PNG LNG Project, Papua New Guinea

The PNG LNG project (Papua New Guinea Liquefied Natural Gas) is a new gas project which is being championed by ExxonMobil to maximise the advantage from three large gas discoveries in the southern and western highlands of PNG.

The new gas discoveries are the Hides, Angore and Juha gas fields that are likely to have reserves approaching 3-4 trillion ft³. The three fields will supply gas for the Asian market via a pipeline to a two-train LNG facility, which will be constructed near Port Moresby.

It is believed that there could be a further two trillion cubic feet of gas or 400 million barrels of oil equivalent waiting to be discovered in PNG and this could require a phase two development of a third LNG train in the future. LNG cargoes are due to start in 2013.

FINANCE AND SHAREHOLDINGS

The project is likely to cost around $10bn to $11bn in investment over the 30-year lifetime of the project (initially $4bn to $6bn to construct the pipelines and LNG trains). The financial close for the project is expected in 2010 and the sovereign funds have not been affected by the US subprime financial crisis.

The project's main shareholder is ExxonMobil (Esso Highlands will be the operator) at 41.6% and other shareholders include: Oil Search (Australian oil and gas producer) (34.1%), Santos (17.7%), AGL (3.6%), Nippon Oil (1.8%) and Mineral Resource Development Corporation / State (MRDC) (1.2%) – the land owners.

The PNG government have retained the right to take a 22.5% stake in the Hides, Angore and Juha gas fields, which could result in state participation in the LNG venture of around 19% (other shareholdings will be reduced to accommodate this). A joint operating agreement was signed between the project partners in March 2008 prior to the Front-End Engineering and Design (FEED) work of the project starting.

PNG LNG PROJECT

The project will be based around a two-train LNG liquefaction facility based near Port Moresby and capable of handling 6.3 million tons of LNG a year. ACIL Tasman has been contracted to prepare reports on the environmental impact and also the economic impact of the project for PNG.

InterOil completed the preliminary engineering and evaluation design work for the project in April 2007. The dual train facility will be constructed adjacent to the InterOil refinery at Port Moresby in the Gulf of Papua to share infrastructure.

The LNG facility will have a 2.3km trestle for loading tankers, two 125,000m³ LNG storage tank, LPG recovery systems and two 50,000-barrel condensate storage tanks.

The LNG facility will be supplied by a 716km gas pipeline, 417km of which will be subsea and 36in (Kopi on the coast is 450km from Port Moresby), while the onshore 265km section will be 32in.

The pipeline will link to the Hides gas conditioning plant (906 million cubic feet a day) and the Juha production facility (250 million cubic feet a day). Between the Juha and Hides facility there will be a 14in gas pipeline and an 8in liquids pipeline for condensate. The condensate will be handled at the existing Kutubu and Agogo processing plant and exported from the existing Kumul platform on the coast (the gas produced as a byproduct from these facilities will be returned to the LNG pipeline).

The LNG project will be led by Liquid Niugini Gas who are a group of experts assembled by project partners InterOil, Merrill Lynch Global Commodities (Europe) and Pacific LNG.

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