Nippon Oil Corp. (5001.TO) said Wednesday it bought stakes in four gas exploration licenses in Papua New Guinea from Australia's Oil Search Ltd. (OSH.AU), for an undisclosed sum.

The fields could help generate feed stock for a proposed Exxon Mobil Corp. (XOM)-operated liquefied natural gas, or LNG, processing plant near Port Moresby in which Oil Search and Nippon Oil are stakeholders.

Oil Search confirmed that it farmed out interests of between 10% and 20% in the four licenses to a fully owned subsidiary of Nippon Oil.

In a separate deal, Oil Search said it also lifted its holdings in another two PNG gas fields by 10% each after buying the interests from Gedd (PNG) Ltd.

"The farm-downs (to Nippon Oil) have taken our interest in licenses where we already have material positions to a more optimal level in terms of risk management," Oil Search's chief executive, Peter Botten, said in a statement.

"They have reduced our expenditure commitments going forward to a more manageable level given the current lower oil price environment."

Oil Search said an active exploration drilling program is planned to commence in the licenses in late 2009.

Late last year, Nippon Oil increased its stake in the proposed PNG LNG project to 5.4% from 1.8% after buying out AGL Energy Ltd.'s PNG interests for US$795 million.

Oil Search has a 34.1% holding in the PNG LNG project and Exxon has 41.6%. Australia's Santos Ltd. (STOSY) holds 17.7%.

-By Kazuhiro Shimamura, Dow Jones Newswires; 813-5255-2929; kazuhiro.shimamura@dowjones.com; and Ross Kelly, 61-2-8235-2957; ross.kelly@dowjones.com

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