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The PNG LNG Project is an integrated upstream natural gas and liquefied natural gas (LNG) development, operated by ExxonMobil. The Project has a common ownership structure across the value chain which includes:

• Upstream facilities, comprising 12 well pads at the Hides, Angore and Juha fields, production wells, gathering systems and processing plants at Hides and subsequently Juha in the PNG Highlands.
• Associated gas facilities at Kutubu, Moran and Gobe.
• LNG liquefaction plant, storage and loading facilities located at State Portion 152, near Port Moresby.
• A gas pipeline from the main upstream processing plant in the PNG Highlands to the LNG plant near Port Moresby.

Discovered gas reserves committed to the Project exceed 9 tcf. Approximately 80% of the gas supply will come from the Hides, Angore and Juha gas fields, with the main gas processing plant located at Hides. The remainder of the gas supply will come from the Kutubu, Moran and Gobe Main producing oil fields, operated by Oil Search. Total reserves will support a production plateau of 14-15 years based on 1P reserves and over 20 years based on 2P reserves. The Project will utilise the existing liquids export pipeline from the PNG Highlands to the coast and the oil loading terminal owned by the PL 2 joint venture group.

The construction of the Project is based on well established and proven gas infrastructure and plant engineering and design, which mitigates the risk of cost overrun and delay. The liquefaction process that is being utilised is Air Products C3/Multi-Refrigerant, which is currently in use in a range of LNG plants globally.

LNG from the Project is fully contracted to four key buyers, comprising TEPCO and Osaka Gas from Japan, CPC from Taiwan and Sinopec from China.  The LNG has been jointly marketed, with ExxonMobil acting as marketing representative on behalf of the Project participants. 

The capital cost for the initial phase of the development is estimated at US$15 billion.

Oil Search's participating interest in the Project is 29%.

The Project will provide a major boost to the PNG economy, more than doubling the country's GDP and tripling export revenues, and create signficant employment opportunities.

Background

In 2006, Oil Search undertook extensive studies into the potential for developing an LNG project based on the substantial resource existing in PNG. As a result of these investigations, it was clear that, due to increasing demand for LNG globally and in the Asia Pacific region in particular, LNG offered the highest value opportunity to develop Oil Search's large PNG gas resources. In early 2007, Oil Search and its joint venture partners in the PNG Gas Project, which was seeking to sell gas from PNG to Australia via a sub-sea pipeline, took the decision to cease work on the proposed project and instead focus on LNG.

In 2007, ExxonMobil, Oil Search and other field owners of the Hides, Angore and Juha gas/condensate fields and the Kutubu, Moran and Gobe Main oil fields commenced pre-FEED studies on the potential for an LNG development based on these fields, which culminated in a decision to move into the Front End Engineering Design (FEED) phase in May 2008.

During 2008, the following milestones were achieved:

• An LNG marketing plan was established
• A Joint Marketing Agreement was signed, covering all commercial aspects of the Project, including gas supply arrangements, unitisation principles and voting arrangements, aligning all the participants behind the PNG LNG Project
• A Gas Areement was signed with the PNG Government, outlining the fiscal terms under which the Project will operate
• Front End Engineering Design (FEED) commenced
• All required legislatory and regulatory changes were approved by the PNG Government
• Initial financing roadshows were held. 

In 2009, further progress was made, including:

• Securing LNG offtakers for the full LNG volume
• Concluding an agreement between the PNG Government and landowners on an equitable Benefits Sharing Agreement (BSA) and finalising multiple individual Licence Based Benefits Sharing Agreements (LBSAs).  These agreements set out how a number of the PNG Government andlandowners' revenue streams are shared.
• Commencing early works (road and camp construction)
• Awarding Execution and Procurement Contracts
• Securing Project Finance
• Receiving approval of the Project's Environmental Management Plan 

The Project proceeded into full execution in March 2010, following the conclusion of all Sales and Purchase Agreements with offtakers and completion of the financing arrangements.

Competitive advantages of the PNG LNG Project

The PNG LNG Project is recognised in the market as the most economically robust greenfields project.  The benefits of PNG LNG include: 

• A conventional LNG Project with no new technology being used
• Substantial certified reserves base with a high liquids content and minimal impurities
• Onshore location with an existing infrastructure base from the oil developments
• Excellent location relative to the strongly growing Asian LNG markets
• Favourable fiscal regime with strong Government support
• Robust economics helped by liquids, which will comprise ~ 15% of the total revenue stream
• Fully aligned Joint Venture with ExxonMobil , which is highly respected for its abilities to deliver major projects, as Operator