Oil Search Managing Director Peter Botten tells Business Advantage PNG that in 10 years he hopes the company’s production will have tripled. He says Oil Search may also look to list its power business on the Port Moresby Stock Exchange.

Oil Search’s Peter Botten. Source: Business Advantage International

Botten says he hopes that in 10 years Oil Search will still be a significant economic and ‘social player’ in PNG.

He anticipates the company will be ‘delivering three times what we are producing now’.

‘I would hope that Oil Search, in its own right, will be producing maybe six million tonnes of LNG (a year).’

Botten says Oil Search is a ‘barometer around the world for PNG’s investment climate.’ When international investors assess the company, they look at a variety of factors.

‘Firstly, you have to think about what the sector is looking like, so if you don’t think the oil price is going to go anywhere, that is one element of investor sentiment.

‘Investors look for quality companies at the bottom end of the cost curve with a track record of delivery and that always puts Oil Search into a pretty good spot.’

Botten believes the company fundamentals are strong.

‘If you want the major world super funds to be part of your investment you need to be on an international exchange.’

‘We have got a pretty good cash flow generation out of our existing production base and our production base is relatively profitable—it would be more profitable at US$100 (a barrel). But at the end of the day we have a very strong balance sheet.’

Liquidity

Botten says the trading liquidity on POMSOX is not high, which is why Oil Search is dual-listed on the Australian Securities Exchange (ASX).

‘If you want the major world super funds to be part of your investment, you need to be on an international exchange.

‘Many of the things that we influence, if not control, are going pretty well.’

‘We have a very credible list of major long-term funds that support us and have done so for many years; some of the biggest funds in the world.

‘But you are only as good as the last project you put on the board, so there is a very strong focus on, and emphasis with our shareholders, to understand when the next phase of LNG development will take place.

‘That is something on which you have to work extremely hard. Many of the things that we influence, if not control, are going pretty well, but the real challenge for us over the next 12 months or so is to bring the country along and make sure the government is prepared to go through the exercise of understanding what is needed—what can and can’t be done in the next phase.’

POMSOX

Oil Search has consolidated all of the company’s power-related activities into a single business entity: Oil Search Power Holdings. Botten says this may be spun off.

‘If our power business grows—and we will grow—we would be anticipating floating that off onto the local exchange,’ says Botten.

‘The government and developers need to work together to make sure there is a stable operating environment.’

‘We think our power companies, both the physical company that generates the power but also the energy company that trades the energy, are both candidates for floating on the local exchange and involving local investors in their future.

‘We think that is a real opportunity for us, given certain scale and revenue streams into our power business.

‘We would very much welcome PNG involvement: by the superannuation funds and by PNG mums and dads who can invest in a locally-based power business.’

Stable

Botten says the government and developers need to work together to make sure there is a stable operating environment ‘by managing land owners and ensuring they feel comfortable they get the benefits they deserve’.

‘The question is the cohesion within the country and the process to deliver world class projects on that sort of scale. Many developing countries don’t reach anything like their true potential. I believe PNG will be different.

‘PNG is doing pretty well at the moment, but it is a tough 12 months coming up.

‘If we can get the support of government to help co-ordinate the next phase of LNG development, and build support for the project in the rest of the country, by demonstrating that the project will bring real value to the whole country, we have a very good chance of expediting billions of Kina in investment, providing employment opportunities and social development.’