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news - png pipeline cost reduction

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    Gas project cost slashed

    SOURCE: PNG National.........

    Project to be viable with sales less than proposed 200 petajoules yearly: Oil Search

    NEW studies have greatly reduced base development costs for the PNG Gas Project by US$700 million (K2.6 billion) to US$1.7 billion (K6.3 billion).
    In its annual report, Oil Search Ltd said the project could be viable with sales of much less than the proposed 200 petajoules annually.
    The joint venture has conditional sales agreements for 80 PJ/year with additional loads of up to 94PJ/year identified in the Northern Territory.
    "This has provided project developers with confidence that project sanction can be achieved with available volumes in the Northern Territory and southern markets."
    Oil Search said the joint venture has completed a comprehensive review of development options.
    It said the preferred development concept now involved simultaneous development of gas from the Hides and Kutubu fields.
    This contrasted with earlier plans to initially tap gas reserves from proven oil fields such as Kutubu and Moran prior to development of the big Hides field.
    Required facilities have been simplified with significant cost reductions and the joint venture is now looking at building most of the gas facilities onshore instead of basing them offshore.
    The report said: "A gas sales development case, with associated condensate stripping, is presently favoured, with substantial flexibility to expand, should markets develop above the 200 petajoules a year level.
    "An LPG (liquefied petroleum gas) fractionation facility is likely to be built if market demand is sufficient at project sanction."
    The studies have also shown the pipeline could viably service the Northern Territory and southern states along or in a combination with Queensland.
    Although it was highly desirable to capture sales opportunities in Queensland, this was not considered essential for the project to proceed.
    Oil Search said all efforts are being made to enter into the front-end engineering and design phase in the second quarter of this year. Failing this, activities will be scaled back and the focus will be moved to other and potentially complementary development options.
    These options included:

    A liquids cycling project at Hides

    Production of compressed natural gas from for local and export markets

    A gas pipeline to Port Moresby, possibly from Uramu

    A feasibility study will also be completed this year on a methanol plant
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