Understanding the PNG LNG Project
Since April 2007, the PNG LNG Project has been working to develop the design basis and feasibility for a world class LNG project that will make Papua New Guinea the world’s newest LNG supplier.
The Project Joint Venturers signed the Joint Operating Agreement in Port Moresby on the 13th of March. The JOA provides an agreed framework for determining governance and ownership interests and for coordinating the development and operation of the Project, which has been set up as an integrated venture incorporating all components including upstream, gas transportation pipeline, liquefaction, marketing, and shipping.
Current participating interests include:
- ExxonMobil (Esso Highlands Limited as Operator) 41.5%
- Oil Search 34.0%
- Santos 17.7%
- AGL 3.6%
- Nippon Oil 1.8%
- MRDC 1.2%
- Eda Oil 0.2%
The PNG Government will also join the Project with a participating interest of between 19 and 20% when they take up their equity at financial close.
On May 22 the Project Joint Venturers signed the PNG LNG Gas Agreement with the PNG Government. This agreement established the fiscal regime and legal framework by which the project will be regulated throughout its lifetime. It was formally presented to Prime Minister Sir Michael Somare at a ceremony in Parliament House.
Sir Michael told Parliament that the PNG LNG Project was the number one priority of his Government.Development Concept
The PNG LNG Project proposes to commercialize the undeveloped petroleum resources in the Hides, Angore and Juha fields and the associated gas resources in the currently operating oil fields of Kutubu, Agogo, Gobe and Moran in the Southern Highlands and Western provinces of PNG.
This project is the biggest and most complex resource development ever contemplated in PNG, and it has the potential to have a profound impact on the nation’s future. With an estimated capital investment for the initial construction phase of more than $US10 billion it is also the largest private sector investment ever considered in the country.
The gas will be prepared for compression and transportation by dehydration and condensate removal at a new 960 million cubic feet per day (mcfd) gas conditioning plant at Hides. It will then be transported by a 315 km onshore and 400 km sub-sea gas pipeline to an LNG Facility at State Portion 152, about 25 km north-west of Port Moresby on the Gulf of Papua.
Condensate will be stabilized at Hides and transported via field condensate pipeline to the existing Kutubu oil export system, blended with crude and exported via the existing Kumul offshore loading platform.
At Portion 152, the Project Joint Venturers will construct a 6.3 millon tonne per annum gas liquefaction plant, product storage tanks and a ship loading berth. This particular location has good access to deep water which was critical to the site selection and prompted the Port Moresby option over other possible sites closer to the mouth of the Omati River.
The target is to load the first LNG cargo from here in late 2013 or 2014.
ExxonMobil’s annual energy outlook puts global LNG demand growing by more than four percent per year through 2030. This growth is driven by demand in North America, Europe and the Asian markets.
In Asia the demand is growing the strongest, driven by rapid economic growth. While in Europe and the Americas the import demand growth is resulting mainly from the decline in production from mature fields.
Until recently, for example, the UK had natural gas supplies from the North Sea to meet its needs during most of the year. But as demand has grown and gas production in aging North Sea fields declined, Britain has become a net importer of natural gas.
In the US, gas production has increased recently driven by increasing unconventional production, but longer term, declines in maturing fields will be difficult to offset requiring substantial increases in LNG imports by 2030 to meet growing demand.
By 2030 global LNG demand is expected to be nearly half a billion tonnes per year. That represents about 15 percent of the world’s gas demand. It’s this growth that provides an excellent opportunity to commercialise the gas resources of PNG.
Since ExxonMobil formally introduced the joint venture project to gas market buyers at the GasTech Conference in Bangkok in March, the project has seen strong interest from throughout the Asian region.
Economic modelling by ACIL Tasman suggests that the PNG Gross Domestic Product (GDP) will more than double as a result of PNG LNG, rising in real terms from K8.65 billion in 2006 to an average K18.2 billion per year. Direct cash flows to the PNG government and landowners are estimated at over US$30 billion over a 30-year life of project, taxes, royalties, and other payments, as well as returns to equity.
Employment (both expatriate and national) will be significant.
The project does have the potential to transform the economy of PNG and benefits from the project may spread throughout the country if the government applies the earnings from its substantial share of the project revenues to social and economic programs.
NOTE:
For more information click on PNG LNG’s website.
The Garamut 