The Oil Search Ltd [ASX:OSH] share price is up 0.4% today after the company said they’ve reached a fiscal stability agreement with Papua New Guinea.
Papua LNG’s project operator, Total, and joint venture partners ExxonMobil and Oil Search have signed a fiscal stability agreement (FSA) with Papua New Guinea’s government in relation to the project.
The FSA is the last step under the Papua LNG gas agreement and gives full effect to agreement that was signed in April 2019.
In a statement, Papua New Guinea’s Prime Minister James Marape said the FSA shows the country’s ‘commitment to this Papua LNG Project and gives comfort and encouragement to the developers to progress the project.’
With the agreement in place, Marape confirmed that the project will keep going ahead with two train projects, independent of the P’nyang Project which is spearheaded by Exxon. This allows for the development of the Elk-Antelope gas fields in the Gulf Province.
Oil Search’s managing director Dr Keiran Wulff had this to say:
‘We are pleased to see further progress achieved on Papua LNG. This milestone highlights the commitment from the PNG Government towards Papua LNG and is a significant step in derisking the project. It also demonstrates increasing alignment between the PNG Government and the joint venture partners. We look forward to progressing Papua LNG and announcing further milestones consistent with our Strategic Review announced in November 2020.’
What could happen next?
At time of writing, the OSH share price is trading at $4.15, up from yesterday’s close at $4.13.
The Oil Search share price collapsed in March in tandem with oil prices and are still trading at around 35% lower than this same time last year.
Oil prices increased overnight with Brent rising around 1% after a report that inventories in the US are dropping.
Oil prices have been rising throughout this year after Saudi Arabia cut production. But while Brent prices have rallied 18% in 2021, Oil Search’s share price increases have been more subdued, around an 11% increase since the beginning of the year.
While oil supply is taking a hit from production cuts, it doesn’t look like we will see an increase in demand in the short term.
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