Future Growth from Gas PNG Mining & Petroleum Investment Conference Sydney December 1, 2008 1
The History . Oil Search long history in PNG - since 1929 Oil & Gas Industry Decades of sporadic exploration oil focus, seeking elephants, on & offshore, large & small companies Kutubu Oil Project start-up in early 1990s Hides…
the Gas Resource Base PNG discovered gas reserves by field (Source: Wood Mackenzie Path Finder) Gobe Area Kuru Iehi Bwata Koko SE Mananda Technical Technical Gas Gas 17,000 17,000 bcf bcf 2% 1% 1% 0.3% 0.1% 0.1% Pandora B Pasca…
The Cornerstone Project . Integrated LNG Project 6.3 MMTPA Strong JV Alignment Gas Agreement Signed Now In FEED Jointly Marketed Bi-partisan government support 9.3 TCF 2C ExxonMobil Operated resource, with OSH In Country…
Oil Search Vision for LNG Expansion 3.5 4.0 tcf additional tcf Forelands & gas volumes required to 25 Offshore Resources underpin construction of Other 3C Exploration each additional train Highlands 20 JV Partner Resources 2C…
the future holds additional gas developments.. Pnyang Juha North Hides PNGs 3 C discovered Juha Huria resource exceeds 32 Tcf; Angore potential likely higher Stanley Moran More LNG holds high value Kutubu PNG LNG Project Gas…
OSH Established Non Project Gas Pnyang Juha North Field (tcf) 2C 3C Highlands: P'Nyang & Juha North 2.3 4.7 SE Gobe Forelands and Kimu Barikewa Offshore: Kimu, Uramu Barikewa, SE Gobe, 2.4 3.7 Uramu, Pandora Total 4.7…
Project Opportunities Typical Project Resource Plant Typical IRR Potential Gas Sources Type (tcf) Capex (%)* (USbn)* Large Scale LNG 3.5 2 - 3.5 Brownfields Forelands, Northern, Offshore & Western - highest Corridor GTL 2.5 2 2.5…
Domestic Gas MOU Aligns Oil Search and PNG Government on gas growth Recognizes priority of PNG LNG Project Important step in next wave gas development For additional LNG and other developments Allows state-industry gas planning…
Core Initiatives Update Forelands and Offshore Hub development Engaged with other key stakeholders in the regions Operators and major interest holders Assessing opportunity to move forward, focussed on LNG Opportunities to…
Core Initiatives Update Petrochemicals Focus remains on methanol/DME Tripartite MOU between ITC/MGC, OSH and the State signed in November 2008 Updates Feasibility Study work ITC/MGC executives visited PNG recently Parties remain…
Asia Pacific methanol demand by country 40,000 CAGR 03-08E 08E-13E Asia 13.1% 10.0% China 22.8% 13.5% 30,000 Other South Asia India Other SEA 000 metric tons Australia 20,000 New Zealand Indonesia Singapore…
Asian Spot Methanol Prices 1999 -2008 700 140 600 120 500 100 400 80 US ton US bbl 300 60 200 40 100 20 0 0 Sep-06 Jan-07 Sep-07 Jan-08 Sep-08 Jan-99 Sep-99 Jan-00 Sep-00 Jan-01…
Core Initiatives Update Western Province gas development Discussions continuing amongst various parties re potential for gas pipelines Ongoing discussions with other operators regarding aggregation, consolidation and/or…
Core Initiatives Update Regional Power Southern Highlands Regional Energy Study Potential for power and micro gas use in Southern Highlands is being assessed Study framed and under discussion for finalisation Identifying…
Gas Growth Opportunities LNG is the main focus for gas growth value, scale, return, synergies Potential for trains from Offshore, Forelands, Highlands Project and non-Project owned/controlled Other gas commercialisation…
The Oil Search Approach . Pursue additional PNG LNG Project trains vigorously Hides, Juha and proximate gas Timing driven by Project Owners Aggregate gas for large scale projects Potential for earlier next train development Achieve…
Gas the Future of PNG 19
OIL SEARCH LIMITED 20
PNG Fold Belt Production and Exploration Ian Longley GM Exploration 1
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 2
