Papua New Guinean offshore company Oil Search has announced that technical staff at a proposed liquefied natural gas (LNG) project have been “demobilised” due to the spread of Covid-19 in the country, casting some doubts over the company’s future in Papua New Guinea.
The plan, a joint venture between the Papua New Guinea Government, Oil Search, and industry majors Total and ExxonMobil, was set to go ahead following the completion of discussions in May. Known as the P’nyang Gas Agreement, the project has since been shelved due to the Covid-19 pandemic and its impact on oil and gas prices, and Total and ExxonMobil withdrawing the majority of their technical and commercial staff.
The suspension of the project is the latest setback for Oil Search, which published its half-year financial figures today, with mixed results for the company. Total revenue fell 26% between the end of the first quarter of 2020 and the end of the second quarter of the year, while half-year revenue is down 19% compared to the first six months of 2019. These struggles are in spite of a slight increase in production over this period, with total production up 4% and total sales up 2% in the first half of 2020 compared to the first half of 2019, as the company struggles to deal with the plummeting oil and gas prices that have rocked the industry amid the pandemic.
Oil Search’s reporting noted that the average oil price per barrel crashed from $68.67 in the June 2019 quarter to $23.05 in the June 2020 quarter, while LNG and gas price fell from $9.30 per million British thermal units (MMBtu) to $7.34 per MMBtu over the same period.
These price collapses have forced the company to cut costs across its operations, with managing director Keiran Wulff noting that: “Following the decisive steps taken in March to reduce 2020 capital expenditure by approximately 40%, in early April we strengthened our balance sheet materially by raising approximately $700 million through an equity issue.
“The placement component was significantly oversubscribed and we ensured that all placement shares were allocated to existing shareholders to minimise dilution,” Wulff continued. “We were very pleased that the raise was strongly supported by our shareholders, particularly given market conditions.”
Earlier this month, the company announced a number of measures to aid in the Papua New Guinea Government’s response to the Covid-19 pandemic; there have just been 19 cases of Covid-19 reported in the country, and a single death, but both the government and private companies remain vigilant of the threat.
“Oil Search commends the leadership of the Papua New Guinea Government and its Covid-19 response team in taking proactive and decisive action regarding the global Covid-19 pandemic,” sad Wulff last week. “To support the government’s initiatives and preparedness, Oil Search will donate much needed personal protective equipment to our local Provincial Health Authorities. The hospital grade equipment to be distributed includes over 250,000 disposable masks, 100,000 medical hats, 100,000 medical gloves, 10,000 face shields, and 5 million millilitres of hand sanitiser.”