Oil Search has signed a Pre-Development Agreement with EnerSea Transport LLC and Itochu Corporation to further explore the opportunity for the transportation of compressed natural gas (CNG) from Papua New Guinea (PNG) to New Zealand.

New Zealand is currently facing an energy crisis as the country's main domestic petroleum source, the Maui Gas Fields, begin to decline at a rapid rate without any significant reserves replacement.

Increased hydro electric production, geothermal production and LNG imports have already been canvassed as possible solutions, although a regional supply of gas could remain economically feasible.

Under the Pre-Development Agreement, work will take place on determining the optimum source of gas from Oil Search's resources in PNG, assessing the market potential in New Zealand and establishing the economic viability of transporting large volumes of compressed natural gas using EnerSea's proprietary transport technology.

The Pre-Development Agreement is designed to facilitate Front End Engineering and Design entry during the fourth quarter of 2004, depending on the results of these studies.

"Oil Search and our Joint Venture partners EnerSea and Itochu believe the supply of CNG to the New Zealand electricity generation market may be economic. We have substantial gas resources in PNG, EnerSea has leading-edge technology to transport it economically to New Zealand, and Itochu has the international experience and know-how to support a project of this kind," said Oil Search managing director Peter Botten.

Using the abundant gas resources of PNG to assist NZ gas supply problems could provide a regional energy solution to a regional energy problem, benefiting both countries.

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