Oil Search Nius

It is now nine months after Project Sanction and the PNG LNG Project is in full swing. On a complex and geographically dis-tributed project such as this, it is sometimes hard to gauge progress, so let’s review some of the ongoing activi-ties. The project is split into eight sub-projects; • C1 Early Works: this part of the

project is designed to install the infrastructure, access and camps that the other LNG contractors will need later on. Apart from building a new wharf and camp at Kopi they are pioneering road access from Gobe to Kutubu and

at Komo as well as restoring the Highlands Highway to provide trucking access to Hides.

• C2 LNG Plant Early Works:

Major work here is focussed on the Plant Site bypass road and the initial installation of electrical and communications supply in-frastructure as well as water and drainage facilities.

• EPC2 Offshore Pipeline: Over

in Kuantan in Malaysia, the first pipe has started arriving at the coating yard ahead of schedule.

In PNG, Saipem have opened their local office and a major design review is

planned for June. • EPC3 LNG Plant: The major

item of progress has been the placing of an order for the Solar Gas Turbine Generators that will power the LNG Plant.

Elsewhere the detailed plot models are being reviewed to ensure that the vari-ous process and service utilities layouts are properly integrated. Substantial effort is being placed into capacity building of the local landowner com-

pany LABA. Finally, the disposal of unexploded ordnance at the Plant site area is now nearing completion. • EPC4 Hides Gas Conditioning Plant: There have been delays experienced with getting access to this site as the archaeological and reset-tlement teams have per-

formed their work. Bringing together the various land-owner groups in a way that provides stability and un-interrupted access to the Hides sites has also been a chal-lenge. The preparatory work is now substan-tially complete and there are positive indications that the Hides landowners are prepared to come together under the HGDC landowner company um-brella. The HGCP is on the critical path for the project so this area will be getting a lot of focus until things are running more smoothly.

• EPC5A Onshore Pipeline: While it is still early days for this contract, pipe supply has started and progress is slightly ahead of schedule.

This contract will have the major im-pact on Oil Search as it involves the installation of the LNG Gas line from Hides to Kikori – right through the oil field areas. It will cross our oil line a number of times and good coordination with the contractor Spiecapag will be vital to minimise disruption.

• EPC5B Komo Airfield: This con-tract has experienced delays that are similar to EPC4 – it is also hoped that progress will start to improve once HGDC is resolved.

• Associated Gas & PL2 Life Ex-tension Projects: These pro-jects are being operated by Oil Search and involve the overhaul

(Continued on page 2)

Jan– June 2010

LNG project progressLNG project progressLNG project progress

PNG Proud: Investing in PNG since 1929

By Phil Caldwell EGM—LNG

Kopi wharf installation.

Coated pipe waiting for shipment.

Heavy haul road grading.

z

Oil Search Nius

Volume 3 Jan—June 2010

Editor Ruth Waram

Reporter Celestine Ove

Design & layout Ruth Waram

Send your editorial contributions to the Public Affairs team for consideration in

the newsletter.

Oil Search Limited was incorporated in

PNG on January 17th, 1929.

Oil Search is one of the largest compa-

nies in PNG, a major tax payer, employer

and investor

PROFILE

2 Oil Search Nius Nius Jan—June 2010


and addition of various pieces of equip-ment and operating systems in PDL2 and PL2.

Both these projects are well underway and on track for completion towards the end of 2012. • Other Areas: Progress is underway in

the areas of Training, Shipping, Com-missioning and Production Organisation development but more on those an-other time.

• Overall - the project has now ramped

up expenditure to over US$ 300 million per month and has now spent in excess of US$ 2,200 million. In addition, the project has finalised all of the major contracts and has committed to over US$ 9,500 million of the anticipated total spend of US$ 16,370 million.

Considerable effort is now being spent on ensuring that the expenditure is efficient and that the project does not get adversely de-layed. With the monthly cost now increasing as more work gets underway; it is important that we all get behind the project as much as possible and help it advance without interrup-tion.

(Continued from page 1)

PNG LNG in full swing

The letter above was written by 12 year old Cynthia Manub, a student at the Assemblies of God Christian Academy in Lae. Cynthia’s dad, Gordon, works with the Public Health Unit in Moro. Gordon celebrated his fifth anniversary of working with Oil Search earlier this year. Her letter is in appreciation of the school fee assistance that she receives, it is one of the benefits her dad receives in working for Oil Search. I received Gordon’s email on the day I was looking back at my eight anniversary of

working for Oil Search — that was on August 5. I have seen the company transform from a small minor player in the PNG petroleum industry to where we are today. What has it been like for you, working for Oil Search Limited? If you have an interesting experience you want to share, don’t hesitate to drop me a line, to consider your article for inclusion in the next edition of Oil Search Nius. Ruth Waram Editor

