Oil Search has abandoned its proposed LNG venture with Britain's BG Gas Group because progress with the ExxonMobil-led LNG project has limited access to PNG gas resources.

Managing director Peter Botten said yesterday the memorandum of understanding with BG, which is valid until October 31, would not be extended due to uncertainties over when gas resources could be accessed for the joint venture plan.

"BG and Oil Search have developed a positive and constructive working relationship over the past year and have agreed to continue to explore further joint opportunities within the LNG and natural gas sector in PNG," he said.

Botten said the MoU had been abandoned even though analysis had confirmed that the BG-Oil Search joint venture "was viable and had many attractions for the development of the PNG gas reserve."

Despite this setback, Oil Search continues to target discovery of additional gas reserves.

Last week, Oil Search began drilling its 90 percent-owned Korobosea-1 wildcat, 28km northwest of the Kimu gas field discovered in 1999, which could contain up to 500 billion cubic feet of gas.

Botten said negotiations had recommenced with the PNG government last month on fiscal terms for the ExxonMobil-led LNG project, in which Oil Search will be a major participant.

Negotiations have also commenced between equity partners in various gas fields on project unitiszation for the LNG venture.

"The activities remain on track to be completed by the end of 2007-early 2008, at which time a FEED (front end engineering and design) decision will be made," he said.

(C) 2007 BBC Monitoring Asia Pacific. via ProQuest Information and Learning Company; All Rights Reserved

Related Project
PNG LNG Project
Facility Type: LNG Owner: ExxonMobil; Oil Search Limited; Santos; Nippon Oil Exploration; AGL; MRDC); Eda Oil
Scope: New Construction Location: Port Moresby Papua New Guinea