OIL SEARCH LIMITED Oil and Gas Exploration and Production An Industry at a Turning Point 3 December 2002
An Industry at a Turning Point The Status Quo Cannot Prevail Fundamental Changes are Required to Deliver Full Potential Value of PNG Resources A Renaissance is Possible and the Value to all Stakeholders is Material
An Industry at a Turning Point THE PRIZE It is possible to almost double the value of the PNG Oil and Gas Business in five years. Requires: Commercialisation of some gas resources Significant reduction in operating cost for oil…
An Industry at a Turning Point THE REALITY Value must come predominantly from existing discovered resources Existing oil and gas fields Fundamental changes to the way we do business We will achieve some value enhancement. Just how…
The Present Outlook Oil Production to continue to decline Reserve growth through exploration since Moran (1997) has not replaced production Only 5 exploration wells drilled in the PNG Foldbelt since 1998, resulting in small oil discovery…
The Present Outlook PNG Oil Production is declining. Gross production (boepd) 150,000 100,000 50,000 Base case oil 0 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
The Present Outlook Correlation between Exploration and Reserve Growth 14 4000 Cummulative MMBO & MMBOE Reserves Wells (Exploration) 12 Cumm Reserves MMBOE 3500 Cumm 2P EUR MMBO 3000 10 Exploration Wells 2500 8 2000…
The Present Outlook Foldbelt commercial oil mean rates post Kutubu 18% (6 successes out of 31 wells) Foreland commercial success rates 1990 0% (0 successes out of 17 wells) Technical success rate post Kutubu (oil and gas) 35% PNG…
The Present Outlook Exploration outlook limited to 2-3 wells in next 2 years Not adequate to increase reserve base and production capabilities Based on historic success rates, need up to 6 wells to achieve commercial oil success The…
The Status Quo Cannot Prevail There are clear ways to ensure change: Commercialise Gas Resources through export project, or other Remember the oil Step change in operating costs Optimise production operations Step change in…
Commercialise Gas Resources Clearly, the most obvious way to change investment and return criteria for the country. Focus on PNG to Australia Project: In the best position ever to successfully close Project timetable determined by…
Commercialise Gas Reserves Project commercialises meaningful volume of discovered resource (still only about one third) drives significant investment operating cost changes underpins revenues for 30 plus years It is not another…
Commercialise Gas Reserves Major progress made in past 12 months: PNG issues made major progress Gas agreement State Equity Financing Plans progressed Community Support Engineering and commercial issues Market conditions Now…
Commercialise Gas Resources Focus on PNG Pipeline Export Project Other options are likely viable but on smaller scale
Remember the Oil Substantial remaining value in existing oil fields Kutubu, Moran, SE Gobe/Gobe, Saunders, Bilip, SE Mananda. Major revenue impact in next 3 years Integration of oil business with gas Requires: continued operating cost…
PNG Oil Production Outlook Production Profile Additional Oil Gross production (boepd) 70,000 60,000 50,000 Incremental full potential oil 40,000 30,000 20,000 10,000 Base case oil 0 02 03 04 05 06 07 08 09 10 11 12 13 14…
PNG Oil and Gas Production Outlook Production Profile Additional Oil Gross production (boepd) 200,000 150,000 Incremental full potential PNG gas project 100,000 Base case PNG gas project 50,000 Incremental full potential oil…
Remember the Oil Key to maximising value operating cost reduction - a continued focus field teams to optimise production Drilling cost review: analyse drilling techniques all aspects of operations and logistics appropriate…
Remember the Oil Reduce time from Discovery to First Oil: Substantially in Industry Participants control Access and tolling issues remain but precedents set Key issue of licensing and benefits distribution
PNG Oil Production Forecast Base Case Barrels of Oil per day Hides GTE 80,000 SE Mananda 70,000 SE Gobe Gobe Main 60,000 Moran 50,000 Kutubu 40,000 30,000 20,000 10,000 0 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30
PNG Oil Production Forecast Max Case Barrels of Oil per day Hides GTE 80,000 SE Mananda 70,000 SE Gobe Gobe Main 60,000 Moran 50,000 Kutubu New Discovery I 40,000 New Discovery II 30,000 20,000 10,000 0 02 04 06 08 10…
Exploration Benefits Beyond Taxes Total Cost of Logohou Seismic Total Cost of Hides 4 US5million US23million 8% 18% 32% 13% 44% 15% 50% Balance 20% Local Wages & Services Taxes & Duties Equipment (outside PNG)…
Remember the Stakeholders Industry Participants: PNG Gas Project material opportunity Materiality of oil assets and prospects an issue for large companies A pivotal Point, Gas + Oil or just Oil
Remember the Stakeholders Industry Participants: Major new investors unlikely without a change to Status Quo Further rationalisation expected Locally based organisation now has materiality to help drive exploration and development.…
Remember the Stakeholders Government and Fiscal Issues: Major effort by Department to promote greater exploration Good first steps Promote close working relationship to maximise impact of reforms.
Remember the Stakeholders Government and Industry Investment Timetable: New PPL - end 2003 First Drilling - 2005-6 Development - 2010-12 First Tax Revenues - 2015+ Value now must come from existing licences and discovered resources
PNG Acreage 1998
PNG Acreage 2002
PNG Acreage 2005
Remember the Stakeholders Landowners and Expectations Very credible history of project support Project equity essential Challenge of revenue distribution Delivery of services and benefits DPE and MRDC key parts of the Partnership
Oil and Gas Exploration and Production The decision point is nigh The status quo cannot be sustained Real value remains: Gas commercialisation certainly Oil developments, based on fundamental changes to the way we do business
Oil and Gas Exploration and Production Real value remains: PNG to Australia Gas Project a prime focus Other commercial options, though smaller, are possible The oil business has substantial value in its discovered resources. These…
Oil and Gas Exploration and Production The challenge has been defined The initiatives to build the business are being addressed Is it Death or Glory Our vision is clear
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