‘Encouraging’ gas find likely to boost Papua New Guinea LNG expansion as China locks in long-term contract


Analysis of test results from a potentially new LNG find at the Barikewa-3 well in the Papua New Guinea’s Forelands is underway but it’s too early to say how that gas will be commercialised, according to well operator, Oil Search. Meanwhile, the signing of a long-term contract for gas from PNG with China confirms demand for gas from China will continue well into the 2020s.

The growing gap between China’s demand for LNG (gas) and domestic supply. Source: Drewery Maritime and LNG Shipping Research

The Barikewa-3 well, located in the PNG Forelands, reached a depth of 1943 metres in mid-July and last month, a drill stem test was performed over the Toro reservoir, one of the two reservoirs in the area.

In a statement to Business Advantage PNG, a company spokesman said it was too early to say what the most likely commercialisation pathway would be.

‘Analysis of the well results from the drill stem test together with cores and log data is underway, which will help determine the optimal commercialisation route,’ they said.

The field was originally discovered in 1957, but its isolated location and the fact that the find was gas meant it was put aside in favour of the hunt for oil.

‘Barikewa is located approximately 10 kilometres from the PNG LNG gas pipeline.’

Kevin Gallagher, the Managing Director of Santos, which has a 40 per cent share in the venture, described the discovery as ‘encouraging and confirms that there are significant natural gas resources close to PNG LNG infrastructure still to be developed’.

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‘Barikewa is located approximately 10 kilometres from the PNG LNG gas pipeline and is therefore well placed to play a part in future LNG expansion projects,’ he said.


The location of Barikewa. Source: Santos

A long-term agreement recently signed between the PNG LNG operators and China’s oil giant PetroChina confirms that demand for LNG from China is unlikely to ease, say analysts.

The sale will provide PetroChina with 450,000 tonnes of LNG per annum over the next three years.

‘The Asian region is very short of energy sources and is also going to be a very big consumer,’ resource analyst, David Lennox of Fat Prophets, tells Business Advantage PNG.

‘PNG is one of the first movers. It is well established and successfully operating.

‘Given the life of its fields, and the potential for further reserves to be found in the region, it would—and should—be seen as a relatively low-cost producer.’

‘The International Energy Agency said that China will become the world’s top importer of natural gas next year.’

Beijing’s National Development and Reform Commission forecasts Chinese annual overall gas demand from domestic and foreign supplies to nearly double from 237 billion cubic metres (bcm) in 2017 to 450 bcm by 2030.


In its Gas 2018 annual report, the International Energy Agency (IEA) said that China will become the world’s top importer of natural gas next year, boosted by liquefied natural gas (LNG) purchases.

The IEA report says as China’s economy grows it will wean itself off coal-generated energy.

A related factor is the increasing demand for heating in China during its winter months.

Chinese demand for natural gas is expected to rise by almost 60 per cent between 2017 and 2023 to 376 billion cubic metres (bcm), including a rise in its LNG imports to 93 bcm by 2023 from 51 bcm in 2017, reported the IEA.

A five-year deal has also been signed for the supply of 450,000 tonnes of gas from PNG LNG to BP. It is for an initial three-year period, rising to approximately 900,000 tonnes of LNG per annum over the following two-year period.

The two deals mean the total contracted volumes from the PNG LNG project will total seven million tonnes per annum, with 6.6 million tonnes already committed under long-term contracts to Japan’s JERA, Osaka Gas, Sinopec, and Taiwan’s CPC.

The International Gas Union reports that in 2017, PNG was ranked the 10th-largest LNG exporter, with Qatar, Australia, Malaysia, Nigeria and Indonesia the top five by volume.


  1. Jonathan Holingu says

    Surely ‘another’ encouraging gas find in PNG. PNG Government (the State) and project owners should allow local landowners from the project site to have greater equity participation in such LNG projects. The legal regime allows for minimum 2% royalty at well-head value shared by landowners, provincial and local governments. A minimal equity interest (not specified in the Oil and Gas law) from the PNG Government’s acquired equity interest is shared between landowners and local government (2% by practise). Another benefit to the landowners is the business development grants, which the value is at the discretion of the Government. If you look at it the local landowners of the project site receive minimal benefits. The economic and political climate in PNG now is ideal for landowners to have greater equity participation in oil and gas projects. The current Government has talked about it before and acted on it. An example is Ok Tedi Mine (although basis varies) and PNG LNG. It is possible. Local landowners now have the capacity and capability to source equity funding. The Government of PNG must make it happen through Policy reforms and Legislative changes. Give local landowners opportunity to have more equity interest in petroleum and mining projects.

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