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Oil Search sees Mideast tension in rise
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australian resources company Oil Search has pointed to higher oil and gold prices for the sudden jump in its share price this week, rather than any new gas contracts. The company, which has a 45 percent stake in the embattled Papua New Guinea gas pipeline project, saw its shares jump 6.7 percent to A$0.64 Thursday on reports it was close to winning a big new contract for the pipeline. Its shares are up another 1.56 percent Friday to A$0.65, compared with a slight easing in the benchmark S&P/ASX200 index, down 0.28 percent. Oil Search was queried by the Australian Stock Exchange after reports circulated Thursday that Alcan South Pacific was about to commit to a 20-year contract for 40 petajoules a year of PNG gas from 2007. In its response Friday, Oil Search said there was no particular information that could explain recent trading in its shares. It said it was aware of the reports about Alcan South Pacific being about to sign a deal. "As announced on December 18, the (PNG pipeline) project sponsors are in intense negotiations with a number of customers in Queensland, the Northern Territory and the southern States," it said. 'Advanced stage'"These negotiations have reached an advanced stage with a number of customers. We don't consider it appropriate to make an announcement concerning Alcan at the present time." Oil Search said it would maintain its policy of announcing gas contracts when they were signed. The company instead pointed to heightened tensions in the Middle East pushing up oil prices, saying this was causing investors to focus on energy stocks. It said this might account for some of the recent trading in Oil Search shares. "In addition, the high price of gold is increasing the returns from Oil Search's interest in the Porgera gold mine." Last month, diversified Australian miner MIM threw a potential lifeline to the $3.4 billion PNG pipeline project after it agreed to take a 20-year gas supply from 2007. (Full story) The conditional commitment of 25 petajoules of gas a year is dependent on MIM's proposed McArthur River zinc refinery proceeding. The pipeline project, which will bring gas from the Papua New Guinea highlands to the Australian eastern state of Queensland via a 3,000-kilometer pipeline, needs at least 100 petajoules a year of customer commitments to go forward. But it suffered a heavy blow earlier in December when Australia's biggest energy retailer, AGL, opted to source gas elsewhere. (Full story) AGL became a founding customer for the PNG pipeline project in March 2002 on the expectation that other customers would come forward. But it said on December 16 that the delay in finding other backers meant it now had to look elsewhere to meet its gas needs from 2006. Oil Search holds the biggest stake in the pipeline project, though the operator is ExxonMobil with 38.9 percent. Other shareholders are Chevon Texaco (9.7 percent), MRDC (representing PNG landowners) with 3 percent, and Japan PNG Petroleum with 3.4 percent.
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