(EnergyAsia, February 16 2015, Monday) — While the oil and gas industry is in retreat around the world, Papua New Guinea is blazing ahead with the planned expansion of a liquefied natural gas (LNG) project that was launched just months ago and the proposed development of a second greenfield project.

An ExxonMobil-led consortium is preparing to expand its recently launched US$19-billion LNG project through the proposed addition of a third train and the debottlenecking of the existing two that were already operating at capacity shortly after start-up last May.

New York-listed InterOil is adding to PNG’s emergence with a proposal to develop the country’s second LNG project.

ExxonMobil expects to make the final investment decision for the proposed expansion of the 6.9-million tonne/year PLNG LNG project in 2017.

The PNG LNG consortium bolstered its case for expansion after operator ExxonMobil PNG Limited announced last week that it had secured a memorandum of understanding with the government to supply up to 20 million cubic feet a day of domestically produced natural gas for 20 years to fuel the country’s growing power demand.

The Pacific country badly needs to expand its electricity supply and infrastructure to support its economy, which is expected to be the world’s fastest-growing this year. According to the Asian Development Bank, PNG’s GDP will grow 21% in 2015 to follow through on last year’s six percent expansion.

In a statement, ExxonMobil PNG said the natural gas supply will enable PNG LNG to provide up to 25 megawatts of electrical power, or about 20% of Port Moresby’s current generation capacity, for an interim period while the government addresses long-term power generation options.

“The remainder of the gas supply will be used to fuel a new state-owned gas-fired power generation unit expected to be located near the LNG plant outside of Port Moresby,” it said.

The agreement is in addition to an existing gas commitment for Hides domestic power generation.

“This agreement enables a reliable long-term supply of natural gas to support Port Moresby’s urgent power generation needs,” said Peter Graham, ExxonMobil PNG’s managing director.

The MoU also provides for the award of licences for the consortium to develop petroleum reserves and pipeline infrastructure to tap P’nyang’s natural gas both to generate power and support expansion of the PNG LNG project.

The US major said subsidiary Esso PNG P’nyang Limited and its partners will start preparing to drill an appraisal well within two years of the awarding of the petroleum development licence.

With these moves, the consortium is on course to overcome the delayed start-up and cost overruns on its US$19 billion project, and taking a lead against rivals in other parts of the world struggling to deal with falling oil and gas prices.

Compared with other countries, the industry has encountered considerably less domestic opposition, labour disputes and environmental headwinds in developing and liquefying PNG’s natural gas reserves. After settling initial disputes with local landowners and wrestling with high start-up cost, the PNG LNG consortium has experienced a relatively smooth implementation of the project.

The project’s other shareholders are JX Nippon Oil & Gas, the National Petroleum Company of PNG, Mineral Resources Development Company and Petromin PNG.

Last month, the consortium launched its first custom-built ship, the 172,000-cubic metre Papua LNG carrier, at the Hudong-Zhonghua Shipbuilding Group Shipyard in China.

The Papua will be operated by Japan’s Mitsui O.S.K. Lines (MOL) on behalf of ExxonMobil PNG Limited. It will join a fleet of another four dedicated carriers to ship LNG to PNG LNG’s customers in Asia: the Spirit of Hela, Gigira Laitebo and another ship now under construction by Hudong.

With a new board and management team firmly in place after years of turmoil including disputes with the PNG government, InterOil is hoping to launch the country’s second LNG project.

The New York-listed, Singapore-based company started off in the mid-1990s with plans to develop an oil refinery and downstream retail business around the Port Moresby area. In PNG’s frontier environment, the company later secured licences to explore and develop large tracts for oil and gas.

After over a decade of shareholder and management changes, the company has decided to focus on developing the natural gas reserves in its large Elk-Antelope field with plans for production from 2017 to support an export-oriented LNG project.

French major Total has bought a stake in the project which also includes Australia-listed Oil Search as a partner.

Analysts have rated PNG as one of the world’s lowest-cost and most competitive players in the crowded LNG industry today.




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