1
UBS Resources and Energy Conference
June 2010
O I L S E A R C H L I M I T E D
2
Oil Search Strategic Priorities
Assist ExxonMobil in delivering PNG LNG Project on time and on budget:
Transformational impact on Oil Search and PNG
ExxonMobil quality operator
Lays foundation for major LNG industry in PNG
Focus on further LNG development:Gas exploration and appraisal activities in PNG
Strategic PNG gas acquisitions
Partner alignment
Optimise oil field management
Undertake measured oil exploration
ACHIEVEMENT OF ABOVE WILL ENSURE CONTINUED LONG TERM TOP QUARTILE TSR PERFORMANCE
3
PNG LNG ProjectUpdate
4
PNG LNG Fields
PDL7
PDL1
PDL2
PDL6 PDL5
PDL9
PDL8
PDL8
PDL7 Nogoli Hides Camp
Ridge Camp
ProposedJuha Facility
ProposedHides
ConditioningPlant
CPF
APF
Power Plant
KUTUBU
ANGORE
AGOGO
HIDESJUHA
5
PNG LNG Project Overview
6.6MTPA, 2 train development, operated by ExxonMobilFully contracted with continuing strong market interestBased on 9.3TCF proven and probable reserves commitmentFiscal stability agreement in place for 10.5TCF of production
APT at 17.5% ROR and 20% ROR. Max case tax rate of 41.7%Initial equities
ExxonMobil 33.2%Oil Search 29.0%Kroton2 (IPBC and Petromin) 16.8%MRDC (PNG Landowners) 2.8%Santos 13.5%Nippon Oil 4.7%
6
PNG LNG Project Construction Activities Planned/Underway
7
EPC Contractors
LNG Plant: Chiyoda/JGCOffshore Pipeline SaipemHides Gas Plant CBI/Clough JVOnshore Pipeline SpiecapagInfrastructure McConnellDowell/CCCEarly Works Clough/Curtain JVAssociated Gas (OSH) Aker Solutions
8
Proposed LNG Plant Layout
FutureExpansion
9
Proposed Hides Gas Conditioning Plant and Well Pads
10
2010 PNG LNG Project Activities
Continued early works: Roads, bridges, camps, site preparation and training facilities
Order remaining long lead items and place purchase ordersOpen supply routesMobilisation of people and equipment by key contractorsAssociated Gas (AG) construction in oil fields
11
Construction Activities
Oiyarip Camp Construction, Mendi
Bridge works, Highlands Highway
300-man Flotel at Kopi
POM Tech construction siteLNG plant site bypass road
Kobalu camp foundations
12
PNG LNG Development Phases
13
GasGrowth
14
PNG Gas Growth
Key strategic priority for Oil Search is to grow gas business in PNGLNG remains optimum commercialisation route for additional gas Significant pre-investment - PNG LNG will provide infrastructure and capacity to facilitate expansion and provide excellent cost structure:
Use of capacity in pipeline, jetty, tanks and services
Trained local work force
Government is very supportive of, and expects, future gas growth
15
PNG LNG Optimisation
Facilities optimisationReviewing available reservesAccelerating appraisal/exploration activities
Hides, Angore, Huria seismic - in preparation for drilling
Actively reviewing :Reserve addsConstruction cost synergies
16
Two-Pronged Gas Growth Strategy
PNG LNG dedicated fields:
Proven (1P) 301 mmboe (OSH share) – all sold
Proven & probable (2P) 505 mmboe (OSH share)
Focus on moving 2P (& 3P) into 1P contractible category through field development optimisation and further appraisal
Other fields and exploration:
Existing proven & probable resources (2C) of 281 mmboe (OSH share), still to be commercialised
Programme to appraise discoveries and explore for new gas
Objective is to prove up sufficient proven contractible reserves to underwrite Trains 3 and 4
1717
Papuan Basin Geological Provinces & Play types
Aure FoldBeltProven Gas – Elk/Antelope
Primary play types:Tertiary limestone
Gulf of PapuaProven Gas – Pandora
Primary play types: Tertiary limestone reefs and Pliocene
turbidites
Foreland BasinProven Gas – Kimu, Douglas, Stanley,
ElevalaPrimary play types: Cretaceous sands
(Base regional seal) in tilted fault blocks and basement drapes
Frontal FoldBeltOil and Gas Production –
Kutubu + HidesPrimary play type: Early Cretaceous sands (Base regional seal) in hanging wall thrust
anticlines
Papuan Basin is lightly explored143 exploration wells in 215,000km2 of prospective area (an average of 1.5 wells/10,000km2)
18
Existing Discoveries
PRL01
PPL234
PRL08PPL240
PRL03
PRL11
PDL7
PPL239
PDL1
PPL190
PPL219
PRL10
PRL02
PDL2
PDL4
PDL3
PRL09
PPL244
9°S
6°S
145°E50km
Kumul Terminal
PDL6PDL5
APRL14
PPL260
APPL249
APPL250
PPL
233
PDL9PDL8
142°E
Distribution of discovered 2P Reserve/Resource
Significant discovered oil & gas reserves/resources in Papuan Basin(predominantly in FoldBelt)Basin is predominantly gas prone85% of basin’s resources by boe are gas
Hides/Juha/Angore
Kutubu/Agogo/SEM
P’nyang
Pandora A
Uramu
Barikewa
Gobe/SEGElk/Antelope
19
Port Moresby80km
Juha
Gobe
Kutubu & Agogo
Hides & Angore
144°E
8°S
6°S
146°E142°E
PNG Exploration Activity –2010-12
PPL219 OSHMananda Attic
PRL1 TLM 3D seismic processing
PRL9Barikewa 3
PRL11/PDL8 Exxon85 km 2D (Huria)
PPL234/244 OSH4720km2 3D
PPL267 NGEPanakawa
PPL259 EWDUbuntu
PPL268 InteroilMitsui agreement on condensate
stripping plant.Elk & Antelope appraisals
75km 2D seismic over leads.
