99

PNG Oil Operations

AGENDA:PNG Production:

2007 update2008 focus areasLife of field

Operating Environment:Rig update and strategyCost environment

Oil and Gas Interface IssuesPNG Oil ExplorationCorporate Summary

100

PNG Production

101

2007 Update

Overall:

Underlying field performance is strong in all fields and reservoir management activities have been encouragingKutubu:

Decline has largely been mitigated by UDT7 and reservoir management activities. Performance of UDT7 remains encouraging

Moran:Impacted by NW Moran shut-in for 6 months and the poorer performance of M6 post-workover. Issues resolved in 2H and 2007 forecast to exceed 2006 by 5%

SE Mananda:Steady as a result of the improved field management

Gobe Main: Adversely affected by the gas compression shutdown during 4Q’06. Programme to convert to Upper Iagifu production is proceeding well

SE Gobe: Adversely affected by the gas compression shutdown. The Wedge area (SEG11) continuing to perform well

Hides:1Q production affected by Porgera JV turbine maintenanceOperations resumed during 2Q and demand is currently exceeding forecast

102

2008 Focus Areas

Usano:4-6 development wells, optimised

with Arakubi outcome

SE Gobe:Possibly 1

development well

Kutubu:2 development wells

and selected workovers

Agogo:Possibly 1

development

Moran:3 development wells

and selected workovers

103

Kutubu

Potential poorly drained saddle

area

2008 PlanA continuous drilling campaign at UsanoKutubu wells in 2H with 2nd rig5-8 workovers anticipated in 2H 2008Develop focussed waterfloodplanFurther optimise gas injectionUsano and Kutubu wells provide competitive returns on investment

Usano redevelopment

5,000

10,000

15,000

20,000

25,000

30,000

Jan 06 Jan 07 Jan 08 Jan 09

bo

pd

P50 RatesP10 Rates

Base (P50)History

P90 Rates

104

Usano MainBlock

Usano EastBlock

SE noseKutubu

Field

Arakubi

IDTG

UDTC

UDTG

UDTB

UDTF

UDTD

UDTE

UDT3A pad

UDT2 padUDT1 pad

Arakubi 1 Pad Location

UDT7

Usano Development

An under-developed field with significant infill potentialUDT 7 performing well and above expectation4 – 6 wells likely in 2008First two wells confirmed at UDTG and UDT C, remaining programme to be optimised based on Arakubi outcome

UDTJ

UDTH

Potential Usano well

Likely Usano well 2007-8

105

Moran Development

Moran infill well

5,000

10,000

15,000

20,000

25,000

30,000

MR (B Block)

M10 ST2 (J Block)

MZ (K Block)

2008 PlanDrill new infill wells:

Downdip producer MZ in the NWCrestal gas injector MR in B block Downdip producer M10 sidetrack

Optimise well rates and balance off take with injectionControl well GOR with rate control, by changing zones and swing well managementThe three Moran wells provide competitive returns on investment

Jan 06 Jan 07 Jan 08 Jan 09

bo

pd

P50 Rates P10 Rates

Base (P50)History

P90 Rates

106

Gobe Main 2008

2008 PlanContinued emphasis on maintaining current production rates through 2008Consolidate Iagifu A production from up to 4 zone changes:

GM4ST3, GM2ST1, GM1ST2, G2X (Hedinia)

Water handling and gas compression optimisationImplement options to return GM7 to production

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Jan 06 Jan 07 Jan 08 Jan 09

Bo

pd

P10 Rates

P50 Rates

P90 Rates

Base (P50)History

107

SE Gobe 2008

2008 PlanImplement options to bring SEG 1ST1 on line, and access Iagifu B in SEG 8 Maintain water injection support to SEG WedgeWater handling and gas compression optimisationPossible infill/appraisal well subject to technical work (not included in forecast)

Iagifu B target in SEG 1 Block area Iagifu A/B Target in G7X block area

4,000

2,000

8,000

Jan 06 Jan 07 Jan 08 Jan 09

bo

pd

P50 Rates

P90 Rates

Base (P50)History

6,000

108

SE Mananda 2008

2008 PlanContinue to revise geological & reservoir models to improve understanding of field and make better performance predictionsContinue to improve uptime efficiencyUse well production data to improve understanding of field structure and drainage volumes

-

1,000

2,000

3,000

4,000

Jan 06 Jan 07 Jan 08 Jan 09

bo

pd

P50 Rates

P10 Rates

Base (P50)History

109

PNG Gross Production

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Jan-

2000

Jan-

2001

Jan-

2002

Jan-

2003

Jan-

2004

Jan-

2005

Jan-

2006

Jan-

2007

Jan-

2008

Jan-

2009

Jan-

2010

Jan-

2011

Jan-

2012

Oil P

rod

uct

ion

(b

op

d)

P10P50P90

Natural decline

110

Life of Field

Life of field analysis being conducted:Reviewing track recordFull resource potential of fieldsCost effective ways to optimise reserves and production.

