Oil Search Says PNG LNG On Track; Boosts 2Q Revenue 53%

Oil Search Ltd. (OSH.AU) said Tuesday it has been informed by partner ExxonMobil Corp. (XOM) that their US$15 billion PNG LNG project in Papua New Guinea remains on track to ship its first cargo in 2014.

Oil Search also reported a 53% increase in second quarter revenue to US$217.8 million from US$142.7 million from a year earlier as higher oil prices offset an 8.8% fall in production to 1.77 million barrels of oil equivalent from 1.94 million BOE.

Close to a dozen large liquefied natural gas projects planned for Australia and PNG are sucking up labor supplies and putting pressure on project costs.

Exxon has advised "it is making good progress towards the planned start-up window of 2014," Oil Search said, while a company spokeswoman said Exxon hasn't "made any changes to the metrics of the project".

Oil Search said the costs and schedule of a project's components often fluctuate throughout its life and that Exxon is managing these as a normal part of its operatorship.

"One focus area remains exchange rate exposure to the high Australian dollar," Oil Search said.

The project has a number of Australian dollar-denominated contracts and pays some staff based in Oil Search's Brisbane office in Australian dollars.

Drilling of the Hides field in PNG, which could support an expansion of PNG LNG to three LNG processing units from the current two, is due to commence in the fourth quarter of 2011, earlier than the initial timetable of mid-2012, Oil Search said.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com

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