ExxonMobil PNG may have trumped Oil Search’s bid for InterOil Corporation, but Papua New Guinea’s largest company will still benefit from the US major’s US$2.3 billion bid, according to Oil Search’s Managing Director Peter Botten. He tells Business Advantage PNG that the bid by ExxonMobil delivers most of the benefits of Oil Search’s take over offer and pushes the ‘cooperation agenda’.

Oil Search’s Peter Botten

‘Bringing ExxonMobil into PRL 15 [the Elk-Antelope gas field] and the Papua LNG project opens up the possibility of cooperation between the projects, which in our view is compelling economics and will help to potentially deliver the next phase of growth in a cheaper, more efficient, way,’ Botten tells Business Advantage PNG.

‘There is opportunity for cooperation between Papua New Guinea’s dominant oil and gas players through sharing of facilities, or an aggregation of reserves.’

‘I think at this time in the cycle, construction activities are as cheap as they have been in a long time but you still need to be highly efficient and cost effective.’

Botten claims that by sharing future investment and the potential of the reserves that each project participant brings to the table, there is an opportunity for cheaper development of LNG, at a faster rate.

Parallels

Since ExxonMobil made its move into the Papua LNG project with its InterOil bid, both Oil Search and its partner Total have expressed a desire to cooperate. This is despite Oil Search having missed out on an uplift in its equity in Papua LNG. Oil Search also loses the opportunity to acquire direct access to InterOil’s exploration portfolio.

The Elk-Antelope gas field. Credit: InterOil

But Botten is positive. ‘I think, at this time in the cycle, construction activities are as cheap as they have been in a long time but you still need to be highly efficient and cost-effective, because the LNG market is challenging and very competitive.’

Botten adds that Oil Search’s good long standing relationship with ExxonMobil means there is a possibility of optimising its position in the future.

He referred to a number of examples in Australia in recent years where there has been little or no cooperation over projects. It led to significantly higher capital costs for construction and a loss of the opportunity to share infrastructure and achieve operating synergies.

Two operators

Commenting on the dominance of ExxonMobil in Papua New Guinea, Botten remains confident that Papua New Guinea will maintain two major operators for LNG, Total and ExxonMobil.

‘As you have seen, we have wound down our interest in the Middle East.’

‘I think Exxon certainly is taking a significant step, but I wouldn’t characterise it as a dominant play,’ he says.

Botten says Oil Search is focused on its participation in the expansion of PNG LNG and the development of Papua LNG.

Full deck

Oil Search has a ‘full deck’ in PNG, says Botten, adding that the company remains focused on its projects and potential exploration in the country.

‘As you have seen, we have wound down our interest in the Middle East. These assets struggled to be economic with oil prices at the levels we are seeing at the moment.’

‘Botten acknowledges that operating in Papua New Guinea has its challenges.’

He will not rule out looking at occasional international opportunities, however. Oil Search is considering some new areas offshore, which may contain similar prospects to those seen at Elk-Antelope, as well as longer term, deep water exploration opportunities.

Challenges

Botten acknowledges that operating in Papua New Guinea has its challenges. But he believes the social issues of a developing country, and the budgetary issues in a low commodity price environment, are all manageable.

‘I think it’s a big vote of confidence into the future.’

‘At the end of the day, it hasn’t impacted investment and it hasn’t impacted the success of the projects.’

Botten also believes that ExxonMobil putting several billion dollars on the table to take over InterOil shows that the US major is positive about the future of the projects in Papua New Guinea.

‘I think it’s a big vote of confidence into the future.’