Papua New Guinea LNG project plans move ahead

Important new energy supplies could be produced from the remote highlands of Papua New Guinea (PNG) under a plan currently being developed by ExxonMobil and its joint-venture participants.

A proposed project in the Southern Highlands and Western Provinces of PNG could bring new supplies of liquefied natural gas (LNG) to world markets by the next decade.

The initial development envisions the construction of the 960-million-cubic-feet-a-day gas-conditioning plant and a gas pipeline to a liquefaction plant to be built on the Gulf of Papua near Port Moresby, the nation’s capital. The LNG plant would produce 6 million metric tons a year of LNG for shipment to international markets. The gas is to be transported to the plant by a 440-mile pipeline (250 miles subsea). Liquids recovered at the existing Hides gas plant would be combined with crude oil from the oil operations and transported through the existing oil export system to the Kumul platform, an offshore tanker loading facility.

Earlier this year ExxonMobil and the project joint venturers signed commercial agreements naming ExxonMobil affiliate Esso Highlands as operator and sole marketing representative for the joint venture. They also signed a gas agreement with the PNG State establishing the legal and fiscal framework for this significant development.

“ExxonMobil is pleased to have completed these key agreements and to move this project to its next stage,” says Peter Graham, venture manager, ExxonMobil Development Company.

Engineering and design

That next stage involves what are called front-end engineering and design (FEED) activities. This includes engineering and design, execution planning, project financing, gas marketing, and all of the regulatory and permitting work, including community and landowner consultation.

“We are expecting a final funding decision late next year,” says Graham. “We look forward to working with the PNG government and our joint-venture participants to maximize the value of the resource and provide long-term, sustainable benefits to the community.”

Those benefits are expected to be substantial. An analysis by economists at ACIL Tasman suggested the project could transform the economy of PNG, potentially doubling its gross national product, boosting government revenue, providing royalty payments to landowners and creating jobs during both the construction and operational phases. With projected total direct cash flows of more than $30 billion to the PNG government and landowners during the 30-year life of the project, the development would be the largest private-sector investment ever undertaken in Papua New Guinea.

National content initiatives

The project would involve a national content plan that includes work force training for project construction and ongoing operations; purchasing local goods and services where possible; building local supplier proficiency, including an improved safety focus; and assisting the development of the project area communities through contributions to health, education and agriculture projects.

Current participating interests in the PNG LNG project are ExxonMobil (Esso Highlands Limited as operator) 41.5 percent, Oil Search 34.0 percent, Santos 17.7 percent, AGL 3.6 percent, Nippon Oil 1.8 percent, Mineral Resources Development Company 1.2 percent and Eda Oil 0.2 percent. The PNG State will join as an equity participant at financial close.  the Lamp

Papua New Guinea at a glance

• Geography: 178,711 square miles, about the size of California; terrain is mostly mountains with coastal lowlands and foothills.
• Climate: Tropical, with two distinct monsoon seasons (Dec.-March and May-Oct.).
• Population (2007): 6.7 million, with an average annual growth rate of 1.8 percent.
• People: The indigenous population is one of the most ethnically diverse in the world, attributable to the isolation created by the mountainous terrain. More than 700 unrelated live languages are spoken, but the official languages are English, Melanesian Pidgin and Hiri Motu. The highland regions of the country are home to 40 percent of the population.
• Government: Constitutional parliamentary democracy.
• Natural resources: Gold, copper ore, crude oil, natural gas, lumber, fish, cocoa, coffee, tea, palm oil, copra oil and rubber.