oil search investing in png - developing markets...search-operated wells, gathering systems,...

OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | POMSoX: OSH | US ADR: OISHY

www.oilsearch.com

UK-PNG Trade & Investment Forum, April 2018

OIL SEARCH –

INVESTING IN PNG

| PAGE 2| PAGE 2

DISCLAIMER

While every effort is made to provide accurate and complete information, Oil Search Limited does

not warrant that the information in this presentation is free from errors or omissions or is suitable

for its intended use. Subject to any terms implied by law which cannot be excluded, Oil Search

Limited accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect)

incurred by you as a result of any error, omission or misrepresentation in information in this

presentation. All information in this presentation is subject to change without notice.

This presentation also contains forward-looking statements which are subject to particular risks

associated with the oil and gas industry. Oil Search Limited believes there are reasonable grounds

for the expectations on which the statements are based. However actual outcomes could differ

materially due to a range of factors including oil and gas prices, demand for oil, currency

fluctuations, drilling results, field performance, the timing of well work-overs and field development,

reserves depletion, progress on gas commercialisation and fiscal and other government issues

and approvals.

UK-PNG FORUM | APRIL 2018

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Established in PNG in 1929

~60% interest in PNG’s producing

oil fields, operated by Oil Search

29% interest in PNG LNG Project,

operated by ExxonMobil

Pursuing major LNG growth

opportunities in PNG in

collaboration with ExxonMobil and

Total:

– Broad alignment reached on

preferred downstream

development concept for 8MTPA

of new capacity

Material gas exploration upside

in PNG

Market capitalisation ~A$11bn

(~US$8.5bn)

Listed on ASX (Share Code: OSH)

and POMSOX, plus US ADR

programme (Share Code: OISHY)

OIL SEARCH PNG LICENCE INTERESTS

Oil Pipeline

Gas Pipeline

OSH Operated

OSH Non Operated

OSH Application

* OSH estimate of gross resource for purposes of the acquisition


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Oil Search has a 29% interest in the PNG LNG Project, a

world-class liquefied natural gas development, which came

on-stream in 2014

Produced 8.3 MT (gross) of LNG in 2017, 5% higher than 2016 and

more than 20% above nameplate capacity:

– One of the best performing LNG projects in the world, a major

achievement in a developing country

The PNG LNG Project contributed 24.4 mmboe net to Oil Search

production in 2017, comprising 20.9 mmboe of LNG and 3.5

mmboe of liquids, ~80% of total Oil Search production

In 2017, the PNG LNG Project sold 110 LNG cargoes, almost 80%

under long-term contract, with remainder on spot market to

North-East Asia customers (> half to Japan):

– Project in process of signing short-medium contracts for up to an

additional 1.3 MTPA LNG with strong interest from top-tier

buyers

PNG LNG PROJECT - STRONG

PERFORMANCE SINCE START-UP

7.4

7.9

8.3

2015 2016 2017

PNG LNG gross production (MT)

+7%

+5%

Nameplate

6.9 MTPA


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PNG LNG Project is the largest resource venture PNG has ever

seen. Investment totalled ~US$20 billion of which ~US$5.5 billion

was spent within PNG

Based on a independent study* GDP growth averaged 5.3% during

the investment phase in the With LNG Scenario compared to 3.3%

under a No LNG Scenario

By 2030, government revenue is estimated to be K32.1 billion under

the With LNG Scenario, compared to K18.6 billion under the No

LNG Scenario, in part due to tax and income revenues flowing from

PNG LNG

On average, employment is estimated to have grown by >50,000 pa

during 2009-2017 and is expected to accelerate to 128,000 a year

over 2018-2030. This compares with 24,000 and 65,000 pa

respectively for the No LNG Scenario. Given the severity of

underemployment, the expected impact on employment is vital for

the PNG economy and for PNG society

* Findings from The Impact of the LNG Project on the Economy of Papua New

Guinea Report by Theodore Levantis, Osborne Sanida

BENEFITS OF PNG LNG TO THE PNG

ECONOMY


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Broad alignment between key parties on preferred downstream development concept:

– Three new trains, two supported by Papua LNG (Elk-Antelope), one by PNG LNG and P’nyang, located at PNG

LNG plant site, totalling 8 MTPA capacity

– Presented to PNG LNG, PRL 15 and PRL 3 joint ventures as well as Government for endorsement

– Negotiations underway on cost sharing terms, conditions governing integration, with gas agreement discussions to

start shortly

Integration of current PNG LNG facilities with additional LNG capacity maximises value for all stakeholders

