ExxonMobil’s smart move in the $19bn PNG LNG Project

ExxonMobil in May 2014 shipped the first cargo of liquefied natural gas (LNG) from the $19 billion Papua New Guinea LNG project ahead of schedule. Production from the first train started in April which is one of an anticipated five-phase project. Phase 2 is expected to begin in 2017 and phase 5 is projected to begin around 2024.

The PNG LNG will more than double Papua New Guinea’s GDP and triple export revenues. It is estimated that about $7.5 billion to $11.7 billion (at current exchange rate) will accrue to the national government over the projected 30-year operation.

Not surprisingly, nearly all this gas has been contracted. The first cargo was Tokyo Electric Power Co. Inc. (TEPCO) in Japan. The other major customers for the project’s output are China Petroleum and Chemical Corp. (Sinopec), Osaka Gas Co. Ltd., and CPC Corp. Taiwan. 

Construction of PNG LNG began in 2010, and took more than 190 million work hours to complete. At its peak, the project employed more than 21,000 people. Flooding, minimal pre-existing infrastructure and extremely steep slopes were among obstacles that were overcome in constructing the project. Pipe had to be airlifted in some areas because the soil could not support heavy machinery and lack of infrastructure required construction of supplemental roads, communication lines and a new airfield. 

The PNG LNG project is an integrated development that includes gas production and processing facilities in the Southern Highlands, Hela, Western, Gulf and Central provinces of Papua New Guinea. Approximately 435 miles of pipeline connect the facilities, which include a gas conditioning plant and liquefaction and storage facilities with capacity of 6.9 million tonnes of LNG per year. 

PNG LNG, operated by ExxonMobil affiliate ExxonMobil PNG Limited, is expected to produce more than 9 trillion cubic feet of gas over its estimated 30 years of operations. In addition to ExxonMobil PNG Limited, co-venturers are Oil Search Limited, National Petroleum Company of PNG, Santos Ltd., JX Nippon Oil & Gas Exploration Corp., Mineral Resources Development Company (representing landowners) and Petromin PNG Holdings Limited. 

Frank Uzuegbunam