By David Winning 
 

SYDNEY--Oil Search Ltd. (OSH.AU) said it would focus on its Papua LNG development and Alaskan assets after the joint venture owners of the P'nyang gas field in Papua New Guinea weren't able to agree terms with the government to develop the resource.

The stalled negotiations signal a possible delay or deferral to a project that would have expanded the active PNG LNG project, which supplies liquefied natural gas to customers in Asia.

Terms currently proposed by Papua New Guinea meant Oil Search and partners in the joint venture, including Exxon Mobil Corp. (XOM), were "unable to obtain a return on their investment that made the project investable and bankable," Managing Director Peter Botten said.

"For Oil Search, the project returns under the state's proposed terms were approximately the same as our cost of capital, on an unrisked basis," he said.

Oil Search said it would continue to talk to the Papua New Guinea government about the P'nyang field, seeking better terms while ensuring an appropriate share of value from any development goes to local landowners and the state. But it would now focus on other opportunities, including Papua LNG, also in the Asia-Pacific country.

"We will seek to advance the Papua LNG Project in a timely way, recognising that several engineering and commercial modifications will need to be made now that the P'nyang development is delayed," Mr. Botten said.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

February 02, 2020 18:10 ET (23:10 GMT)

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