The Road Fold Belt Highlands Highway
Karst Topography
Kutubu Discovery well 1986 5
Tectonics and Hydrocarbons TangguhGas Province SFS New Guinea Cenderawasih Oil & Gas Salawati Bay Basin Bintuni Basin Hides Gasfield Arafura Platform Tasman Line Kutubu Fly Oilfield Neogene Basin Platform Gulf of…
New Guinea stratigraphy along the Fold Belt Ma Irian Jaya Papua New Guinea 0 Ieru seal 100 Toro Rvoir 200 Imburu - source 300 Upper Western Permian toofTriassic limit 400 Mondio Fm Phanerozoic basement Granite Otomona Fm…
Exploration Concepts Subthrust Plays 4,000 New Plays Gas Focus 3,500 Oil Foldbelt - geological Gas integration of outcrop, 8tcf Sr isotope, SAR, DEMs etc 3,000 Undev. Subsurface prediction of offset anticlinal crests 2,500…
Regional fold belt cross- section Moran SW NE Paua Kaipu Mosa Agogo MSL 0 5km
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 11
Usano Development and Usano East Appraisal UDT 7 online March 2007; UDT 8 (UDT G) online 6th June 2008; UDT 9 (UDT B) online 12 August 2008; UDT 10 (UDT J) online 30th October 2008; UDT 11 (UDT D) currently drilling UDT 9…
Oil Operations: Providing Cash for Growth Since Oil Search took over operatorship of PNG oil fields in 2003, fields have produced 45 mmbbl in excess of previous operators expectations and field life extended Aim is to optimise PNG…
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 16
Field Geology PNG Style.. 17
2007-2008 Exploration wells Well Type Spud Date Days Trap Type Result Comment Well Spud to Rig Release Exploration 24/4/2007 28 HW Anticline Gas Disc Proven new pool Juha-4 Exploration 13/3/2007 106 HW Anticline Shows Breached/…
Kutubu 2 Pre Drill Top Toro Depth Structure
Kutubu 2 Simplified Post- Drill Structure Well intersected strong shows was highly overpressured U. Ieru erosion Bawia + Giero growth Older extensional fault
Arakubi-Pre-drill, top Toro map Ar ak Arakubi ub target box i Possible splay identified on seismic 06 -4 04 Lin PN Usano 2x block e UDT4 block PN ne 04 Li -4 11 1km
Usano UDT-10 and Arakubi
Post-drill top Toro map, Usano-East upside potential Kube-Kabe Lead No updip closure Lagifuago to west SEALING Ar Cross-fault ak Iagifu ub PN i 04 -4 06 11 -4 99 PN Ar a kub He i Fa di ult ni a Fa Usano-East…
PPL240 - Korobosea PPL240 WI % KOROBOSEA Oil Search 90% Gedd 10% Korobosea 1 tested KIMU prospect along trend from Kimu gas discovery Prospect defined by seismic (9 lines of good quality) PRL08 Reservoir known to be…
PPL240 - Korobosea Korobosea tilted fault block covers 20+km Korobosea-1 spudded 22nd October Well intersected water-wet Alene and Toro reservoirs SW Korobosea NE Darai Lmst Alene Sst Toro Sst 2km
Never underestimate the weather factor Korobosea rig site Kuri Airstrip under water
NW Paua PPL219 PPL233 PPL 233 WI % NW PAUA Oil Search 52.5 PDL6 PDL5 Esso Highlands 47.5% Moran Paua Highly prospective structure adjacent to SE Mananda Moran PPL219 Stacked Toro and Digimu reservoirs APF Agogo Moro PPL219…
NW Paua - Petrel Model Line PN96-304 Depth migration NW Paua Target Box
Cobra 1A PDL4 PPL219 PPL 190 WI % Gobe Oil Search 62.6 Main Murray Petroleum 26.5 SE Gobe Wasuma Cue PNG Ltd 10.9 COBRA Seismically defined footwall anticline (Sub-thrust Play) adjacent to SE Gobe oil field PDL3 PDL4…
Cobra Well Site, 2008 Well Site Well Site 5km Water Source Water Source
Cobra 1A ST3 venting gas from closed chamber DST
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 32
PNG LNG Project AsiaPacs next LNG development 33
PNG LNG: The Premier AsiaPac LNG Project World Class and World Scale LNG Project 2C resources of 9.3 tcf 6.3 mmtpa, 2 train LNG project Clean, liquids-rich gas No technology issues or concerns Well positioned for the Asia market…
PNG LNG Project Integrated development of Hides, Angore and Juha gas fields plus associated gas from the Kutubu, Agogo, Gobe and Moran oil fields Upstream infrastructure including production wells, processing facilities and…
