Oil Search in bid to boost PNG returns

Oil Search is hoping to boost the capacity of its gas export project in Papua New Guinea, with the addition of a further two export units, as it seeks to boost returns from its assets in that country.

"A key strategic objective ... is to capitalise on the asset base currently being constructed by the PNG LNG project, by adding a third (and possibly fourth) LNG train," company chairman Richard Lee told shareholders at Friday's annual meeting.

"An expansion of PNG LNG is regarded as the highest value opportunity in our growth portfolio.

"The discovery of a sizeable gas accumulation at P'nyang South in early 2012 has brought us a step closer to underpinning an expansion, with further material gas resource upside in the Highlands being tested over the next 18 months by an extensive seismic and drilling program."

The initial exports from the $US19 billion project begin next year, with the main partners in the project - Oil Search, Exxon Mobil and Santos - raising a further $US1.5 billion of project finance, to fund 70 per cent of the 21 per cent cost increase disclosed late last year.

Oil Search's share of the remaining project costs are estimated to be about $US500 million, it told shareholders.

"We have more than sufficient liquidity to fund these remaining costs, with a cash position at the end of March of $US439 million, an undrawn $US500 million corporate debt facility, as well as strong cash flow generation from our producing assets in PNG," Mr Lee said.

The project has an initial 6.9-million-tonne export capacity although, like a number of gas export projects being developed at present, is keen to boost exports, at a time when US exporters are also vying to enter the industry in the wake of a surge of domestic US gas reserves.