Managing director Peter Botten said the company made considerable progress on its “PNG in-country gas commercialisation strategy” during the second quarter.

Oil Search recently signed a memorandum of understanding with Oswal Projects regarding a proposed world scale ammonia/urea plant while discussions are progressing with Japanese partners Mitsubishi and Itochu on a proposed petrochemical plant.

“The recent signing of an MoU to sell gas to Oswal Projects for a world scale ammonia/urea plant, to be located near Port Moresby, is one example of the significant lift in interest in PNG gas by a range of international companies,” Botten said in the company’s quarterly report released on Tuesday.

“It is expected that negotiations will accelerate with Mitsubishi and Itochu in the second half of 2006, on gas sales agreements to supply up to 86 petajoules per annum of gas to a petrochemical plant in the Port Moresby area.”

Under the MoU with Oswal, Oil Search has committed 50PJpa to the ammonia/urea plant, with Oswal said to have recently initiated a comprehensive feasibility study on the proposed plant.

A decision to enter front-end engineering and design for the petrochemical plant project, scheduled to take four to six months to complete, is expected to be made in the second half of this year.

The long-mooted pipeline to Port Moresby was also said to be looking more viable as a result of progress made on the two proposed developments.

Botten said the advanced nature of both the petrochemical plant talks and Oswal’s ammonia/urea plant, “helps to underpin the economics of a proposed pipeline into Port Moresby”.

As a result, Oil Search said it had recently initiated work to update the previously completed pre-FEED study on a gas supply pipeline to the Port Moresby area.

Meanwhile, Botten said the company was now focused on a major exploration and appraisal drilling program in a bid to prove up additional gas resources to satisfy the anticipated demand from the mooted projects.

Botten said high hopes are held for the Juha field where the company hopes to prove up around 4 trillion cubic feet of gas.

“The first of these wells will be drilled at the Juha gas and condensate field, starting in the last quarter of 2006. Drilling in this program will continue through 2007 and into 2008, with the objective of proving up in excess of 4Tcf of contractible gas over this period,” he said.