PNG Government Prefers Exxon, Total Pursue 2nd LNG Project

PNG Government Prefers Exxon, Total Pursue 2nd LNG Project
Papua New Guinea is backing a new greenfield liquefied natural gas facility led by France's Total SA in addition to an expansion of the existing $19 billion Exxon Mobil Corp. PNG LNG project.

(Bloomberg) -- Papua New Guinea is backing a new greenfield liquefied natural gas facility led by France’s Total SA in addition to an expansion of the existing $19 billion Exxon Mobil Corp. PNG LNG project.

The Pacific nation expects its gas reserves to feed both PNG LNG as well as the separate Papua LNG venture, according to  Wapu Sonk, the managing director of Kumul Petroleum, the state oil company. Plans to develop both projects have been in doubt since Exxon bought a stake in natural gas fields that were originally slated for the second project and said it intends to funnel that gas through PNG LNG.

“Exxon has been operating in the country for a long time and it knows what the government wants,” Sonk said in Singapore on Wednesday. “That’s two supermajors and two separate projects.”

Papua New Guinea’s abundant resources, lower taxes and cheap labor are a bright spot as LNG developers, punished by slumping prices amid a global glut, seek to delay investments and cut costs through integration.

Exxon agreed in July to pay as much as $3.6 billion for InterOil Corp., which discovered the vast Elk-Antelope gas field meant to underpin the Total-led Papua LNG project. InterOil said Wednesday that a majority of stockholders approved Exxon’s acquisition.

'Enough Reserves'

Oil Search Ltd. is a shareholder in both ventures and has encouraged a tie-up to lower development costs, cautioning in August that a new greenfield project may not proceed.

Sonk said he doesn’t know how the companies will decide to develop the projects and that Kumul supports integration for the third train at PNG LNG so the companies can save money. Kumul currently holds a 16.5 percent stake in the PNG LNG project and plans to take up its full 22.5 percent stake in all LNG trains built in the country, Song said. Exxon and Total can find a way to cooperate to build a second facility, Nixon Duban, minister of petroleum and energy, said at the same event in Singapore.

Oil Search sees two new LNG production trains at PNG LNG fed by the Elk-Antelope resources, as well as the P’nyang gas field, which the Sydney-based company owns with Exxon and Japan’s JX Nippon Oil & Energy Corp.

"It’s too early now, but between Elk-Antelope and P’nyang we’re confident that we have enough reserves to justify three trains” by 2023 to 2025, in addition to the existing two trains at PNG LNG, Sonk said. "The new trains could be for Papua LNG, PNG LNG or both combined. All those will be decided at a later time.”

Oil Search rose as much as 1.6 percent to A$6.39 in Sydney on Thursday. Shares are down 5.4 percent this year, while LNG prices in Singapore are 15 percent lower.

--With assistance from Perry Williams. To contact the reporters on this story: Dan Murtaugh in Singapore at dmurtaugh@bloomberg.net; Sharon Cho in Singapore at ccho28@bloomberg.net To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net Alpana Sarma

Copyright 2016 Bloomberg News.

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