3 Oil Search Nius Managing Director’s Message Jan—June 2010


LNG dominating our businessLNG dominating our businessLNG dominating our business Team We are now more than half way through the year already and the calendar until Christmas is filling fast. To date, 2010 has been dominated by the progressive ramp up of ac-tivities surrounding PNG LNG. More and more people and contractors are mobilising to PNG and although early days, the Project is now hav-ing a significant impact on our field operations and anyone who lives or works in Port Moresby. There is no doubt that the PNG LNG Project represents an unprece-dented opportunity for PNG to transform its economy and allow government to deliver the services and opportunities the broad popu-lation deserves. Of course the Project will also transform Oil Search and our pre-sent Strategic Review is designed to guide us through the massive changes brought about by LNG de-velopment, whilst we deliver maxi-mum value to our shareholders in a socially responsible and sustainable way. This review will provide us with the direction and programmes to fur-

ther build our business and give our staff the opportu-

nity to build their careers as we grow as an organisation. As part of this development, Oil Search will do its best to influence all areas of Government to ensure that the massive benefits that will flow to PNG are used wisely, to generate more wealth, provide ser-vices such as schools, hospitals, roads etc., and generate further opportunities for Papua New Gui-neans across the nation. As a major corporate entity in PNG, we need to take responsibility for trying to influence government and project landowners to use these benefits wisely. We also need to play a role in put-ting some of the benefits that come to us back into the country and en-sure that the Project works in a stable operating regime. We must continue to have commu-nity support for our operations, maintaining a social licence to op-erate in the country and a unique Oil Search identity. These issues

will be covered as part of the Stra-tegic Review. Although early days for the LNG Project, it is generally progressing well, despite early growing pains, as the Operator and Project Con-tractors get used to the operating environment in PNG. We are now about 7 months into a 3.5 to 4 year development timeta-ble for Trains 1 and 2. There will undoubtedly be increas-ing stress on the country’s infra-structure as the major mobilisation of people and equipment builds up later this year and into 2011. We will keep a very close watch on inflation and some of the negative impacts that this size of project has on people living and working in PNG, so that we can potentially help us all manage these issues. There is not much we can do about the traffic though and it will only get worse. I would to thank our many staff who interface with the PNG LNG operations in helping pro-ject people get acclimatised and progress the project in an efficient and safe way.


MESSAGE FROM MANAGING DIRECTOR PETER BOTTEN, CBE

Infrastructure upgrade underway in Kopi, as at April this year. Pictures courtesy of PNG LNG Project.


I would also like to thank our people who are carrying out the associated gas and facilities life extension work in our own operations. This is designed to allow our oil fields and facilities to provide first gas production into the pipeline and LNG plant and to contribute gas over many more years than the operations originally anticipated when they were built for oil production. As I mentioned in my note to you in early June, we are now a bit under half way through our Strategic Review process and the team is finalising the core material to be used to analyse options for the Company to build our business over the next 5 years. We are planning a number of workshops, over the next few weeks, to go through each of the main operating and value streams and ensure we are carrying out work that optimises our business, whilst developing programmes that continue our major growth path in LNG, exploration and new business. We will also refine what we would like to be in 2015 and what we need to do to deliver our vision for this time pe-riod, building on our present core strengths and corpo-rate culture. The initial part of this work will be reviewed to our Board in October and rolled out across the organi-sation after that. Whilst the Strategic Review and PNG LNG operations are accelerated, we also continue to suc-cessfully produce oil and explore. Well done to all concerned in the PNG field operations who have very successfully reduced our gas flaring to achieve results well above our initial targets. Well done also to our Yemen Team who delivered a re-markable safety performance in their drilling operations over the last 6 months. I would like all of you to focus once again on our safety performance and further enhance our culture towards Incident Free Operations. This is a challenge and respon-sibility that we all own, including the performance and safety of our contractor employees. Recent safety performance has not been up to our high level of expectation and we have had a number of high potential incidents that could have resulted in major inju-ries or worse. I would like to encourage you all to take a daily proactive role in leading safety performance in your area. I would also like you all to improve supervision and input to our contractors who work with us, to ensure their safety culture and attention to keeping people safe at least matches our own. Please remember that it is just not acceptable for any of our people to come to work and go home injured in any way. Do what you can to encourage IFO and make the second half of 2010 our safest ever.

LNG dominating our business (Continued from page 3)

The Kaiam Ferry Crossing.

ABOVE: The offshore piling progress. BELOW: The flotilla accommo-dation at Kopi. These pictures were taken in April. Pictures courtesy of the PNG LNG project.