Work in progress at the moment but positive initial results:60 mmstb+ unrisked potential from 40 activitiesRisked P50 contingent resources of 17 mmstb estimated

Source: RISC

PNG Reserve Addition Potential 5 year lookahead

0

10

20

30

40

50

60

70

Unrisked Total EUR Adds

Unrisked 2C EUR Adds

Risked 2C EUR Adds

EU

R A

dd

s m

mst

b

Kutubu

Moran

Gobe/SE GobeSE Mananda

Kutubu

MoranGobe/SE Gobe

KutubuMoranGobe/SE Gobe

111

Life of Field

We have consistently underestimated production 3 to 5 years out:

Focus on the benefit from next year’s activityRisking less mature opportunities

Probabilistic forecasting tool will assist in improved forecasting of production in the near term

PNG Oil Production Budget Forecast vs Actual 2002-2007

Source: RISC

112

PNG Operating Environment

113

PNG Rig Update

Rig 101:Refurbishment, commissioning and crewing successfully completedCurrently drilling KoroboseaFuture plans include Cobra, Wasuma and possibly Barikewa or Gobe

Rig 3:Commissioning complete and rig being mobilised to siteDrilling contractor secured and resourcing on trackTarget early December 07 spud for Usano campaign – sites and flowlines ready

Rig 226:Drilling Arakubi sidetrack then to NW Paua by roadThen to Moran for development wells

Rig 4:Delivery 3Q08. Costs maintained

New Rigs provide upgraded capability and dual sub-structure and mast to improve drilling efficiency and minimise moving time between wells

Strategy review considering the optimum rig numbers, balancing future development, exploration and appraisal requirements for oil and gas and the optimum cost structure

114

Cost Management

Cost pressures:Impact of A$ appreciationInflationary pressures:

CommoditiesTransportation costsEquipment and contractor costsDrilling consumables

Mitigation measures:Ongoing tight cost control High grading of opex projects Overhead challenge Special projects:

Aviation efficiency Supply chain optimisation

Target:Small increase in 2H07 due to planned MEJs, strong dollar, targeting no real increase in per barrel costs in 2008

115

Oil and Gas Interface

116

Oil and Gas Interface

Oil fields provide significant P1 and P2, low development cost gas resource to the LNG projectGas development provides benefits to the oilfields:

Operating cost sharing Reserves bookings and amortisation improvementsPossible tax rate improvements subject to negotiation with the StateIncremental pipeline tariffsIncremental condensateAbandonment cost deferral

Current thinking:Oil Search remains Operator of the oil fieldsOil fields have gas delivery obligations but retain flexibility to optimise oilGas offtake has positive impact on oil production and appears rate insensitive

117

PNG Exploration

118

PNG Exploration 2008

Oil - Remaining 2007 & 2008 programme testing ~25-30 mmbbl net risked reserves

Gas – exploration/appraisal to add reserves to support commercialisation projects –testing ~30mmboe net risked reserves

PNG 2007 exploration budget US$120m net

Planned 2008 exploration budget up to ~US$80m net subject to budget reviews

Continued seismic for gas and oil exploration/appraisal, in Highlands, Forelands and Offshore

Active programme to optimise interests in existing licences and new venture opportunities

Korobosea

Barikewa

NW Paua

Cobra

Wasuma

Flinders

ArakubiMananda Attic

119

PDL 2 - Arakubi

14.5ExxonMobil

11.9AGL

6.8Merlin Petroleum

6.8PRK

60.0Oil Search

WI %PDL 2

Located 2km from infrastructure, connected by roadArakubi 1A proved the presence of excellent Toro and Iagifu reservoirsStructure is folded tighter than initially mapped. Mean reserves now ~15 mmstb Up dip side track underway

Reserves: 15 mmstbCOS: 50%

* ExxonMobil did not participate in initial Arakubi well

Line PN04-411Depth migration

Usano 2x block

UDT4 block

Arakubi structure

APF

Moro

Ridge CampCPF

SE Mananda

Moran

Paua

LakeKutubu

Agogo

ARAKUBI

PDL2

10km

Kutubu

120

Bawia

Juha

Alene

Toro

Hedinia

Iagifu

PDL 2 - Arakubi

South North

Possible deepeningof sidetrack?

