France’s Total and its partners signed a long-awaited deal with Papua New Guinea on April 9 that will allow initial work to start on a $13 billion plan to double the country’s LNG exports.
Developing the Pacific island nation’s gas reserves is seen as crucial to its economy as LNG is its biggest export earner, while demand for the fuel is surging globally.
Total’s partner Oil Search Ltd. said the agreement would allow the parties to start engineering and design work for a project dubbed Papua LNG also involving Exxon Mobil Corp.
They now aim to make a final investment decision in 2020, targeting first production in 2024, Oil Search said.
Patrick Pouyanne, chairman and CEO of Total, said the project would further strengthen its position in the Pacific basin and ensure its future LNG portfolio growth.
Australia’s Oil Search had first hoped the agreement with the government would be sealed in 2018, as the partners race LNG projects in Canada, Mozambique, Qatar and the United States to meet an expected supply gap in Asia in the early 2020s.
The agreement was delayed after an earthquake hit PNG in February 2018, which sapped government resources and slowed negotiations over issues such as how much gas from Papua LNG would be reserved for the domestic market.
Papua LNG plans to develop the Elk and Antelope gas fields to feed two new production units, or trains, to be built at the PNG LNG plant run by Exxon Mobil.
Total said the Papua LNG project of 5.4 million tons per annum (Mtpa) capacity will consist of two LNG trains of 2.7 Mtpa capacity each and will unlock more than 1 billion barrels of oil equivalent of natural gas resources.
At the same time, Exxon Mobil plans to add a third train at PNG LNG, to be fed with gas from its existing fields and a new field, P'nyang, down the track.
Together, Papua LNG and the Exxon Mobil expansion are set to roughly double exports from the PNG LNG plant to 16 million tonnes a year. Analysts estimate the overall expansion will cost about $13 billion.
“It has taken longer to get the gas agreement signed than expected. But it is completed and on reasonable terms. LNG expansion is now inevitable,” Bernstein analysts said in a note.
An agreement on the P’nyang development is expected to be signed in the current quarter, a spokesman for PNG's state-owned Kumul Petroleum said.
“Dialogue is ongoing with the PNG government to conclude the required gas agreement for the P’nyang project,” Exxon Mobil said in an emailed statement.
Under the deal signed on Tuesday, the government will gain a 22.5% equity stake in the Papua LNG project.
Total, Exxon Mobil and Oil Search have agreed to shoulder the government’s share of the costs incurred until a final investment decision is made.
“We are particularly pleased that the joint venture partners have agreed to assist Kumul ... and that brings certainty to (Kumul) exercising its full equity entitlement of 22.5 percent,” Kumul Petroleum Managing Director Wapu Sonk said in a statement.
However, the government will have to fund its equity share of the projects, which would be roughly $900 million, assuming construction is 70% debt financed.
The agreement requires the companies to reserve about 5% of the gas for the domestic market, a key provision to boost power supply in the impoverished South Pacific nation.
Hydrogen Hubs Across US Submit Plans for $7 Billion in DOE Funding
2023-04-11 - Applicants are vying for $7 billion in U.S. Department of Energy funding to develop between six and 10 regional clean hydrogen hubs.
EU Plans Subsidies for Hydrogen Made Using Renewable Energy
2023-03-16 - The European Union's hydrogen subsidy scheme would make clean versions of the fuel more competitive with fossil fuel-based hydrogen.
Upgrading Rules and Standards to Bolster the Energy Transition
2023-05-08 - To have a successful energy transition and deliver succinct, clear and achievable regulations, policymakers must lend an ear to the industry experts.
Report: Post-IRA Clean Energy Investment Surges Past $150 Billion
2023-04-18 - The Inflation Reduction Act likely spurred 46 new or expanded utility-scale clean energy manufacturing facilities that, if brought to fruition, would represent $150 billion in investment, according to a new report.