4 Oil Search Nius MD’s Message Jan—June 2010

5 Oil Search Nius Feature Jan—June 2010

Lake Kutubu research study updateLake Kutubu research study updateLake Kutubu research study update


Oil Search has embarked on a major research project to understand the current state of the Lake Kutubu envi-ronment, both biophysical (water, fish, sediment) and social, including direct and indirect impacts of the local population on the health of the Lake. Discussions with stakeholders inter-ested in the sustainable use of re-sources associated with Lake Kutubu identified the need to undertake a de-tailed study to understand relevant issues and opportunities and factor them into a long-term management programme. The Lake Kutubu catchment is classi-fied as a wetland of international sig-nificance under the Ramsar Wetland Convention, the second highest rank-ing after World Heritage Listing. There is an management programme but due to anticipated changes as a consequence of recent approval for LNG development and increases in local populations, this requires review and modification. It is important to understand the cur-rent status of the environmental health of the lake, including changes in social situations, so these can be factored into the long-term sustain-able management of the Lake Kutubu environment. The research study is divided into two phases. The first includes two compo-nents; a) biophysical - water, sediment,

fish, micro-organism diversity, hydrology and lake profile, and

b) socio-economic - population in-crease, lifestyle changes, lake re-source harvest and use. Findings from the first phase studies will form the basis of the second phase activities, involving develop-ment of a conservation and manage-ment programme. This will involve stakeholders such as the Department of Environment and Conservation (DEC), the Ramsar Se-cretariat, relevant Government agen-cies such as National Fisheries Au-thorities and Tourism Promotion Au-thority, WWF and other NGOs, land-owners and the Lake Kutubu Wildlife

Management Area Commit-tee, Oil Search and the

PNG LNG Project. Extensive consultation and discussions will ensure transparency and owner-ship of the programme. The first phase of the project is al-ready underway, with external (Brisbane, Australia based) environ-mental consultants undertaking sam-pling of water, sediment, fish, cray-fish, algae and other micro-organisms, sources of water inputs into the Lake

and a detailed study of the lake’s pro-file (bathymetry). Samples have been submitted to laboratories in Australia for analysis and a report is expected in the middle of July. Analyses include heavy metals con-centrations in sediment, water and fish/crayfish; diversity of the micro-organism population of the lake (as primary source of food for lake fish), an understanding of the amount and quality of water input from the catch-ment into the Lake and behaviour of the Lake as it relates to depth and mass of the water body.

Scientists from Hydrobiology (Brisbane, Australia) taking part in the water inflow study with Lake Kutubu landowners.

By Dr Ben Yaru Environment Manager

Leaders representing all villages around Lake Kutubu discuss the days’ activities with OSL CA officer Marc Mulungu and VLO Stanley Wabi

Continued on page 6

6 Oil Search Nius Feature 2Jan—June 2010


Preliminary output from the depth profile measurements.

Lake Kutubu researchLake Kutubu researchLake Kutubu research study updatestudy updatestudy update

Knowing water input and the water profile are important in understanding the potential for “turnover” events, where low oxygen water from the bottom can rise to the surface productive zone where most fish live, subsequently killing fish and crayfish. A second component of the first phase involves a detailed survey of the socio-economic status and lifestyle changes of lakeside villages over the last 15-20 years.

Changes from a subsistence lifestyle to one more based on a cash economy may place undue pressure on the de-mand for resources from the lake, which may not have been present previously. This could include the use of products such as detergents, availability of outboard mo-tors and small mesh nets cou-pled with increased frequency and efficiency of fish harvest, all potentially impacting fish catch sizes, which can dimin-ish over time. All of these are important fac-

tors which must be as-sessed in order to develop an effective long-term con-servation and management programme for the sus-tainable use and protection of the unique Lake Kutubu environment. As findings of these studies become available, updates will be provided in future publica-tions. For further information, call the author on ext. 3183 (internal), +61 2 8238 8138 o r e m a i l t o b e n e [email protected].


2010 Sabatayn workshop

Oil Search recently initiated a workshop to encour-age sharing of technical ideas between companies working near our blocks 3 and 7 in Yemen. Working with the Petroleum Exploration and Pro-duction Authority (PEPA), we organised the 2010 Sabatayn workshop on June 13. The main goal of the workshop was to share and transfer technical knowledge and experience be-tween the various exploration companies operat-ing in the area. During the workshop; presentations were given by PEPA staff, Oil Search and the other companies' representatives (SINOPEC China, KNOC- Korea, and OMV- Austria) made different presentations on Fractured Basement Reservoirs, Reservoir Po-tential of Lam Member, the effects of salt on seis-mic data, the nature of fractured basement reser-voir and the seismic imaging challenges in the Sa-batayn basin. The Oil Search presentations were prepared by the technical team and delivered by Adnan Al Ham-madi while the workshop planning was handled by Walid Al Odaini. Both Walid and Adnan have been with Oil Search since our early days in Yemen, first as secondees from the government agency (PEPA) and now as employees of Oil Search. Speaking during the opening of the workshop the PEPA Chairman Engineer/ Nassr Al-Humaidi pointed out to the importance of these scientific meetings as they embrace relevant information to oil companies either for their exploration or pro-duction activities. Mr Al-Humaidi expressed his appreciation and thanks to Oil Search (ROY) for its support and for initiating and organising the workshop. Speaking on behalf of the participants at the end of the

workshop, Oil Search deputy general man-ager Shane S c h o f i e l d thanked PEPA chairman and engineer Nassr Al-Humaidi (pictured left) for his efforts and presented him with a cer-tificate of ap-preciation.

