Papua New Guinea LNG project given green light

By AAP

 

A $US15 billion ($A16.5 billion) liquefied natural gas project in Papua New Guinea has been approved by its operator and co-venturers.

The PNG liquefied natural gas project is a joint venture led by Esso Highlands Ltd, a subsidiary of energy giant ExxonMobil, with several partners.

Australian listed companies Oil Search and Santos are both part of the deal, as well as Japan's Nippon Oil, the PNG government's Eda Oil and a trustee to represent landowners affected by the project.

Managing director of Esso Highlands Peter Graham said in a statement that the project had been approved pending completion of sales and purchase agreements with LNG buyers and the finalisation of finance arrangements.

These were expected to be concluded by early 2010, he said.

"With this decision to proceed, the Papua New Guinea government and landowner nominees have joined the project as equity participants," Mr Graham said.

"We are pleased to achieve the important milestone of securing the approval of the co-venturers to move ahead with our project," he said.

News the project would be given the go-ahead was made at a ceremony in PNG's capital Port Moresby attended by the nation's Prime Minister, Sir Michael Somare.

"ExxonMobil and our other private sector development partners have shown significant confidence in our nation," Sir Michael said, according to a statement issued by ExxonMobil.

"Cooperation between the public and private sectors will create value for the Papua New Guinea society as a whole and grow our economy in the future," he said.

The project participants will now continue to work with the PNG government and lenders to secure all the necessary environmental and social program approvals, the statement said.

The massive project is tipped to generate 6.6 million tonnes of LNG per annum for about 30 years.

It has hit some hurdles, with some local landowners unhappy at their representation during negotiations.

The PNG LNG project will develop gas fields in PNG's highlands and Western Province and transport the gas via pipeline to an LNG facility near Port Moresby for shipment overseas.

Analysts had been expecting the deal to be given a final approval from the project's partners, with expectations boosted after two big sales deals were recently signed.

In a separate statement Oil Search managing director Peter Botten described the move as "historic" for both his company and for PNG.

"PNG LNG represents a long term legacy project which will add over 19 million barrels of oil equivalent to our annual production and result in approximately a nine-fold increase in our booked oil and gas reserves," he said.

"The development of this project represents an opportunity to fundamentally change the outlook of the PNG economy and its people."

Mr Botten said that when the project commences production, PNG's gross domestic product would more than double and export revenues would triple.

Santos said the approval of the project was the "next major step in its transformational LNG growth strategy".

"PNG LNG will provide Santos with long-term underpinning production and cash flows over the project production period," Santos said in a statement.

Santos chief David Knox said the project would transform Santos' production and earnings profil when it came online in 2014.

The company's share of project production is expected to be about nine million barrels of oil equivalent (mmboe) per annum at plateau including LNG and associated liquids.

"I appreciate the strong commitment of the government of Papua New Guinea, the PNG landowners and our operator Exxon to make this project a reality," Mr Knox said.

At 1515 AEDT shares in Santos were trading down eight cents, at $14.67 while shares in Oil Search were down nine cents, at $5.81.