"The present market outlook for gas sales indicates a likely sales volume of over 250 PJ pa. This volume will need plant expansion over the base case volume of between 150 PJ pa and 200 PJ pa," Botten said in the company's 2005 Annual Report. Oil Search is PNG's largest oil and gas producer.
"Capital cost estimates for building the project have been influenced by the higher cost of certain materials, equipment and services, along with a plant expansion to cater for higher throughputs."
Botten said despite these proposed adjustments, the project economics remain "attractive" due to higher gas off-take and the prevailing oil prices.
"A significant shift in medium and long-term gas pricing has been noted in various markets over the last 12 to 18 months. Given the fine balance of supply and demand for gas in the East Coast gas market predicted for 2015 and beyond, it is likely that further gas sales into this market will be impacted by an increasing price trend over this period," he said.
"The project participants will attempt to capture these likely price increases in any future contracts."
Botten said a number of elements needed to be nailed down prior to project sanction expected in the second half of this year.
"Key elements required to reach project sanction include finalisation of the gas sales agreements, completion of engineering and capacity optimisation studies, negotiation of benefits distribution to landowners, along with a range of commercial agreements and finalisation of financing arrangements."
In terms of secondary developments arising out of the PNG Gas project, Botten revealed the company was currently in negotiations with Mitsubishi Gas Chemical, Itochu and others with regards to development of "world-scale" petrochemical plant in Port Moresby.
Botten said the consortium was currently in the process of finalising a feasibility study and front-end engineering and design entry for this project as well as an ancillary pipeline to Port Moresby.