YEMEN

7 Oil Search Nius Gas Development Jan—June 2010


Growing the gas business in PNG

Following the Financial Invest-ment Decision (FID) and Fi-nancial Close on the PNG LNG Project, it is now critically im-portant that the PNG LNG pro-

ject be delivered on time and on budget so that all stakeholders in the Project can maxi-mise their benefits and PNG can continue to build a track record of delivering projects and production. In addition to the existing benefits that will be provided by the PNG LNG Project, it also pro-vides a platform for future growth as a result of its ongoing track record with customers, lenders and investors, infrastructure and workforce capacity. A high priority for Oil Search, and other project own-ers, is to grow the gas business in PNG using the foun-dations of Train 1 and 2. Our work to date has shown that the most value add-ing opportunity is through LNG expansion and we are pushing ahead as fast as possible. Whenever the next LNG Train is approved, we will be able to achieve significant synergies from the existing infrastructure, namely pipeline capacity and jetty, tank and utilities capacity at the LNG Plant. If we are successful in our goals, we may also achieve additional synergies in workforce planning and design savings, both of which could be significant. To do this, we will need to aggregate sufficient gas resources and capture the market. On the marketing side, we believe that the PNG LNG market will continue to show strong growth and that PNG LNG has significant competitive advantages through an aligned joint venture, supportive Govern-ment and an excellent track record that it will be able to win the competition for additional sales from a third train. In terms of reserves aggregation, the reserves could come from a variety of sources. Existing PNG LNG Pro-ject fields, existing discoveries and new exploration success. All avenues are being progressed at the mo-ment. In the existing PNG LNG fields, we believe there is up-side in the Kutubu associated gas complex and within Hides. We are working with our Co-Venturers to at-tempt to accelerate the drilling of some Hides wells to demonstrate the possible upside long before the devel-opment wells are planned. In existing discoveries (eg P’nyang, Barikewa and Pan-

dora) we are looking to aggregate these into an expan-sion LNG train. You may have noticed over the last few months that we have increased our equity in Pandora and recently we increased our equity in Barikewa in an arrangement with Santos. The third way is through exploration and a number of things are happening at the moment: • Offshore, Oil Search has organised a large explo-

ration 3D seismic survey in the Gulf of Papua (see figure) which is a first for PNG and will hopefully enable Oil Search and its partners to “see” the gas in the subsurface and thus quickly deliver any new gas to the project. An offshore exploration program is planned for late 2011 and 2012.

• Onshore, we have just completed a seismic sur-

vey over Huria and this data is being analysed at the moment to see whether we can justify drill-ing at this location.

• An unconventional concept Oil Search is pursu-

ing this year is the exploration for Coal Seam Gas (CSG). Coals have been drilled at shallow depths in many foreland wells over the last 30 years wells and in late 2009 Oil Search took out mineral licences covering 11,000km2 over prin-cipally the swamps of the northern Gulf and Western Provinces.

• A special drilling rig is being imported from Paki-

stan to drill at least 3 wells to evaluate this po-tential in August and September this year. If successful these coals could deliver large vol-umes of gas similar to the large volumes re-cently proven and now being developed in Queensland.

By Phil Bainbridge EGM Gas Development

The outline of the 3 D seismic survey.

Oil Search Limited is committed to protect ing the health and safety of its employees and

contractors . We recognise that the use of illicit drugs, alcohol and some medica-tions can adversely affect job per-formance, the work environment and the safety and health of our workplace. Consequently, Oil Search has a Drug and Alcohol Policy in place across the business. It applies to all employees, contrac-

tors, sub-contractors, consultants and visitors whilst working at any Oil Search locations or whilst driv-ing a company vehicle. The Policy contains a number of procedures outlining the rules gov-erning the use of various sub-stances. It also details the use of the differ-ent testing processes, including random and ‘post cause or suspi-cion of abuse’ testing and the con-sequences of returning a positive test result. The policy can be found on the Oil Search intranet: Workgroups/Health Service/Health Education (on the left-hand side)/Drug & Al-cohol.

Please take the time to read it and understand how it applies to you. As a way of reinforcing the impor-tance of the Policy, we have also developed an e-learning training module that everyone is required to undertake. It takes about 15 minutes to com-plete and concludes with a brief assessment. You will hear more about this through your Group 4 sessions and line manager. Human Resources will be support-ing everyone to complete the train-ing module over the next couple of months and will be providing re-ports to line managers so they can track the progress of their teams.

