Thursday, August 31, 2006

Oil Search's Iraq move

OIL Search has expanded its interests in liquefied natural gas and oil in the Middle East as it tries to move beyond the doubtful PNG gas pipeline project.

Papua New Guinea's biggest oil and gas producer yesterday said it was ready to tap into war-torn Iraq's re-emerging oil and gas industry by taking a 20 per cent share in an oil exploration company looking for oil in the north of the country.

It also signed a Memorandum of Understanding with British Gas to look at developing an LNG project in PNG, managing director Peter Botten said.

"BG has extensive global experience and a proven track record in the upstream development of gas fields, the construction and operation of large scale LNG plants and LNG marketing," Mr Botten said.

"We see this initial investigation into LNG as highly complementary to our other gas commercialisation projects in PNG."

Oil Search shares took a hammering last month, dropping more than 10 per cent after AGL pulled out of the consortium with Malaysian government-owned Petronas building the Australian leg of the long talked about pipeline.

Oil Search said early last month it expected the pipeline to go ahead and was confident of finding a buyer for AGL's stake.

But yesterday's announcements were backed by analysts and the market, which yesterday saw shares recover almost 4 per cent, rising 13ยข to $3.45.

Speculation in trading circles was the stronger outlook put Oil Search back on the takeover target list with Adelaide-based Santos, whose reluctance to sign up to take gas from the PNG pipeline was a key reason for AGL to scale back its involvement, a likely suitor.

Fat Prophets senior analyst Gavin Wendt said the LNG and oil expansion could be seen as a replacement project for the company in case the PNG gas pipeline did not go ahead.

"Their share price has taken a bit of a battering, despite an outstanding production and profit report," Mr Wendt said.

"The company is trying to diversify away from the perception of having such a tremendous reliance on PNG."

Oil Search has a one-year option to convert its 20 per cent holding in A&T Petroleum into a 10 per cent direct interest in the Bin Bawi exploration and production sharing agreement 90km from the giant Kirkuk oil field in Kurdistan in northern Iraq.

Mr Botten said the area was a relatively stable part of Iraq with foreign investment increasing in the region.


Damn imperialist, taking over Kurdistan, the other Iraq.


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