"Pre-FEED technical studies have determined that the optimal LNG plant size is a 6.3 million tonne per annum two train plant to be located near Port Moresby," Oil Search managing director Peter Botten said.
"A review and update of expected capital costs is currently underway following a bottom-up rebuild by the operator, ExxonMobil, in preparation for FEED entry."
He added a comprehensive coordinated development and operating agreement covering all commercial aspects of the project including gas supply arrangement, unitisation principles and voting requirements had progressed in the fourth quarter of 2007 while all co-venturers had signed a marketing plan for LNG from the project this month.
ExxonMobil will market PNG LNG on behalf of its partners once the FEED decision has been made.
"Discussion also continued regarding licence renewals. The PNG Government passed legislation that will allow the extension of Petroleum Retention Licences (PRLs) for shorter terms than those that previously applied," Botten said.
"It is anticipated that PRLs covering the southern part of the Hides gas field and the Angore field, which form part of the PNG LNG Project and expire in March, will be renewed under the new provisions."
The PNG Government had reportedly decided to limit any extension to ExxonMobil's PRL 11 and 12 until the LNG project entered FEED or a final investment decision was made.
Botten also said Oil Search expects its 2008 preliminary work program that includes a series of development wells in PNG - primarily on the Kutubu and Moran fields - is expected to help mitigate natural field decline.
"As a result, total production in 2008 is expected to be similar to 2007 levels," he said.
The company had posted fourth quarter 2007 production of 2.47 million barrels of oil equivalent, 3% lower than in the third quarter of the same year, due to natural field decline in PNG and a lower contribution from Egypt.
Total production in 2007 was 9.78MMboe, in line with the company's forecasts.
Despite the drop in production, the company posted record revenues of $US690.2 million for 2007 due to high oil prices averaging about $US77.78 per barrel, about 16% higher than in 2006.
Botten added Oil Search had set aside between $US130-140 million for exploration this year, down from $US213 million last year.
About $US70 million will be spent in PNG while the remainder will be used in the Middle East and North Africa.
