Can PNG cope with another LNG?

Papua New Guinea’s A$20 billion LNG project is only months away from yielding dividends, but already a new group of global prospectors are lining up to commence a second project of similar nature. French giant Total Oil and Australian Oil Search—both familiar with potential riches in the vast PNG fields—are talking up their chances of a new liquefied natural gas project in the Gulf of Papua even before the flagship LNG project gets off the ground.
Partly PNG government-owned, Oil Search has in recent years been engaged in exploration, development and production of oil and gas in PNG. As part of its expansion strategies, lists plans for a petro-chemical plant and compressed natural gas project. On the other hand, Total Oil has spread around the South Pacific in the last decade or so—capturing markets and creating operations in Australia, Fiji, French Polynesia, New Caledonia and PNG. 
Known as one of the world’s six ‘super-major’ oil entities behind such big names as Dutch Shell, Mobil and Caltex, France’s Total Oil has businesses covered in the entire oil and gas chain—from crude oil and natural gas exploration and production to power generation, transportation to refining and petroleum product marketing. Between the two, they have a mega conglomerate in mind for a new LNG project in PNG with potential to rake in billions of dollars for the local economy, as well as their own coffers. 
Though Total Oil has been reserved with its plans but Oil search last month openly declared and talked up the company’s exploration venture in the Gulf of Papua with prospects of establishing a stand-alone LNG project if needed. With the current Mobil-Exxon-operated LNG project presumably 80% complete, there is growing hopes that sales will begin in early 2014 with handsome rewards for Oil Search as it has a 29% stake in it.
Floating LNG?
“Development options include stand-alone LNG, floating LNG or integration with existing infrastructure,” Oil Search’s chief executive, Peter Botten outlined last month at their shareholders’ meeting in Australia. He added that the company was examining prospects beyond the foundation of the initial PNG LNG. A key objective for the company is to capitalise on the asset base being built by the initial LNG and add a third and possibly fourth LNG train used to liquefy that natural gas. “An expansion of PNG LNG is regarded as the highest-value opportunity in our growth portfolio,” Oil Search chairman Richard Lee told shareholders.
 “The discovery of a sizeable gas accumulation at P’nyang South in early 2012 has brought us a step closer to underpinning an expansion, with further material gas resource upside in the (PNG) Highlands being tested over the next 18 months by an extensive seismic and drilling programme.” Oil Search’s renewed interest in PNG is heavily focused on gas exploration—which it says takes precedence over the oil business with the latter being run to fund gas expansion.
 Their optimism is riding high for another LNG project despite the initial venture incurring higher exploration expenses—forcing Oil Search’s profits down 13.2% in 2012 to A$176 million. With a market capitalisation of nearly $3 billion, Oil Search is undisputably the largest oil and gas exploration and development company incorporated in PNG, extending a 17.6% stake for the government there. The alliance between Total Oil and Oil Search gained momentum last October when they jointly acquired five new licenses to operate in the onshore and offshore Gulf of Papua and the eastern forelands area.

Davendra Sharma

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