ExxonMobil commits $600 million to early works at PNG LNG project

Sydney (Platts)--15Jun2009
ExxonMobil has begun preliminary construction work for its 6.3 million
mt/year LNG project in Papua New Guinea, joint-venture partner Oil Search said
Monday.
The early works program, which covers a range of infrastructure projects,
will involve an investment of around $600 million over the next 12 months, and
paves the way for the start of full construction, expected in early 2010. The
work will include the upgrade and repair of roads, construction of camps,
wharf upgrades, early site preparation in the PNG Highlands, construction of
training facilities and ordering of long lead items.
The PNG project is based on gas from the Hides, Angore, Juha, Kutubu,
Agogo, Moran and Gobe fields, which is to be piped to liquefaction facilities
near the capital Port Moresby. The front-end engineering and design phase of
the project got underway in May 2008, and the project partners are targeting a
final investment decision at the end of 2009, with first LNG in 2014.
The project is currently held by operator ExxonMobil (41.5%); Oil Search
(34%); Santos (17.7%); an affiliate of Nippon Oil (5.4%); and local companies
MRDC (1.2%) and Eda Oil (0.2%). The PNG government is expected to take up a
stake of around 19-20% in the development on financial close.
"This positive early works decision follows the recent signing of the
umbrella benefits sharing agreement and substantial progress made on LNG
marketing," Oil Search said in a statement.
ExxonMobil in April reached a deal on the key terms for a heads of
agreement with a major Asian customer, understood to be Chinese giant Sinopec,
for 2 million mt/year of LNG from the PNG project. Oil Search said a further
announcement on LNG marketing was "expected to be made soon."
The benefits sharing agreement defines how the benefits of the project
will be shared between the PNG government, provincial governments, project
area landowners and local level governments, Oil Search said. The umbrella
agreement sets the framework for a series of individual license-based
agreements, to establish the final benefits distribution.
ExxonMobil earlier this month announced the award of two contracts for
early works activities, including a major construction contract for upstream
civil infrastructure to the Clough Curtain joint venture.
The decision to proceed with early works was a "major vote of confidence
in the PNG LNG project," according to Oil Search Managing Director Peter
Botten. "It demonstrates an increased level of commitment to the project by
the participants, as milestones are progressively met," he added.
--Christine Forster, christine_forster@platts.com