Commencement of early works by Papua New Guinea Liquid Natural Gas (LNG) Project

Oil Search is pleased to report that the PNG LNG Project participants have agreed to a proposal by the Project Operator, ExxonMobil, to commence Early Works activities on the PNG LNG Project.  Early Works include a range of infrastructure projects, such as the upgrade and repair of roads, construction of camps, wharf upgrades, early site preparation in the PNG Highlands, construction of training facilities and ordering of long lead items.

The development of this infrastructure will facilitate full construction to commence in early 2010, following the Final Investment Decision which is targeted to take place in late 2009.

This positive Early Works decision follows the recent signing of the Umbrella Benefits Sharing Agreement (Umbrella BSA) and substantial progress made on LNG marketing.

 The Umbrella BSA defines how benefits, including those provided for under the Oil and Gas Act, will be shared between the PNG Government, Provincial Governments, Project Area Landowners and Local Level Governments.

The negotiation of the Umbrella BSA was a major exercise in democracy. 

Held in Kokopo, East New Britain over a five week period, it involved over 1,000 representatives selected by the communities to represent them in the discussions.  The Umbrella BSA sets the framework for a series of individual licence-based agreements, to establish the final benefits distribution. 

As previously advised, significant progress has also been made on marketing the Project’s LNG and a further announcement on this is expected to be made soon.

Peter Botten, Oil Search's Managing Director, said: "The decision to proceed with Early Works, comprising an accelerated investment of approximately US$600 million over the next 12 months (US$200 million net to Oil Search), prior to the formal sanction of the Project at the end of this year, is a major vote of confidence in the PNG LNG Project.

“It demonstrates an increased level of commitment to the Project by the participants, as milestones are progressively met.  

As announced by ExxonMobil recently, a number of contracts for early works activities have already been awarded, including a major construction contract for Upstream Early Civil Infrastructure to Clough Curtain JV, a joint venture between Clough Niugini Ltd and Curtain Brothers PNG Ltd."