8 Oil Search Nius HR News Jan—June 2010


Drug & Alcohol Policy Rollout By Paul Crute EGM—HR

Changes to the Oil Search employee share plans

In 2009 there were several changes to taxation legislation in Australia and the Board took the opportunity to review the

existing Oil Search employee share plans. The main aims of the review were to: • Have consistent plans across Oil Search, • Make it easier for employees to receive the

benefit of the share plans, • Reduce the administration of employee share

plans, • Ensure compliance with taxation legislation. The existing plans were reviewed and consolidated un-der the Oil Search Long Term Incentive Plan that was approved by the Board at their April 2010 Meeting. Under the Oil Search Long Term Incentive Plan, em-ployees can be granted Performance Rights, Share Op-tions, Restricted Shares or Share Appreciation Rights. At their May 2010 meeting, the Board approved alloca-tions under the Long Term Incentive Plan with a grant date of 1 June 2010 and a vesting date of 17 May 2013. Under the 2010 grant, the Employee Share Option Plan will be replaced by an award of Share Appreciation Rights under the Long Term Incentive Plan. A Share Appreciation Right operates in a similar way to a share option, with any benefit to the employee deliv-ered in shares, removing the need for an employee to pay any exercise costs.

The number of shares that an employee will receive is based on the growth in the Oil Search share price from 13 May 2010 to 17 June 2013. The other main change to the grants under the 2010 Long Term Incentive Plan is that there will be auto-matic exercising on the vesting date of 17 May 2013. This means that employees will not have to complete an exercise form, as this will be done automatically by the share plan administrator. The roll out of the new share plans commenced in Syd-ney and Brisbane on 2nd June and was followed by a full roll out in PNG from the 7th to the 11th of June. A second roll out in PNG was undertaken in the week commencing July 5th. Feedback to date on the revised share plans has been positive, with employees appreciative of the reduction in complexity and administration of the Long Term In-centive Plan. Further details on the 2010 grants under the Long Term Incentive Plan are contained in the guide that accompanied your offer letter, as well as the booklet that was handed out during the roll out presentations. While there have been changes to the 2010 grant, the previous grants under the Employee Share Option Plan and Performance Rights Plan remain unchanged and still maintain their grant date, vesting date, exercise period and expiry date, as well as exercise price for Share Options. Please contact your supervisor/manager or Human Re-sources contact if you would like any further informa-tion on the new Long Term Incentive Plan.

By Erron Palmer Rewards Manager

9 Oil Search Nius ICT News Jan—June 2010


Microwave network upgraded

Oil Search maintains an extensive com-munications network to support its op-erations in the Southern Highlands, the National Capital District and Gulf Prov-inces of PNG. The network, which uses a microwave backbone, supports a combination of: • Voice communications

• Data communications

• Radio communications

• Telemetry for the export and production facilities

This network services the main produc-tion facilities and supports the Distrib-uted Control System, which provides the supervisory control and data acqui-sition from the Kumul Marine Terminal, for the oil pipeline at the Main Line Valve sites. The microwave network also delivers radio and voice communications, along with intranet data services to the main and satellite camps, plus the technically challenging location of the Kumul Ma-rine Terminal. This network infrastructure connects to Port Moresby Office and the Australian Oil Search offices by a gateway into the Telikom PNG microwave network at Mt. Favenc and a satellite earth station lo-cated at Iagifu Ridge. The microwave backbone is the key technology facility connecting all the Oil Search PNG sites to these gateways.

The existing network had evolved over time and comprised a mixture of older equipment origi-nally installed as part of the Kutubu development, as well as more recent installations by the Oil Search ICT team. Much of the radio equipment previously in the main backbone was quite old, especially in a world where the de-mands on technology infrastructure increase rapidly. The network was starting to have op-erational issues which included: • Increased risk of failures in the

old equipment; • Reduced availability of spare

parts; • Extended repair times;

• Very limited product support;

• Limited or no training available for ICT telecommunications staff; and

• No expansion capability to meet the growing needs of the busi-ness

A team of major project experienced technical and engineering people were tasked to undertake preparation and planning work for an upgrade of the system. A business case was developed for the upgrade of the microwave and lightning protection systems that were in use across the PNG asset. With the support of the oil joint ven-tures, Oil Search ICT setup the Micro-wave Upgrade Project and the Lightning Protection Upgrade Project and devel-

oped a project plan. To execute the plan, goals that meet the Oil Search mis-sion were set including the: • Delivery of an upgraded Microwave Radio Network with

significantly improved reliability, using the latest and most inno-vative system available, thus ensuring the longest available life expectancy from the equip-ment installed.

• Development and maintenance of a delivery plan that allowed the team to Plan the Work and Work the Plan.

• Delivery of the projects to time, quality, and cost parameters whilst supporting the develop-ment ambitions of the ICT Tele-communications Operations team with technical training and an opportunity to participate in a structured project.

• Delivery of these projects safely in PNG’s remote mountainous terrain and arduous conditions, with no negative impact on the environment or local communi-ties.

