OIL SEARCH LIMITED PNG to Australia Pipeline Project Alignment Matters December 2005 1 Australian & PNG Gas Conference
A Long Time Coming PNG Project has taken a step change towards commerciality over the past 12 months Alignment of key stakeholders for risk mitigation and growth FEED entry a pivotal point Front End Engineering and Design almost…
A Generational Change Gas Supply fundamentals for East Coast Australia are changing The Cooper Transition Maturity brings higher expense A struggle to remain competitively priced A healthy and growing CSM supply Significant…
The Impact of Change A change in the power base Gas pricing will remain highly competitive Ensures gas market growth and a larger pie for us all Delivers gas from NT to Sydney Facilitates regional growth especially in North…
Lesson from the Past PNG Project has had a number of iterations First Iteration Townsville supply from Pandora Too small a market Too little reserves Second Iteration Townsville and Gladstone markets Required : Kutubu and Hides…
Lesson from the Past Third Iteration Queensland Markets A pragmatic joint venture solution Strong alignment with governments Too much, too soon Fourth Iteration Upstream integration and recalibration A few days in the sun Time…
Lesson from the Past Fifth Iteration Lessons learnt from the past Revised development plan Flexible for smaller market thresholds Maximum liquids value The importance of stakeholder alignment Who can drive success 7
Upstream Participants Joint venture between ExxonMobil 39.43% Oil Search 54.15% MRDC/State 3.02% Merlin (JPP) 3.39% Gas Sales with condensate export Conversion of Kutubu oil fields to gas production Development of Hides Gas…
PNG Gas Project Configuration 600 mmscfd Sales Gas HIDES PRODUCTION New CENTRAL Full Condensate Recovery Condensate Gas GAS CONDITIONING FACILITY pipeline pipeline PLANT (CGCP) KUTUBU CPF 700mmscfd Oil production & 165 mmscfd…
Infrastructure Overview Final pipeline configuration and route being determined by customer demand Abundant competitively priced gas to NT, Queensland and southern markets Interconnected pipeline system promoting competition…
PNG Pipeline Project The Importance of Alignment : Hugely complex project Integration of upstream field groups and value sharing New gas supply entering a highly competitive market Over 30 stakeholders Upstream Customers /…
Targeted Alignment The Key to Project Success Deliberate strategy to achieve key stakeholder alignment Project FEED decision Joint Venture alignment to commit US90m for detailed engineering work Key message to customers of…
Targeted Alignment The Key to Project Success The importance of an integrated approach: The Australian Energy company model Reserve ownership Infrastructure access / ownership Markets and aggregation Downstream developments…
Targeted Alignment The Key to Project Success Market/Customer and downstream alignment The importance of AGL Largest East Coast energy retailer Major gas customer Pipeline and infrastructure Downstream development potential A…
Targeted Alignment The Key to Project Success Santos Important energy participant in Australia Customer/infrastructure owner Negotiations continuing Powerful upstream/downstream alignment for next generation of supply 15
Targeted Alignment The Key to Project Success Government in Papua New Guinea Strongly motivated to deliver Committed to in-country development after core Pipeline Project delivered Of critical importance to country development…
Targeted Alignment The Key to Project Success Landowners in PNG Excellent production reliability in oil projects, based on project ownership and business development partnerships Meaningful project ownership Benefits distribution…
Targeted Alignment The Key to Project Success Financing Material interest from banks to support quality project PNG Government / Oil Search working closely to co-ordinate financing 18
OSH Funding Requirements Seeking debt finance - 70:30 debt: equity For equity component, Company balance sheet very robust Zero gearing and strong cash reserves US100 m committed revolver currently undrawn and does not expire…
Sources of Project Debt Finance Commercial banks to provide primary funding commitment, Right sector, geographical growth area, banks asset hungry and opportunity poor in resources OSHs existing corporate oil facility supported by…
Clear need for gas in Eastern Australia Wood Mackenzie analysis suggests even with PNG, Coal Bed Methane & Yet-to-Find (YTF) gas there is a clear need for new sources of gas supply to meet demand Eastern Australia - Supply &…
So What is Different Now The Easy Stuff Simple design configuration optimises oil facilities whilst accelerating liquids production Capital efficient design Established market threshold with upside volumes. Focus on moving…
A Long Time Coming Focus on all aspects of Project Delivery FEED activities proceeding well Design criteria fit for purpose, maximising value of liquids Underwriting customer base to be converted to firm agreements Further…
Alignment Matters Learning Lessons from the Past Project being driven by motivated stakeholders Upstream alignment Key stakeholders with upstream, customers and downstream integration Important corporate drivers to succeed Clear…
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