Targeting FEED decision in second half of 2018

LNG EXPANSION – VITAL TO DRIVING

THE PNG ECONOMY FORWARD


Space for 8 MTPA new train capacity

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Recertification of P’nyang gas field

resources by an independent expert has

resulted in a tripling of gross certified 1C

resource to 3.51 tcf, while 2C gross

resources have increased to 4.36 tcf

Combined with recently-certified gas

resources in the Elk-Antelope fields, ~11 tcf

of undeveloped 2C gas resource to support

LNG expansion, with in excess of 8 tcf 1C

basis

Global LNG demand grew 11% in 2017 and

expected to grow by more than 6% pa over

next five years

Only 7.2 MTPA of new LNG capacity

sanctioned in 2016-17

To fill forecast supply-demand gap in mid

2020s, 50 MTPA of projects need to take

FID by 2020

LNG expansion from PNG well placed to fill

supply-demand gap, targeting premium NE

Asian markets

SIGNIFICANT RESOURCE UPSIDE TO

UNDERPIN LNG EXPANSION


Global LNG supply demand balanceSource: WoodMac 4Q 2017

Hides

Gobe

Kutubu

P’nyang

Elk-AntelopeJuha

0

100

200

300

400

500

600 UnderConstructionOperationalSupplyDemand

LN

G C

ap

ac

ity (

MT

PA

)

| PAGE 8

PNG EXPLORATION – MULTIPLE PLAYS TO

SUPPORT FURTHER LNG GROWTH

Multiple material exploration prospects in

PNG to support further LNG growth

Oil Search PNG licence portfolio focused

on four potential LNG-scale hubs (NW

Highlands, Gulf/Forelands, Shallow

Offshore Gulf, Deepwater Gulf)

Strategically aligned JVs with appropriate

equity levels

PNG’s yet-to-find potential estimated at 40

tcf gas, >550 mmbbl oil, with giant fields

predicted

Major focus on commercialisation routes,

optimising capital efficiency and value

Muruk

Elk-

Antelope

NW Foldbelt

Offshore Papuan Gulf

Shallow and Deep Water

Gulf/ Forelands

Kimu

Barikewa


| PAGE 9

Magnitude 7.5 earthquake struck the PNG Highlands on

26 February at 03:44 (PNG local time) with numerous aftershocks

No fatalities or serious injuries to OSH staff or contractors. However,

injuries and deaths in surrounding communities. Major relief efforts

within community (see later)

OSH-operated production in PNG Highlands and ExxonMobil

operated PNG LNG Project facilities (HGCP, Hides wells, LNG trains)

shut in as precautionary measure and to assess damage

Remedial work undertaken to ensure integrity and safety of Oil

Search-operated wells, gathering systems, production facilities and

other infrastructure:

– Gobe and Kutubu fields back onstream in March, with production

being ramped up progressively

– Moran sustained more damage with production to be reinstated

over 2018

PNG LNG safely recommenced LNG production in April

HIGHLANDS EARTHQUAKE

Many landslips in the

Hegigio gorge

Landslip between the CPF and Ridge

Camp


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Communities significantly impacted:

– Many deaths, destruction to homes, schools, roads, bridges, loss of basic

necessities

OSH relief efforts:

– ‘First Responder’ to communities (few organisations with on-the-ground

ability to acquire relief aid, respond with medical support and deliver to

impacted areas)

– Working with Landowner Leaders, Government Agencies and Donor

Groups to coordinate delivery of urgent relief (food, water, shelter, medical

support)

– Logistics support:

– OSH’s Moro base – coordination point for delivery and distribution of

aid

– OSH helicopters and personnel – assisting with distribution of

emergency aid, food, medical and supplies

– Oil Search Foundation continues to play ongoing major role in

addressing communities critical needs

HIGHLANDS EARTHQUAKE –

OIL SEARCH RELIEF EFFORTS

PGK 16 million (US$5

million) committed in

cash and kind to support

disaster relief efforts in

Hela and Southern

Highlands Provinces


• >200 tonnes of food and

supplies delivered into

villages, reaching

~200,000 people

• 100 health centre kits

delivered

• ~2,400 medical

treatments undertaken

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HIGHLANDS EARTHQUAKE – OIL

SEARCH RELIEF EFFORTS


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Oil Search has contributed over US$2.2 billion in socio-economic benefits

since 2013

Oil Search has committed US$56 million to the Oil Search Foundation,

which delivers Health, Women’s Empowerment and Leadership and

Education programmes

Since 2016, Oil Search has injected around US$7 million to the Hela

Provincial Hospital which now provides around 300,000 people with top-

class health and community facilities

In 2017, project managed school, hospital, road and community facility

projects worth US$122 million on behalf of the PNG Government, through

various tax credit schemes

OTHER SOCIO-ECONOMIC BENEFITS

DELIVERED BY OIL SEARCH TO PNG


OIL SEARCH LIMITED | ARBN 055 079 868 | ASX: OSH | POMSoX: OSH | US ADR: OISHY

www.oilsearch.com

April 2018

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