LNG

Papua New Guinea Prime Minister James Marape urged Australian LNG and mining sector investors to “take my people with you” in an address to a mining and petroleum conference in Sydney on future development projects in his Oceania nation.

Papua New Guinea said it was preparing to start talks with ExxonMobil Corp. and partners in one of two feed-gas projects to negotiate better terms for the government and its holdings in the development of the PNG LNG expansion.

Oil Search, the Papua New Guinea energy company, said the PNG liquefied natural gas plant again posted high quarterly production, though suffered output disruption because of damage to the loading facility amid optimism for a final agreement before the end of 2019 on the LNG expansion project.

Oct 10 (LNGJ) - Oil Search, the Papua New Guinea-based energy and LNG company, said efforts were now focused on the P’nyang Gas Agreement, with discussions between the PNG government and ExxonMobil, the operator of P’nyang, now taking place to clear the way for a doubling of LNG production to almost 20 million tonnes per annum

   “Finalization of the P’nyang Gas Agreement and the passing of associated Papua LNG legislative changes are pre-requisites for launching the front-end engineering and design phase of the proposed three-Train LNG development,” said Oil Search. The Australian Securities Exchange-listed company is a shareholder in the P’nyang gas resources and gave the update to investors during a UK road show.

Oil Search Managing Director Peter Botten, one of the leading figures in Papua New Guinea oil and gas development over the past 26 years and who had a key role in the nation’s emergence as an LNG exporter, has decided to hand over the company helm to a successor.

Papua New Guinea said it would honour a natural gas agreement with French energy major Total signed with a previous government for the Oceania nation's liquefied natural gas expansion projects after securing some concessions and is now likely to proceed with finalizing a second feed-gas accord.

The decision removes uncertainty over the plan that arose after new Prime Minister James Marape came to power in May 2019 promising to win more benefits from the international oil and gas companies backing the expansion.

The Papua LNG gas agreement is one of two accords needed for Total and its partners, including Exxon Mobil Corp. and Australian-listed Oil Search Ltd and others, to go ahead with the expansion proposals.

“The government has now cleared Total to proceed full steam ahead with the implementation of the Papua Gas Project,” said Petroleum Minister Kerenga Kua in a statement.

Peter Botten, the Managing Director of Oil Search whose headquarters are in PNG, said he was happy with the outcome despite the project delays.

“We are pleased that the PNG Cabinet (National Executive Council), has completed its review of the Papua LNG Gas Agreement and has validated the agreement as executed on 9 April 2019,” stated Botten.

“The next step for the proposed integrated three LNG Train development is the finalization of the P’nyang Gas Agreement,” he added.

Botten explained that once this final step is completed the Petroleum Retention License 15 in the Gulf Province of PNG and the PRL 3 licence in the Western highlands, as well as the overall LNG joint ventures, can proceed into the front-end engineering and design phase of these “nationally important” developments.

Doubts about the gas deal escalated in August when the government suddenly called for talks to revise the agreement.

The minister Kua said Total had made some concessions, promising to prepare a detailed plan outlining how much local equipment and services would be used in the project and to negotiate with any third parties wanting access to the project’s gas pipelines.

Total would also be willing to negotiate for PNG to take a stake in the pipelines after the state has repaid all its loans and costs on the LNG project, and would consider buying LNG carriers in a joint venture with the state.

“Most of these are substantial new concessions on potential future benefits,” state Minister Kua.

The two existing LNG Trains at the plant northwest of Port Moresby have a nominal capacity of 6.9 million tonnes per annum but are actually running close to 9 MTPA.

Three other Trains are planned in the expansion and the five Trains when operational would have an actual capacity of nearly 20 MTPA.

Analysts said the expansion when completed would put PNG into the premier league of global LNG suppliers.

Oil Search, the Australian-based oil and gas producer based in the Papua New Guinea capital Port Moresby, said it was confident about the future of PNG LNG and its expansion project as the nation recovers from a political crisis.

Papua New Guinea LNG stakeholder Oil Search posted lower first-quarter revenues as it remained focused on pushing forward the construction and expansion plans for three additional liquefaction Trains in the Oceania nation involving separate joint ventures.

The Australian-listed company with oil and gas interests in PNG and to a lesser extent Alaska said total revenue for the quarter was US$398.1 million.

Oil Search said this represented a drop of 21 percent below the fourth quarter of 2018, primarily due to the timing of LNG shipments, with three LNG cargos worth more than US$35M in revenue net to Oil Search, on the water at the end of the period compared with one cargo at the end of the previous quarter.

However, the operating revenue for the three months was still higher than the US$295M reported in the same quarter a year ago.

The company said the quarter was also marked by progress on the PNG LNG expansion as the government and its energy company partners, including LNG plant operator ExxonMobil, signed a formal Gas Agreement defining the fiscal framework for the Papua expansion project.

The PNG LNG plant, located northwest of Port Moresby, already produces more than 8 million tonnes per annum of LNG and studies have supported new LNG capacity comprising three Trains each with 2.7 MTPA of output and the upstream development of the Elk-Antelope field to provide feed-gas.

The other signatory to the agreement with the government was French major Total, the main shareholder in the Petroleum Retention Licence 15 that will underpin most of the production increase at the plant.

The agreement gives the PNG Government and landowners 22.5 percent of the project with Total holding 31.1 percent, ExxonMobil 28.7 percent and Oil Search 17.7 percent.

“Following the completion of the Papua LNG Gas Agreement, focus has now turned to finalizing the P’nyang Gas Agreement, with a targeted signing in the second quarter of 2019,” said Oil Search Managing Director Peter Botten.

“Substantial progress has also been made on other commercial agreements supporting the proposed three-train, 8 MTPA downstream development at the PNG LNG plant site,” he added.

“The Papua LNG, PNG LNG and P’nyang joint ventures are targeting a final investment decision in 2020, which would place the proposed three-Train development on track to commence deliveries of LNG in 2024,” stated Botten.

Oil Search said that all PNG LNG stakeholders were committed to meeting the global market window when significant new LNG supply is required to meet demand growth and requirements for replacement of expiring contracts.

“Oil Search’s dedicated LNG equity marketing team continues to report strong buyer appetite for LNG from the proposed new Trains, underpinned by the reliability of our operators, the proximity of PNG to North Asian markets and the high heating value and quality of LNG from PNG,” said Botten.

“Many buyers are seeking both geographic and seller diversification, which are highly favourable drivers in support of new equity LNG sellers such as Oil Search,” he added.

The company said its total quarterly production was 7.25 million barrels of oil equivalent, reflecting a continued strong performance by the PNG LNG plant, offset by lower oil field production.

The PNG LNG plant produced at an annualized rate of 8.8 MTPA during the quarter, 28 percent above nameplate capacity.