UEBT Thrust Fault?

Arakubi 1A

Backlimb of Usano Main Block – c. 40 deg dips

Possible extension ofUsano East block

Fault penetrated@3184mMD

Possible steep thrust

Schematic section – well currently at top reservoir in sidetrack

Arakubi 1A sidetrack

121

PPL 233 – NW Paua

47.5Esso Highlands

52.5Oil Search

WI %PPL 233

Highly prospective structure adjacent to MoranDigimu target with Toro secondaryLarge upsidePartially constrained by Paua 1X well (1996)Important test of ‘next trend’New seismic acquired in 2005Site construction complete Oil Search operating on behalf of EssoTo be drilled Q4 2007 after Arakubi

Reserves: 40-120mmstb (depends oncolumn height and number of reservoirs)

COS: 24%

Line PN04-411Depth migration

Usano 2x block

UDT4 block

Arakubi structure

APF

Moro

Ridge CampCPF

SE Mananda

Moran

Paua

Kutubu

LakeKutubu

Agogo

NW PAUA

PDL2

PPL233

PPL219

PDL5

10km

122

PPL 190 – Cobra

26.5Murray Petroleum

10.9Cue PNG Ltd

62.6Oil Search

WI %PPL 190

Near field exploration opportunitySeismically defined structure adjacent to SE GobeTest of Footwall play with potential to open up a significant new fairwayIagifu sandstone is primary objectiveWell site under constructionTo spud late 2007 after Korobosea

Reserves: 30-40mmstbCOS: 17%

Gobe Unit

Gobe Main

COBRA

PPL219

SE Gobe

PPL190

PDL4

Iehi

PDL4PDL3

10km

123

PPL 219 – Wasuma

8.75Merlin Petroleum

91.25Oil Search

WI %PPL 219

Reserves: 30-40mmstbCOS: 20%

Near field exploration opportunitySeismically defined structure to north of GobeOne of the last un-drilled ‘simple’ Hanging wall structure within the main Foldbelt trendIagifu sandstone is primary objectiveWell site construction scheduled to start late 2007To spud Q1 2008 after Cobra

Gobe Unit

Gobe Main

WASUMA

PPL219

SE Gobe

PPL190

PDL4

Iehi

PDL4PDL3

10km

124

PPL 219 – Mananda Attic

8.75Merlin Petroleum

91.25Oil Search

WI %PPL 219

Prospect updip from Mananda 3 and 4Site construction to commence Q1 2008Drilling late 2008/early 2009

Reserves: 30-70mmstb (depends on fluid phase and number of reservoirs)

COS: 20%

APF

SE Mananda

Moran

Agogo

MANANDA ATTIC

APDL6

PPL219 PPL233

Paua

Kutubu

PDL5

PDL210km

125

PNG Exploration - Gas

Two core areas;

ForelandKorobosea (0.5 tcf @ 19% COS, OSH @ 90%)Kimu (0.85 tcf)OSH @ 60.7%Barikewa (0.72 tcf)OSH @ 42.5%Farm-in opportunities

OffshorePandora (1.5 tcf)OSH @ 5%Near field exploration opportunities

FlindersPPL 234APPL 293

AngoreJuha

P’nyang

Iehi

PPL234

APPL 293

Uramu

Pandora

Flinders

BarikewaKimu

Korobosea

126

PNG Q4 2007 - 2008 Exploration

Oil exploration25-30mmstb net risked reserves being testedNet well cost ~US$60mArakubi, NW Paua, Cobra, Wasuma

Gas - Co-ordinated programme to add reserves to support commercialisation projects

Exploration1 well - Korobosea Net well cost US$22mPossible Flinders offshore well late 2008

Appraisal1 gas appraisal well - BarikewaNet well cost US$8m

127

PNG Q4 2007 – 2008 Exploration Cont.

Continued seismic for gas and oil exploration/appraisal

Highlands 50km firm, up to 100km depending on well resultsOffshore

Up to 1,000km infill for PPL 234Up to 5,000km regional grid for APPL 293Possible 3D over Pandora

Ongoing review of farm-in opportunities onshore and offshoreTotal 2008 PNG exploration budget up to US$80m net (subject to budget)