Before the new equipment could be installed; the project team was required to perform Site Make Ready Works at the radio sites across the oil operations area. This including a considerable amount of working at heights and the safe hauling and installation of 12.5 tonne of steel antenna supports, on towers up to 60 metres above the ground.


By Brian Merritt Telecommunications Project Manager

New antenna mounts and preparing to re-move the old antennas at the Iagifu Ridge

The Gobe tower with the new microwave dishes.

10 Oil Search Nius ICT News Jan—June 2010


Other tower work included removal of unused antennas and the tidy up, re-moval or relocation of radio cables to make space for the new cables and out-door equipment. The team needed to dig trenches and lay metal strips in the ground to bond everything back to a common electrical earth point to protect the new system and the equipment it connected to from lightning strikes. There was considerable work performed inside the small communications huts to; make space, upgrade the power systems, add cable tray supports and make modifications to the cable entries. Upgraded lightning protection and new equipment racks were installed in preparation for the new microwave ra-dios. A contractor installed the new radios under the supervision of the ICT project and telecommunications teams. The systems were then put through a rigor-ous testing and commissioning pro-gram, with the acceptance criteria being 100% error free operation. A large portion of the microwave radio system was handed over from the ICT project team to the ICT telecommunica-tions team after testing and commis-sioning was completed in late November 2009. A very thorough preparation by the telecommunications team in pre-wiring and planning the migration of services from the old radios to the new system, meant the migration of all the commu-nications and telemetry services were successfully completed, largely unno-ticed by the many customers the ICT group support. During this first half of 2010 almost all of the remaining main microwave back-bone links and the smaller ones to most of the Main Line Valves and the Gobe Bush site that services the Gobe Airfield have been completed. The wet weather and heavy cloud have hampered safe access to complete the remaining mi-crowave links for Aiio Main Line Valve via Iagifu and Manu Tower, but these sites will still on track for completion in 2010. A significant microwave project scope change was introduced for the second quarter of 2010, with our General Man-ager Operation’s supporting Oil Search’s ICT department to work with Digicel, for the introduction of mobile phone ser-vices across the OSL lease area. The cooperative rollout has provided

access to mobile phone communication services for Oil Search staff, the sur-rounding communities and the large number of people who are working alongside OSL to make the LNG project a success. In addition to the provision of mobile phone services to all the main camps, OSL’s business will soon benefit from other gains achieved from ICT sharing a small portion of our new microwave radio system’s capacity and radio tower space with Digicel. A new Digicel radio tower has been built at Aird Hills in the Gulf Province, with support from OSL’s Community Affairs, the ICT Microwave Project Office and our colleagues at Kopi. This tower is much taller than Digicel required, being built to the greater height so it will be useful for OSL. ICT telecommunications now has the opportunity to provide an alternate communications path to Kumul Marine Terminal, with much improved and safer helicopter access than that offered by the current microwave link site for Kumul from Mt Favenc. The cooperative agreement between OSL and Digicel will also bring another opportunity for improvement to the ICT services provided to the OSL business. Many of us in the field in PNG will have experienced some difficulties in recent months, if not years, with services like JDE, internet and telephone call capac-ity degrading considerably at times, making it hard to perform our tasks efficiently. OSL has made space at Moran Peak in the Southern Highland Province, for a new Digicel radio tower which is cur-rently under construction. Once this tower is completed and the Digicel mi-crowave equipment is installed, we will have another gateway to provide com-munications services to our Port Mo-resby Office and subsequently the Sydney office where JDE and internet services originate, along with being our connection points for telephone services. It is expected that weather permitting, all of the land based microwave links will be com-pleted in 2010. Whilst the rain and clouds upon us, the ICT team isn’t sit-ting around waiting

for it to improve, just to get on with the original project scope of replacing the old Harris Microwave link from Mt Favenc to Kumul Marine Terminal. Instead the team has seized this oppor-tunity to focus on innovation, improve-ment and thinking outside the box, by planning a much better service to the export facility. Using a new site is only one of the steps on this journey, as there has been considerable research into what technology equipment should be deployed at this site to take advan-tage of the greatly reduced microwave radio path. The results of the technology research and other important criteria, like the longevity of PNG radio frequency li-cences have been incorporated into a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). In the near future ICT will consult with the key stakeholders and the microwave project sponsor, so they may choose the next steps for the microwave pro-ject team to achieve communications for the Kumul Marine Terminal, that meets the business needs now and for a considerable time into the future.


Microwave network upgraded

The new Digicel tower at Aird Hills

Foundations preparation for the new Moran peak tower.

11 Oil Search Nius GAS Jan—June 2010


Work progresses on Associated Gas

The last few months has been an exciting period

for the Associated Gas and PL2 Life Extension Projects. We have appointed Aker as our EPCM Contractor for AGRP which has required that our project team, lead by Brian Harradine, relocated to Melbourne to undertake the de-tailed design and start preparing for construction. As you all know Monadelphous have been successfully doing our mechanical services and project work for the last couple of years, and a key challenge for the project team has been to create an execu-tion strategy which both captures Monadelphous’ field experience and capitalises on Akers well known engineering and project manage-ment experience.

