The share prices of Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) are 2.3% and 1.5% higher respectively today.
It's a decent time to be an oil company at the moment with the oil price slowly on the rise ever since the lows of 2016. A very low oil price might be useful for consumers and certain businesses, but Australian governments and businesses benefit when it's at a fair price, which might be around today's price.
A higher commodity price, of any type, encourages businesses to invest large amounts of capital expenditure into new projects.
Liquefied natural gas (LNG) is another of the main focuses of ASX resource businesses at the moment.
Oil Search and Santos shares are higher today because the PNG LNG Project co-venturers have entered into a mid-term LNG sale and purchase agreement (SPA) with Unipec Singapore, a wholly-owned subsidiary of Sinopec, for the supply of LNG commencing in April 2019.
This agreement is for the supply of approximately 0.45 million tonnes of LNG per annum over a four year period.
The total contracted volumes of the project has now reached 7.9 million tonnes per annum, with 6.6 million tonnes of PNG LNG's annual output already committed under long-term contracts to JERA, Osaka Gas, Sinopec and CPC. There are also 1.3 million tonnes under mid-term SPAs with PetroChina, BP and Unipec.
Santos has a 13.5% stake of PNG LNG and Oil Search has a 29% stake.
Oil Search Managing Director Peter Botton said "Oil Search believes that the PNG LNG Project now has an appropriate mix of long-term contracts, mid-term contracts and sales on the spot market." That seems like a good strategy to me.
Whilst there is useful news for Santos and Oil Search, I'm not sure that the current share prices reflect market-beating opportunities for potential investors, particularly with the recovery of the sector since 2016.
