April 11, 2007 / 2:48 AM / in 12 years

Oil Search and partners to study PNG LNG project

SYDNEY, April 11 (Reuters) - Australian-listed oil and gas producer Oil Search Ltd. (OSH.AX) and partners for its three gas fields in Papua New Guinea have joined Exxon Mobil Corp. (XOM.N) to study a potential liquefied natural gas (LNG) project in the Pacific country.

Papua New Guinea-based Oil Search said in a statement on Wednesday the study will explore building an LNG plant, using resources from the Hides, Angore and Juha fields, with production capacity of 5-6.5 million tonnes per annum.

Oil Search said the study will also kickstart negotiations with the Papua New Guinea government on financial terms.

About US$60 million is expected to be spent on studies over the next year, to be shared between operator ExxonMobil (XOM.N), Oil Search, Santos Ltd. (STO.AX) and Nippon Oil Corp. 5001.T.

Santos said in a separate statement that the study was expected to be completed by the end of 2007 and first LNG cargoes were targeted for 2012-2013.

Exxon and its partners shelved a troubled $3.5 billion Papua New Guinea-to-Australia pipeline project in February to focus on more profitable gas projects in the country.

Demand for LNG has risen significantly as it is seen as more environmentally friendly compared with other fuels, such as oil or coal. The ease of transport has also helped it gain popularity as customers seek to secure energy without the need for pipelines.

Although several other LNG projects are expected to come onstream around 2011-2013, including Woodside Petroleum’s (WPL.AX) Pluto and Browse projects in Western Australia, analysts have said there would be no shortage of demand.

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