The approach that we are adopting is an integrated team approach which captures the respective strengths of the two organisations. Aker have an EPCM lead role, with Monadelphous providing a dedi-cated AG workforce working through their existing field organi-sation. A significant portion of AGRP re-volves around modifying our Crude Storage Tanks to accept conden-sate. Undertaking this work will be very challenging to do it safely. Some of this work will require a “shutdown”. This work will have to be planned at an incredible level of detail to ensure we do it safely, and at the same time minimise the loss of revenue. You will start to see the Aker team arrive from around August, please make them welcome. As you know, the LNG project will be operating for a very long time

(+20 years) which also means that the oil pipeline and Kumul Platform will have to transport and export the condensate from Hides for the same period. A new CALM buoy will have to be manufactured by SOFEC and installed to make sure that our tankers berth safely. We will also be refurbishing the Kumul platform to make sure that we can export reliably and safely for the next 20 years plus. Andy Curtis and a small specialist team is managing this work from our Bris-bane engineering office. PSN are doing the engineering work for us, again based in Melbourne, so Andy and the team are doing a lot of fly-ing. Some of this work has been ex-tremely challenging technically, and we have been working with a num-ber of Exxon technical specialists in Houston to ensure we use the best technology to achieve safe and reli-able operations.

By John Cushworth GM—Engineering Projects

Congratulations to the Yemen drilling team The Oil Search Yemen drilling team achieved a major milestone on June 20th 2010. The team recorded 12 months of operation free of Lost Time Incidents. Active supervision and encouragement by Oil Search representatives, with vigorous Oil Search management support, created a strong HSES culture on all locations from the outset of operations. In particular this has allowed a step change in safety behaviour by JOECO; our Drilling Contractor. Over the last 12 months, multiple activities have been undertaken, including: • Construction of a civil camp • Construction, equipping, and operation of a 1.2

km long airstrip • Construction of 3 well pads with associated ap-

proach roads • 3 water wells drilled and put into production • 3 road based rig moves • 2 deviated exploration wells drilled, tested and

suspended (Tubb'a-1 and Al Meashar-1) • With a 3rd deviated exploration well being drilled

(Jebel Al Milh-1). Shane Schofield, Yemen country manager when ac-knowledging the achievement said: "This milestone has been noted at the highest level of the Oil Search Safety Management System (Group 1).

“I passed on their acknowledgement and appre-ciation to every individual in our team.

“The challenge for us now is to continue to build a reli-able, lasting safety culture with strong processes and procedures that will assist us in delivering another year of the same." After the searing heat of the Yemeni desert had re-treated, crews and management celebrated the suc-cess of being 1 year LTI free with a BBQ at the Jebel Al Milh-1 rig site. As a more permanent reminder of this milestone, a safety award and certificate will also be presented.

YEMEN

Below: The celebration barbeque.

12 Oil Search Nius The Next Steps Jan—June 2010


Oil Search is now valued at ~A$7billion having grown from A$500 million six years ago. We will continue to grow, we will continue to expand, and we will continue to change. Change is inevitable. Volatile global busi-ness conditions demand strong responses and we have responded and will continue to do so. We have achieved some incredible things since becom-ing Operator in 2003 - we are good at getting things done. Our next goal is LNG – this has allowed us to commercialise 567 mmboe of our contingent gas re-serves which will deliver a core revenue stream for the next 30+ years. We have until late 2013 (first LNG) to consolidate all of the good work done so far and to add Reliability into the core of our operation here in the field. We cannot make this change overnight - there is much to be done, however every journey starts with a single step ... our journey is called Next Steps. Next Steps is, quite simply, the way we need to run our business for the future if we are to meet Our Vision for the Oil Operations Business. Our Vision is where we want to go with our business here in PNG and we be-lieve that: We are going to be the leader in oil & gas operations in PNG – operator and employer of choice – delivering first class performance with first class peo-ple. How we are going to get there is Our Mission and we believe that: We will continue to grow by being reli-able, innovative and profitable in: • Delivering our projects safely

• Supporting our people’s development ambitions • Operating with care in our environment & com-

munity To enable us to do this we have identified key Values and Behaviours we will need to employ: Each day we will work smart, hard and safe being accountable, de-pendable, consistent and honest. Our expectation is that we will trust each other; we will recognise and acknowledge our cultural diversity as a strength and we will be passionate in our pursuit of delivery, commitment to learning and going the extra mile. Since the launch of Next Steps in November last year Oil Operations has been developing performance measures for our Key Result Areas (KRAs) - Our KRAs are: • Deliver World Class HSES • Maximise Production • Optimise Costs • Develop our People • Long term Sustainability Each Department has developed work plans and Key Performance Indicators (KPIs) to drive the changes needed to achieve the vision. Next issue we will describe some of the things we have been doing to encourage and support this process and interview some of our Team who are making their transition. See more about Next Steps on our Intranet website (Workgroups/Next Steps) or contact Oscar Melepia / Andrew Boardman.

