, which appointed former Woodside Petroleum executive Michael Hession as its chief executive this month, is in talks with PNG LNG operator Exxon Mobil to supply gas from the onshore Elk and Antelope gasfields to the Port Moresby LNG plant.
Oil Search said the negotiations focused on 4.6 trillion cubic feet of gas from the fields.
"The discussions are focused on InterOil and (joint-venture partner) Pacific LNG selling Exxon Mobil sufficient gas to develop an additional LNG train at the PNG LNG project site," Oil Search managing director Peter Botten said yesterday in the company's second-quarter production and revenue report. Oil Search has a 29 per cent interest in PNG LNG's first two trains, which are now 90 per cent complete, but has no interest in the InterOil fields.
"We are watching the progress of these negotiations with interest. Should this gas be brought into the PNG LNG project, it is likely Oil Search will have an opportunity to participate in this expansion," Mr Botten said.
Oil Search is also trying to confirm gas for expansion of PNG LNG, most notably at the P'nyang field. The company said engineering scoping work on potential development of the field continued during the quarter.
In its report, Oil Search said oil and gas output in the three months to June 30 fell 9.7 per cent from a year earlier to 1.63 million barrels of oil-equivalent, which was in line with expectations.
It maintained its annual production guidance of between 6.2 million and 6.7 million barrels.
Revenue in the quarter fell 3 per cent from a year earlier to $US204.9 million, the company said, which was ahead of Deutsche Bank forecasts because of the timing of shipments.
Oil Search shares yesterday fell 21c, or 2.6 per cent, to $8.02.
Oil Search said it had discovered modest quantities of natural gas during a new exploration campaign in PNG, but that the find had encouraged it to continue drilling.
The Port Moresby and Sydney-based company began looking for gas in the Gulf of Papua this year as part of a campaign that may help it develop another gas export plant. Oil Search said its Flinders and Hagana wells in the Gulf of Papua intersected good quality geological properties that may indicate the presence of larger resources nearby.
"Although the volumes at Flinders and Hagana are likely to be relatively modest, the company has been sufficiently encouraged to take up a further well option and will drill the Kidukidu prospect once Hagana-1 is completed," the company said.
