Oil production increase

Oil Search Ltd has delivered an increase in production in the second quarter of 2007, with record oil prices providing a significant boost to revenue.

Output in the three months to June 30 was 2.45 million barrels of oil equivalent (Mmboe) compared to 2.28 Mmboe in the previous quarter of 2007, the company reported.

The oil producer said revenue in the second quarter increased by 54 per cent to $US177.8 million ($A201.53 million) on the first quarter following average prices of $US76.09 per barrel.

Oil Search said the oil price was a new record for the company.

Total revenue for the first half of 2007 was $US292.9 million ($A331.99 million) compared to $US308.2 million ($A349.33 million) in the corresponding period in 2006.

Despite the increase in production, Oil Search has downgraded its full year forecast from 10.5 Mmboe to 11 Mmboe in 2007 to 9.5 Mmboe to 10 Mmboe.

This was due to delays in development drilling in Papua New Guinea and a ramp up of Area A in Egypt.

"Based primarily on the delays ... the 2007 full year production forecast has been revised to between 9.5 Mmboe to 10 Mmboe, with a similar production level expected in 2008," Oil Search managing director Peter Botten said.

The company forecast a 10 - 15 per cent rise in production in 2009.

Oil Search said work continued during the quarter with BG Group on developing a PNG liquefied natural gas (LNG) plant with a capacity up to 7.2 million tonnes a year.

"Discussions are ongoing with the PNG government and resource holders in a number of fields to assess the merits of the BG proposal to buy gas, build a two-train facility and potentially underwrite market offtake," Mr Botten said.

In February, Oil Search and its partners shelved plans for an $8 billion gas pipeline from PNG to Australia in favour of a more economical alternative.

It has been estimated the LNG operation with BG Group in PNG could cost about $8 billion to develop.

"The BG option may provide an earlier first-gas date, reduced capital costs and a more flexible project structure that would facilitate future expansion," Mr Botten said.

source:www.theage.com.au