PNG LNG Expansion Gains Momentum

PNG LNG Expansion Gains Momentum
The PNG LNG project includes liquefaction and storage infrastructure in Papua New Guinea's capital, Port Moresby (above).

Santos Ltd. has signed a binding letter of intent to acquire a 14.3-percent interest in Petroleum Retention License 3 (PRL 3) that includes the P’nyang natural gas field in Papua New Guinea, the Australia-based firm reported Thursday.

According to Santos, the P’nyang farm-in advances the expansion of the US$ 19 billion PNG LNG facility. Santos owns a 13.5-percent stake in the complex, which currently can produce more than 8 million tonnes per annum (mtpa) of LNG.

“The arrangements we announce today mark an important step towards the proposed expansion at the PNG LNG plant via a 2.7-mtpa third LNG train fed by existing project resources and P’nyang,” Santos Managing Director and CEO Kevin Gallagher said in a written statement. “We are very pleased to execute the letter of intent with the PRL 3 participants who are also affiliates of Santos’ partners in the PNG LNG Project.”

Under the terms of the binding letter of intent, Santos would acquire a 14.3-percent interest (pre-government back-in) in PRL 3 from ExxonMobil affiliates, Oil Search affiliates and Merlin Petroleum Co. ExxonMobil, Oil Search and Merlin currently own 48.99-percent, 38.51-percent and 12.5-percent interests in the license, respectively. After the farm-in, ExxonMobil and Oil Search would each own a 36.86-percent interest in PRL 3 and Merlin would own 11.96 percent.

Santos noted that the farm-in deal also calls on the company to pay a total amount of US$ 187 million, with US$ 120 million payable after a fully termed sale and purchase agreement has been executed (expected in late June 2019). The firm added that it would pay the remainder in contingent installments based on:

  • the award of a production development license to replace PRL 3
  • a final investment decision to build the new liquefaction train at PNG LNG to liquefy gas from P’nyang.

Santos also stated the execution of a sales and purchase agreement remains subject to the parties agreeing to enter into front-end engineering design (FEED) for the PNG LNG expansion. According to the company, P’nyang holds a certified gross 2C contingent resource of approximately 4.4 trillion cubic feet of natural gas. On the PNG LNG project website, ExxonMobil states that major long-term customers include China Petroleum and Chemical Corp. (Sinopec), Osaka Gas Co. Ltd., The Tokyo Electric Power Co. Inc. and CPC Corp.

“We look forward to working with the PNG Government, our partners and landowners to make expansion at PNG LNG a reality,” Gallagher said.


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John  |  May 30, 2019
Any idea how much Train 3 will cost to build?