The Next Steps—Change is inevitable By Andrew Boardman Supply Chain Change Support Mentor

PNG LNG dominates third quarter activities • Following the announcement in

March 2010 that full execution of the PNG LNG Project had com-menced, activities ramped up considerably during the second quarter of 2010. Key activities during the quarter were focused on the ongoing mobilisation of people and equipment to various locations in PNG, site preparation and early construction works.

• During the quarter, Oil Search

and its joint venture partners discussed LNG expansion oppor-tunities. In addition, consolida-tion and optimisation of Oil Search’s licence interests contin-ued, with a number of acreage transactions finalised during and shortly after the end of the pe-riod.

• Oil Search’s total oil and gas

production for the second quar-ter of 2010 was 1.94 million bar-rels of oil equivalent (mmboe), only marginally lower than first quarter production of 2.00 mmboe. This primarily reflected a continued strong performance from the recently completed ADT2 well at Kutubu. Total oil production was 1.69 million bar-rels (mmbbls).

• 1.62 mmbbls of oil were sold

during the quarter, resulting in a minor increase in crude inven-tory levels from 0.33 mmbbls at the end of March to 0.38 mmbbls at the end of June. The average realised oil price was US$78.81 per barrel, 7% higher than in the first quarter of 2010. The Com-pany remained unhedged during the period.

• Total operating revenue was

US$142.7 million compared to US$133.9 million in the first quarter of 2010. The increase reflected higher realised oil prices combined with a similar level of oil sales.

• At the end of June 2010, Oil

Search held US$1.35 billion in cash, excluding joint venture balances, while US$503 million had been drawn down from the PNG LNG project finance facility. Oil Search continues to maintain its oil loan facility, which had an undrawn balance of US$333.5 million at the end of June.

• During the quarter, US$67.2

million was spent on exploration and evaluat ion act iv i t ies, US$220.6 million on the PNG LNG Project and US$1.1 million on oil field development work.

13 Oil Search Nius SPORTS Jan—June 2010


The Daffodil Corporate Golf Challenge will be held on August 20th at the Port Moresby Golf Club. It is the single largest Public Relations event sponsored by Oil Search Limited. Noted as one of the premier events on the Port Moresby Golfing Calendar, the Daffodil Cup has a very good backing from the busi-ness community in Port Moresby and Lae. Oil Search is the principal sponsor, who hires the venue, pays for catering etc as well as some team prizes, while other business houses also donate prizes. All the funds that are raised from the event are handed over the to the Port Moresby Can-cer Relief Society, to supports its work in maintaining and providing for the Cancer Ward at the Port Moresby General Hospital as well as carrying out cancer awareness. Prior to the Oil Search support, the POM Gen-eral Hospital, a government hospital, did not have a dedicated cancer ward for patients, who were diagnosed. Apart from purchasing specialist gowns, gloves, cabinets to mix the chemotherapy drugs etc, the Oil Search support also caters for awareness, food to feed the patients who come in daily for their treatment, as most of them cannot afford things like food processors to prepare the special meals. Cancer is one of the major killers in PNG, and without facilities to treat and cater for these patients, most of them, when diagnosed are more less given a death sentence, that is, they are told that there is nothing the doctors can do unless they want to go overseas for medical treatment. There is currently only one oncologist in the country, and only one radio therapy machine, but that is based in Lae, and most patients from the country are referred to Lae as well. The Brisbane Broncos rugby league club has donated a team jersey to the POM Cancer Re-lief Society, which is autographed by the cur-rent team members, which will be auctioned that evening, as part of the 2010 fundraising events.

Daffodil Corporate Golf Challenge

Daffodil Cup organising committee members Willie Kupo from Oil Search and Sylvia Pascoe, the vice President of the Port Moresby Cancer Relief Society hold up the framed Broncos jersey.

Sponsorship for 2010 Fun Run

The Baruni Community School in Port Moresby were the happy recipients of Fun Run shirts, sponsored by Oil Search Limited. The Fun Run is a fun raising activity organised by the PNG Sports Federation to raise funds for national teams partici-pating in international sporting tourneys. The Baruni Community school, on the outskirts of the city is located along the route to the PNG LNG plant site, and it is important to have a presence there. Oil Search purchased the t shirts at the auction, had the company logo printed on them and handed it over to the school to sell and raise funds.

Oil Search Transport and Security coordinator for Port Mo-resby Rage Arnie hands over the t shirts to the Baruni Commu-nity school headmaster Ano Gavara as students show the t shirts with the logo.

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