PNG’s first LNG export due by July - Solomon Star News

PNG’s first LNG export due by July

13 March 2014

Papua New Guinea’s first liquefied natural gas cargo is expected to leave from near Port Moresby in the next four months, with the $US19 billion (K46bn) PNG LNG project set to perform a rare regional feat by coming on stream ahead of schedule.

The ExxonMobil-run project, which would process gas from a gasfield in Southern Highlands, would ship first exports midyear, Exxon chief Rex Tillerson said.

This brings forward targets for first shipments restated by Exxon’s Australian-listed partners Oil Search and Santos last month.

“Despite the many challenges, the project is actually progressing a few months ahead of schedule, the first cargo delivery in the middle of this year,’’ Tillerson told analysts in the US.

“It looks like it’s probably going to start off early relative to what we had planned – just a superb job of execution by the project team there in an extraordinarily difficult environment.’’

The project, whose cost has blown out by $US3bn (K7bn) from the original budget, plans to export nine trillion cubic feet of gas that will be piped from a well pad nearly 3000m above sea level.

A 700km pipeline carries the gas through mountainous jungle to the LNG plant at sea level near Port Moresby.

“Installation was accomplished here while overcoming flooding, volcanic soil conditions and steep pinnacle reef slopes,” Tillerson said.

“Pipes had to be airlifted by helicopter, as the soil cannot support heavy machinery or the transportation loads of trucks. This was no easy task, as we were talking about enough steel to build 20 Eiffel Towers.”

Santos narrowed the timetable down even further, saying in an insurance document posted on its website last week that the first cargo was scheduled for July 1.

The start of the project will bring a rush of cash flow for Oil Search, which owns 29 per cent of the project, and Santos, which owns 13.5 per cent.

With PNG LNG looking on track, attention has turned to expansion of the two-train project, with a battle for PNG’s biggest unassigned gas resource playing out in the background.

Tillerson said a third train was being looked at and there was space at the Port Moresby site for third and fourth trains.

He did not mention the Elk and Antelope fields controlled by Houston-based InterOil that are the best bet to support the third train.

Oil Search last week agreed to pay $US900m (K2,196m) to take a 23 per cent stake in the field that also gives it pre-emptive rights over an up to $US3.5bn (K8bn) purchase of a 62 per cent stake in the field held by France’s Total.

Oil Search’s move could bring Exxon, which was unsuccessful in striking a deal with InterOil last year, back into contention.

Oil Search and its soon-to-be significant shareholder, the PNG Government, are keen to use the existing PNG LNG plant site to speed development of Elk and Antelope.

Elsewhere, Tillerson said a floating LNG plant remained the lead option for the offshore Scarborough field in Western Australia. Exxon’s partner BHP Billiton has called for investigation into sending gas to the North West Shelf LNG plant when its reserves run low.