PNG LNG Project Fields Angore Juha Main Hides Moran Agogo Kutubu Gobe Main 36
Project Interest Determination PNG LNG Interest 36% JV Partners Share of FEED Oil Search PNG LNG Interest costs 34% ExxonMobil 41.5% Oil Search 34.0% 32% 17.7% OSH expected post Santos Government back-in 30% final project…
Oil Search Vision for LNG Expansion 3.5 4.0 tcf additional gas tcf Forelands & volumes required to 25 Offshore underpin construction of Resources additional train Other 3C Exploration Highlands PNG LNG fields comprise JV Partner…
Location of Gas Resources: PNG LNG Project Fields Hides Field 2C 3C Juha Angore Hides 5.3 9.9 Moran Juha, Kutubu Angore, Agogo Kutubu, Gobe Main Moran, Gobe Main 4.0 5.1 Total 9.3 15.0 Sufficient 3C upside in existing…
Location of Gas Resources: Other field resources Pnyang Juha North Hides Field 2C 3C Juha Highlands: Angore Pnyang Moran Juha Kutubu Agogo North 2.3 4.7 Gobe Main Forelands SE Gobe and Kimu Offshore: Barikewa Kimu,…
Location of Gas Resources: Exploration Pnyang Juha North Hides 2009 2011 exploration Juha Huria programme will test over Angore 9 tcf mean resource Moran (gross), with average POS Cecilia Kutubu of 15% Agogo Testing off-shore…
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 43
Wasuma PDL4 PPL219 PPL 219 WI % Gobe Main WASUMA Oil Search 91.25 SE Merlin Petroleum 8.75 Gobe Wasuma 2009 Oil Drilling Candidate Near field exploration opportunity PDL3 PDL4 adjacent to the SE Gobe oil field Iagifu sandstone…
Wasuma / Wasuma Deep Prospective hangingwall (shallow) and footwall (deep) targets. SE Gobe Oilfield Wasuma Deep
Wasuma Site Construction Water Source 5km Well Pad Water Line
Iwa PDL6 PDL5 PPL233 PDL 2 WI% Moran Oil Search 60.05 Paua ExxonMobil 14.52 SE Merlin Petroleum 6.78 Mananda PRK 6.75 Agogo PPL219 IWA AGL (PNG) 11.90 Lake Kutubu PDL2 Near field exploration 2009 oil and gas Kutubu…
Gobe Main FW Iagifu Depth Map Gobe Main FW Top Darai HC Water Contact Top Ieru Top Toro GM FW Top Iagifu Depth in m tvdss Country: Papua New Guinea Licence: PDL4, PPL21950mmbbl Seismically defined footwall anticline…
Hides FW SW NE Top Toro depth structure map Hides FW Spillpoint Hides FW 1000m MSL Darai -1000m Ieru -2000m Toro -3000m Imburu -4000m - ss n -5000m r o ti o C c se Country: Papua New Guinea Licence: PDL1, PRL12…
PPL234 Lead 7 NW Lead-7 SE GOP100 depth map GOP20 LO GOP40 6- 12 4 GOP60 Lead-7 Spillpoint GOP100 2km Depth in m tvdss LO6-124 Country: Papua New Guinea Licence: PPL234 Name: Lead-7 Amplitude supported…
Wage Prospect SW NE Toro depth structure map n Wage tio ec -s s os Cr Wage Darai Ieru Toro Spillpoint Depth in m tvdss 10km Country: Papua New Guinea Licence: PPL233 Distal Foldbelt play oil test Name:…
Outline of Talk Introduction Development Summary Recent Exploration Future = Move to Gas PNG LNG Development Future Exploration Summary 55
Summary Development focussed on oil production has been successful and continues through 2009/10 Recent exploration has focussed on oil and has had mixed results Our understanding of the geology and prospectivity has increased…
OIL SEARCH LIMITED 57
OIL SEARCH LIMITED Oil Financing in PNG 3 December 2008 1
Oil Search Debt Financing History 500 435 400 300 300 245 No PRI USM 215 PRI 200 104 98 100 0 Kutubu PF Gobe 1996 BP Acquisition Refinancing Borrowing Borrowing 1991 1999 2001 Base Loan Base RCF and Revolver…
2008 Financing: A Case Study Lehman AIG Freddie Mac bailout US/Euro & Fannie bankruptcy ML bank Mae rescue takeovers takeover packages June July August September October Syndicate IM Bank Revised Formed Due diligence,…
New Facility Key Features Self arranged: no underwriting or arranger fees paid US400 million sought. Offers of over US900 million received. Facility increased to US435 million. Very strong syndicate of global banks, including the…
