The $US15 billion ($A16.46 billion) liquefied natural gas (LNG) project in Papua New Guinea has been given the go-ahead, subject to finalising sales agreements and finance, both of which won’t be a concern.
The PNG LNG project is a joint venture led by a subsidiary of energy giant Exxon Mobil, with several partners, including Santos and Oil Search in Australia.
ExxonMobil will own 33.2%, Oil Search, 29%, the PNG Government 16.2% and Santos 13.2%.
The project, which will produce 6.6 million tonnes a year of LNG from late 2013 or early 2014, will be the largest private investment in PNG and is expected to contribute more than $30 billion to the nation’s economy over the life of the project.
The project will develop gas fields in PNG’s Highlands and Western Province and transport the gas via pipeline to an LNG facility near Port Moresby for shipment to customers, mostly in Asia.
It’s the 5th LNG project in the Australasian region to be given the OK, or to be in production.
The first was the North West Shelf in WA where the Woodside led group is examining plans to extend its life by another two decades, at a cost of $5 billion or more.
There’s Pluto, the big project from Woodside, the huge $43 billion Gorgon deal and the Bayu-Undan producing project which has its LNG plant near Darwin.
As well, the news comes only three days after Chevron and Tokyo Electric Power signed a heads of agreement on a huge LNG contract that could be worth $A90 billion for the Wheatstone project offshore the Pilbara coast in Western Australia.
Chevron said yesterday it expects to sign a further sales agreement with a major Korean buyer early in 2010.
Besides Oil Search and Santos Japan’s Nippon Oil, the PNG government and a trustee to represent landowners affected by the project, are in the project that will be led by ExxonMobil.
A final investment decision was forecast to come by yesterday and it duly came in an announcement from an Exxon subsidiary called Exxon Highlands.
"Exxon Mobil Corporation announced today that the co-venturers have agreed to proceed with the development of the Papua New Guinea (PNG) liquefied natural gas (LNG) project, pending completion of sales and purchase agreements with LNG buyers and finalization of financing arrangements with lenders.
"At a ceremony at the PNG National Parliament House in Port Moresby, Peter Graham, managing director of Esso Highlands Limited, an ExxonMobil subsidiary, announced that pending completion of these sales and financing arrangements, significant project activity will commence in 2010. Esso Highlands is the operator of the project.
“With global demand for LNG forecast to nearly triple by 2030, the PNG LNG Project will be an important supply source to meet this future demand, particularly for the economies in the fast growing Asia Pacific region,” said Neil Duffin, president of ExxonMobil Development Company.
“The supply of cleaner-burning natural gas will also be critical in helping reduce global emissions.
"The co-venturer approval of the PNG LNG Project is a significant milestone.
"We look forward to applying our world-class execution capabilities and continuing to work together cooperatively with the PNG government to bring this resource to production.”
Oil Search CEO, Peter Botten said in a statement that the decision to move ahead with the PNG LNG Project will "transform Oil Search into a major participant in a world scale Liquefied Natural Gas (LNG) project.
"PNG LNG represents a long term legacy project which will add over 19 million barrels of oil equivalent to our annual production and result in approximately a nine-fold increase in our booked oil and gas reserves.
"The impact on PNG is no less significant.
"The development of this Project represents an opportunity to fundamentally change the outlook of the PNG economy and its people. When the Project commences production, the country’s Gross Domestic Product will more than double and export revenues will triple."
He said significant project activity is scheduled to commence in 2010, with the award of key Execution, Procurement and Construction contracts due to be announced shortly.
"While there will no doubt be many challenges, the PNG LNG partners are fully aligned on bringing this Project into production in late 2013/early 2014, with continued strong support from the PNG Government."
Buyers of gas from the project already are Japan’s Tokyo Electric Power and Osaka Gas, Taiwan’s CPC Corp and China’s Sinopec Corp.
