ExxonMobil鈥檚 Papua New Guinea LNG plant opens path to Asian gas demand
ExxonMobil's joint venture-led Papua New Guinea Liquefied Natural Gas plant has started production ahead of schedule, offering new supplies of LNG to Japanese, Taiwanese, and Chinese buyers. The plant is expected to produce more than 9 trillion cubic feet of gas over 30 years of operation.
ExxonMobil's joint venture-led Papua New Guinea Liquefied Natural Gas plant has started production ahead of schedule, offering new supplies of LNG to Japanese, Taiwanese, and Chinese buyers. The plant is expected to produce more than 9 trillion cubic feet of gas over 30 years of operation.
With ExxonMobil鈥檚聽announcement聽that its joint venture-led Papua New Guinea鈥檚 Liquefied Natural Gas (PNG LNG) has started production聽ahead of schedule, there is officially a new LNG supplier to Asia. The $19 billion plant will supply 6.9 million tons per year (mtpa). Not surprisingly, nearly all this gas has been contracted.
Of the 6.9 mtpa, 6.6 mtpa has been contracted to Asian buyers, including: TEPCO (~1.8 mtpa) and Osaka Gas (~1.5 mtpa) from Japan, CPC from Taiwan (~1.2 mtpa) and Sinopec (~2.0 mtpa) from China. PNG LNG is expected to produce more than 9 trillion cubic feet (tcf) of gas over the project鈥檚 expected 30 years of operation. 聽
PNG鈥檚 entrance into the LNG producer market comes at a time when many other LNG projects from around the world have received the lion鈥檚 share of media attention. From the prolific cost overruns on聽LNG projects in Australia聽to the聽burdensome regulatory approval process聽in both Canada and the United States, LNG has been known to be very expensive and politically contentious. 聽聽
At this point, it looks like the PNG LNG plant has escaped some of these challenges, particularly because of its competitive advantages. The project has substantial booked reserves with high liquid yields from onshore sources with an existing infrastructure base for oil developments, a great location relative to the growing Asian LNG markets, and a fair fiscal regime that is backed by a government that is keen for new revenue streams.
According to an economic impact聽study聽completed by ACIL Tasman, when the project is in production it will more than double Papua New Guinea鈥檚 GDP and triple export revenues. Harvard鈥檚 Kennedy School conducted a聽study聽in 2013 estimating that some 20 to 30 billion PNG Kina (the local currency, or about $7.5 to $11.7 billion at May 2014 exchange rates) will accrue to the national government over the projected 30-year operation.
Looking ahead, PNG LNG鈥檚 recent production start is just the beginning of what the ExxonMobil consortium has in mind for the country. LNG PNG just completed phase 1 of an anticipated five-phase project. Phase 2 is expected to begin in 2017 and phase 5 isn鈥檛 projected to begin until 2024. 聽
This scale of development is being led by ExxonMobil鈥檚 long-term view of Asia-Pacific鈥檚 growing demand for LNG. In November 2011, ExxonMobil PNG LNG project executive Decie Autin predicted, 鈥淔rom a regional perspective, gas demand in Asia-Pacific is expected to grow faster than any other region: we鈥檙e looking at about 4 percent per year. At that rate, Asia-Pacific will become the largest regional gas market in the world by 2015.鈥�
PNG LNG鈥檚 output is only a fraction of what Asia-Pacific will demand in the future. As Autin said, 鈥淲e believe that the Asia-Pacific demand for LNG will grow in just the next two decades by the equivalent of more than 10 PNG LNG projects鈥he project provides PNG with a tremendous opportunity to compete for an increased portion of this rapidly growing market.鈥�
It appears ExxonMobil鈥檚 long-term view has proven accurate.