PRL4 HZNStanley Appraisal
PPL285 SASOLAwapa
PPL234 OSHFlinders
TLM Douglas & Puk Puk Appraisal
1500km 2D
PRL5 HZNElevala Appraisal
PRL3 ExxonP’nyang Seismic
PDL2 OSH60km 2D
Drilling
Seismic
Legend
Over the next 2 years;20+ wells4,700+ km2 3D2,000+ km 2D
20
4,700km2 of 3D seismic commenced April 2010 – biggest 3D survey ever undertaken in PNGAgreement signed with Talisman, to swap Talisman’s 35% equity in PPL 244 for 60% of OSH’s 80% equity in PPL 239. Takes OSH interest in PPL 244 to 80%. Oil Search to take over operatorship of PPL 244
Unlocking the Offshore
4700 km2 3D
21
Coal Bed Methane Potential in PNG?
Oil Search awarded seven licences for CBM exploration, each approx 2,500 sq km in area
Three wells to be drilled in 2010 to further refine coal location, rank and thickness
If encouraging, drilling programme may continue
22
PNG Attracting Growing Interest
Port Moresby144°E
8°S
6°S
146°E142°E
Talisman Equity Participation
80km
Juha
Gobe
Kutubu & Agogo
Hides & Angore
Port Moresby144°E
6°S
146°E142°E
Sasol & Interoil Equity Participation
80km
8°S
Juha
Gobe
Kutubu & Agogo
Hides & Angore
Port Moresby144°E
8°S
146°E142°E
Petroleum Licences
CSG Licences
6°S
80km
Oil Search Equity Participation
Juha
Gobe
Kutubu & Agogo
Hides & Angore
PNG transaction value ~US$1.4 billion over past 18 months, inc NOEX acquisition of AGL licencesTalisman and Sasol have acquired significant acreage in Western Forelands. Interoil has strong position in Eastern ForelandsOSH strategy focused on enhancing position in core PNG LNG Foldbeltacreage and Gulf - viewed as offering greatest potential for large gas discoveries
23
MENA 2010 Exploration Summary
Commitment
Discretionary
Future Commitment
Well Types
Prospect/Lead (POS%)Mean Oil Gross (mmstb)Mean Gas Gross (bscf)
Seismic
CommitmentDiscretionary
Permit 2D(distance)/3D(area)
Sana’a Office
Dubai Office
Tajerouine
Le Kef
K42
Shakal
Block 7
Block 3
Taj. + Le Kef 600km
K42 200km
Shakal 50km
Jebel Milh (17%)28 mmstb
Block 3 & 7 400km
Al Meashar - oil discovery
Block 3/7 well,late 2010
24
Production Outlook (net to OSH)
PNG LNG adds ~18 mmboe pa to OSH at plateau in 2015 onwards. 30 year Project lifeT3 could add an additional ~9 mmboe pa, with T4 of similar magnitude
Net
Pro
du
ctio
n (
bo
ep
d)
0
10,000
20,000
30,000
40,000
50,000
60,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
LNG GasLNG Gas
PNG DevelopmentPNG Development
70,000
80,000
Potential T3 LNG GasPotential T3 LNG Gas
LNG CondensateLNG Condensate
90,000
Potential T3 LNG CondensatePotential T3 LNG Condensate
25
Oil SearchUndergoing Metamorphosis
Company undergoing major transformation through development of PNG LNG
Significant growth delivery over next 5 yearsPNG LNG T1 and T2Commitment to T3Reserves growth for further gas optimisation
Major strategic review underway to optimise growth path and prepare for major production and revenue growthDedicated review team in place,Focus areas :
PNG oil and gas operations interfacePNG LNG deliveryGas New Business (T3 & TA) plus other optionsGrowth and business developmentPNG stakeholder managementCapital managementOrganisation capability
Provide potential value, programmes and organisation to deliver through 1st LNG production
26
O I L S E A R C H L I M I T E D