Total SA contemplated 13$ bn. project in Papua New Guinea has come another step closer.
The government of Papua New Guinea agreed to set financial terms early 2019. The project will help to double liquefied natural gas (LNG) exports from the country.
Analysts suspect that LNG expansion will cost $13 billion. Thus, it is indispensable to the Pacific island nation’s economy as LNG is its biggest export earner. Furthermore, the demand for the fuel is surging in international energy markets.
Prime Minister Peter O’Neill on Friday stated that the sides had accepted “physical terms”. He also said some contract provisions as revenue share in the community and the provincial governments required more work.
Difficulties in land-owner rights and revenue-sharing agreements have been an almost permanent feature of resource development in PNG.
A non-regulatory memorandum of understanding (MOU) signed on Friday is a government’s commitment to settle a gas agreement in 2019. That would lead to the development of Papua LNG, run by Total.
Exxon Mobil’s PNG LNG plant
Papua LNG will produce gas from the Elk-Antelope fields for two new processing units, called trains, at Exxon Mobil’s PNG LNG plant.
Along with that, Exxon Mobil intends to develop gas at the P’nyang field to help fill a third new train at the plant. In concert, the projects will double the plant’s output to nearly 16 million tonnes annually.
Oil Search, an associate of Papua LNG and PNG LNG, announced all sides were “aligned on the need to ensure that new LNG developments in PNG remain competitive with other new LNG projects worldwide”.
The companies are desperate to begin export from the new trains by 2024. At that time the LNG market is expected to require new supply to meet rapidly growing demand in Asia. Nevertheless, analysts claim it might be hard to meet that timeline. The final investment decision may not come until 2020 or 2021.
Analysts estimate the expansion will cost around $13 billion, well below the $19.5 billion cost of the original project, which involved building a wide range of infrastructure from scratch, including a 700-km (435-mile) pipeline through the nation’s rugged highlands down to the coast.
The government targets to get better fiscal terms for the country than it did with Exxon Mobil’s PNG LNG project in 2009. Back then it was looking to secure the most significant foreign investment in the country during the global financial crisis.