Report says Papua New Guinea LNG expansion ‘a virtual certainty’

Latest Oil and Gas News: September 10, 2012

Compiled By: Larry Persily (Platts; Sept. 6) - Competition from lower-cost LNG in North America and East Africa will favor the expansion of existing LNG projects in and around Australia over costly new developments, Bernstein Research analysts said Sept. 6.

"Costs and competition will favor brownfield LNG expansions over greenfield projects going forward," the analysts said. Oil Search is the most likely Australian LNG producer to expand its initial project, located in neighboring Papua New Guinea, the analysts said.

Partner ExxonMobil started drilling operations late July at the Hides gas field onshore. In addition to Exxon (33.2 percent) and Oil Search (29 percent), the other partners are the National Petroleum Company of Papua New Guinea, Australia's Santos, Japan's JX Nippon Oil & Gas Exploration and PNG landowner group Mineral Resources Development Co.

The $15.7 billion project is two years into a four-year construction schedule and is on track to start up in 2014. The liquefaction facilities will comprise two production trains with total capacity averaging almost 900 million cubic feet of gas per day. Additional drilling "makes PNG LNG Train 3 a virtual certainty," the analysts said, adding that they expect front-end engineering design studies on Train 3 to commence next year, with a final investment decision by early 2014. Additional expansions could follow, they said.