Profound change is underway in the Papua New Guinean economy — and the fortunes of Australian Securities Exchange-listed companies Oil Search and Santos — following the first shipment from the ExxonMobil-led PNG liquefied natural gas project.
First gas from the $US19 billion project is making its way to a utility company in Japan on board the LNG carrier Spirit of Hela. Production from the first processing train started last month. Production from the second train has also started as additional wells in the Southern Highlands come online.
ExxonMobil PNG managing director Peter Graham said the first cargo of LNG was a historic moment for PNG. He said the start-up positioned PNG as a resource-rich nation uniquely placed to deliver natural gas to meet the growing demands of Asian markets.
“Revenue from the PNG LNG project will support PNG’s continued economic and social development,’’ he said.
“The PNG LNG project demonstrates to the world what PNG is capable of delivering.”
ExxonMobil is the project operator and 33.2 per cent partner. Oil Search owns 29 per cent and Santos 13.5 per cent. The remainder is shared between the PNG government and landowners, and Japan’s Nippon Oil.
PNG Prime Minister Peter O’Neill said the project would deliver “significant economic benefits to our country that will last for generations to come’’.
Early economic benefit studies suggested the project could double PNG’s gross domestic product.
Santos chief executive David Knox said the start to sales from the project marked the beginning of Santos’s “transformational growth”.
The group has an 11.5 per cent interest in the existing Darwin LNG project and has its Queensland LNG project to come. PNG LNG will quadruple Santos’s LNG production once the project reaches full output from its initial two-train (6.9 million tonnes annually combined) development.
Subject to additional gas resources being confirmed, a third train (3.45 million tonnes annually) is expected to be developed. Because it would leverage off existing infrastructure, the cost of a third train could be as little as $US5bn.
A pipeline more than 700km long connects the gas fields in the Southern Highlands to the liquefaction and storage facilities near Port Moresby.
The project is expected to produce more than nine trillion cubic feet of gas across 30 years of operations. Main customers are Sinopec, Tokyo Electric, Osaka Gas and Taiwan’s CPC Corp.
PORT MORESBY, (THE AUSTRALIAN)