Oil Search in Talks to Sign Shorter Term LNG Contracts
Papua New Guinea based Oil Search is in talks with Asian buyers to sign shorter term LNG contract amid low global spot prices.
Speaking at Macquarie Australia conference, company’s managing director Peter Botten said the idea is that short and medium term contracts could largely take Oil Search out of LNG spot trading. The spot LNG price in Asia has nearly halved in last one year.
"We have a view that the spot market is going to be quite challenging over the next 12 to 18 months and certainly we are in a process of looking at various short-term and medium-term contracts which could largely take us out of LNG spot trading," Sydney Morning Herald quoted Botten as saying.
He said that large buyers such as South Korea and Japan are beginning to push back as their demand for the fuel levels off.
"I do believe there are markets such as Japan which are reasonably mature and you're probably not going to see much growth, and you may see some substitution through contract rollovers," Botten said. "You also see mature markets in Korea and Taiwan."
Oil Search will also look to acquire exploration acreage in PNG over the next 12 months as an additional source of supply to PNG LNG and Papua LNG.
Late last month, Oil Search said that integration of PNG LNG project and the proposed Papua LNG project would be beneficial for both the projects in current low energy price environment.
Oil Search has interests in both ExxonMobil operated PNG LNG project, which is due for expansion, and Total operated Papua LNG project, which is based on development of the Elk-Antelope gas fields.
The company believes use of existing infrastructure and the co-location of plant sites would help drive capital efficient investment, cost and operational synergies and schedule acceleration, maximising returns for all stakeholders, including the PNG government, landowners and co-venturers.
“Generating maximum shared value through working together is particularly important if there is an extended period of low oil and gas prices,” Oil Search said.