Seven Steps to a Successful Financing 5
Step One Build your bank relationships, especially when you dont need them ; Consistency of contact ; Education ; Ancillary business ; Trade-off between lowest price and preserving relationships 6
Oil Search Bank Relationship History SMBC Natixis NAB Dexia Westpac KBC Hypovereinsbank Bank West West LB MeersPierson/Fortis ABN Bank of Scotland Dresdner SG Citibank Swiss Bank State Bank NSW NMB/ING…
Step Two Work within the existing constraints of the debt markets ; No underwriting banks not willing to bear the sell-down risk ; Allow long lead times for credit decisions and documentation the quick answer is the no answer ;…
Step Three Maximise competitive tension ; Club-style deals work better when banks are rationing credit ; Lock in a term sheet up-front. Leave the bidding to focus on price and amount. ; Increase the direct interface with…
Step Four Proactively address sovereign risk ; Provide structural solutions Political risk insurance Offshore proceeds accounts ; Conduct a proper risk assessment ; Appropriately reward banks that assume the political risk…
Political Risk PNG Investment Climate Despite some political uncertainty due to changes to Government in the early years, since the law on Integrity of Political Parties was passed in October 2003, the PNG political system has…
Political Risk PNG Track Record The PNG Government has never defaulted on a scheduled debt repayment Since oil production began in 1992, Oil Projects have never lost/missed a shipment due to landowner or government intervention…
Step Five Take your corporate social responsibilities seriously.. the banks do ; Benchmark your operations against the Equator Principles and the IFC Performance Standards even if your financing is outside the scope ; Document…
Our Communities Operations cover 1,800 km in the Southern Highlands and Gulf Provinces Population 25,000 people Huli, Fasu, Foe, Sau and Gulf ethnic groups, 110 villages, 13 language groups and hundreds of clans 60% of work…
Cultural Diversity 15
The Health of our People and Communities Major commitment to Health Care Over 70 health professionals employed 6 educators 8 medical clinics Over 50,000 patients treated each year About the same as a major regional hospital in…
Community Health Programmes Major Areas Local Health Service - support and capacity building Primary and public health programmes Malaria control HIV Aids management and education Immunisations Maternal health 17
Local Economic Development Local landowner companies provide a significant proportion of goods & services utilised on site contract values total A68 million pa. Programme to support local entrepreneurial training Support for…
Education Enhancement Education sponsorship programme (A450,000 pa) tertiary studies, positive selection bias for female applicants and those studying health, education & trade subjects. More than 100 students sponsored a year.…
Environmental Management Key goal to minimise impact on environment Systems aligned with ISO 14001 & Equator Principles Company is working towards ISO 14001 accreditation Major programmes include: Fauna/Flora research partnership…
External Recognition Oil Searchs policies of minimal forest destruction, placing rigs by helicopter and banning all hunting by employees showed how an extractive industry could be positively helpful to the environment. As far as…
Step Six If possible, dangle a big carrot ; Our carrot is the PNG LNG Project 22
PNG LNG Changes the Landscape PNG LNG Project represents PNGs cornerstone gas development; will more than double country's GDP Affects economy of PNG and its balance of trade situation profoundly (ACIL Tasman report , Feb 2008)…
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