The company’s oil and gas production in 2004 reached a record 11.05 million barrels of oil equivalent (boe), up 6.25% from 10.4 million boe in 2003.

Oil Search had forecast 2005 production to be 11.5-12 million boe and production to rise to 12.5-13.5 million boe.

But the 2005 figure was now being revised to take into account lost production from the closure of the company’s Kumul offshore export terminal, shutdown for repairs after a loading buoy was found to have a broken anchor line.

2004 was the company's first full year as operator of the PNG fields, according to managing director Peter Botten. The company managed to reduce field operating costs to $US6.23 a barrel, down from $US6.75 a barrel in 2003.

Oil Search today said it had cut costs by 20% in 2004 and intended to continue its cost-cutting strategies in 2005.

Oil Search was also benefiting from its alliance with Halliburton, which gave the company access to world class technical, engineering and field operations support, he said.

But 2005 would pose some problems for Oil Search given the current environment of high costs and increasing competition for field equipment, services and personnel, Botten said.

Nevertheless the company would ramp up its drilling campaign. By the end of the year, three rigs were expected to be operating in the biggest drilling program seen in PNG for more than a decade.

“While much of the drilling is concentrated on appraisal and development, we expect exploration activity to increase in the second half of the year, with a focus on drilling prospects near to existing infrastructure, which can be brought into production quickly should they be successful,” Botten said.

“In parallel, the company is pursuing an active exploration program in the Middle East and North Africa, encouraged by the early development of the Nabrajah field.”

The company also has a 52.4% stake in the $3.3 billion PNG Gas pipeline project which will transport gas from Oil Search's Kutubu gas fields and ExxonMobil's nearby Hides gas field to Australia.

The project's front-end engineering and development (FEED) contracts have been awarded, with Eos – a consortium of KBR and WorleyParsons – winning the main contract in January.

“Work is expected to accelerate over the next few months on the various FEED activities and the joint venture is targeting to complete the FEED studies by the end of 2005 and to reach financial close in the first half of 2006,” Botten said.