Oil Search (ASX: OSH) is one of the few lights on the ASX this morning, up slightly above 3% following a positive update on their Papua New Guinea LNG project. The essence of the announcement centres on the decision of PNG’s cabinet to stand behind the agreement they signed with Oil Search earlier this year. This allows the company to go ahead with capacity increases at the Papua LNG project, part of a $20.6bn expansion of LNG facilities between a few major players in the industry. The company is hoping to quickly finalise the P’nyang Gas Agreement that will enable further project development against a more stable regulatory backdrop.
Oil Search’s share price sat in correction territory over the past 3 months, due to the PNG Government’s decision to review the project. The review affected a potential $20.6bn expansion of LNG production facilities, in addition to creating clouds over the prospects for Oil Search’s existing projects. PNG was already at a disadvantage as a production jurisdiction, with several business leaders in the industry speculating that the country’s deteriorating regulatory environment made it a harder place to do business. Investor sentiment suffered further as the PNG government threatened to tear up an agreement that it previously agreed to, holding the Oil Search share price down as the company’s growth prospects sat in limbo.
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