Where is Papua New Guinea’s next LNG project?


With the ExxonMobil-led PNG LNG project ‘more than 90% complete’ and due to start exports in the second half of 2014, what are the chances of additional LNG projects for Papua New Guinea? Business Advantage PNG considers the candidates.

Hides gas field. (Credit: ExxonMobil)

Hides gas field. (Credit: ExxonMobil)

Papua New Guinea’s economy looks set to be heavily reliant on its considerable gas reserves in coming years.

The indications are that a third and probably a fourth train will be added to the PNG LNG project over the next three-to-five years. In addition, PNG could attract investment for at least one or more LNG projects in the Gulf and Western Provinces in this period.

‘These potential projects would have a massive impact on government revenues, because the income is long-term and predictable,’ says Greg Anderson, Executive Director of the PNG Chamber of Mines and Petroleum.

But Anderson warns that how the income is used it will be critical for the country—hence the importance of the proposed sovereign wealth fund and other governance measures such as the mooted Independent Commission on Corruption.

New gas prospects

  • US-based InterOil is pursuing plans to develop its Elk and Antelope gas fields through sales of gas and by a possible standalone LNG project in the Gulf Province if a major operator can be found (new Chief Executive Officer Michael Hession told investors last month that ‘InterOil has no plans to be an LNG operator’).
  • Oil Search has teamed up with the French energy giant, Total, and has discovered ‘modest’ amounts of gas in its Flinders and Hagana wells in the Gulf of Papua. But it is now preparing to plug and abandon its wholly-owned Kidukidu-1 probe in the Gulf, after finding only small amounts of gas in late August.
  • Australia’s Horizon Oil and Canada’s Talisman Energy have aggregated a number of gas resources in Western Province and a number of additional wells will be drilled over the coming year. It is very likely that there will be sufficient gas on an aggregate basis to drive a standalone LNG plant somewhere in Western Province or offshore. In the interim, Horizon is developing a small condensate stripping operation on one of the fields, Stanley, and it is intended that an associated gas-fired power station will provide power for the Ok Tedi mine and the northern part of the Western Province.
  • Australian Prime Ministerial aspirant, Clive Palmer of Palmer Petroleum, claims he has found a new field in the Gulf of Papua.

Gulf Province

InterOil, which has its headquarters in Cairns, Australia, was awarded a Retention Licence over the Elk and Antelope fields in November 2010. The licence covers nine blocks surrounding the Elk and Antelope fields.

Last month, exclusive talks between InterOil and ExxonMobil expired, although the two companies are still in talks to jointly develop the two fields. The Minister for Petroleum and Energy William Duma has been quoted in the local media as saying Shell is a potential stakeholder in the InterOil project.

Story continues after advertisment...

While the size of the gas reserves at Elk and Antelope are not proven as yet, InterOil’s now-retired Chief Executive Officer Phil Mulacek last year told Business Advantage PNG that reserves could be as large as 10 trillion cubic feet, giving a potential  export capacity of 8.8 million tonnes of LNG over 15 years.

Industry analysts say if the project is between four and five trillion cubic feet of natural gas, ExxonMobil is likely to prefer to expand its existing plant rather than build a new one.

Sydney-based Oil Search signed a joint venture agreement with the French energy giant, Total, last October, a move described by Greg Anderson as ‘a great achievement’.

He says it brings an additional ‘super major’ to the country. Both companies will hold equal interests in each of five licences in the onshore and offshore Gulf of Papua.

In late August, Australian mining magnate, Clive Palmer, claimed his company, Palmer Petroleum, had identified a gas deposit ‘off the northern end of the Gulf of Papua and close to the ExxonMobil’s LNG project’.

He claimed the field could be worth more than AUD$35 billion.

Industry sources discount the viability of Palmer’s claim, saying these statements are based on interpretation of 3D seismic data and that the actual presence of oil or gas in the identified structures can only be confirmed by further exploration under licence. It should also be noted that most of the licences Palmer holds are in very deep water.

Papua New Guinea's Petroleum Projects. Click on map to enlarge. (Credit: PNG Chamber of Mines and Petroleum

Papua New Guinea’s Petroleum Projects. Click on map to enlarge. (Credit: PNG Chamber of Mines and Petroleum)

Western Province

Canadian-based Talisman is looking to launch an LNG project in the Western province by 2015.

It has shares in nine licences, including the $US300 million Stanley liquids recovery project it shares with Horizon Oil. While it had hoped to begin production in late 2013, there have been delays in receiving a petroleum development licence for this field.

In 2012, Talisman entered a US$280 million joint venture with Mitsubishi over its LNG plans, giving Mitsubishi about 20% shareholding in its licences.

Sydney-based Horizon Oil and Japan-based Osaka Gas have formed a strategic alliance to fund a ‘mid-sized LNG project’ along the coast of PNG’s Western Province.

LNG availability has the potential to influence prices for PNG, ‘but where PNG has an advantage is that its gas is wet’, meaning it contains compounds like butane and methane which can be separated and sold on their own.

The project will see 7,900 square kilometres of Western Province’s Stanley gas field developed for LNG production, Horizon Oil said in a statement.

Petroleum Minister William Duma has suggested that gas from the K650 million Stanley project will be sold to third parties such as OK Tedi Mining to generate power for regional mining operations.

The use of gas-fired power would displace inefficient diesel generators supplying power to regional projects, he said.

‘Indeed, the use of gas-fired power to displace diesel requirements at Ok Tedi (are) estimated to generate fuel savings worth Kina 2.2 billion (A1 billion) over 20 years,’ he said.

Horizon Oil lodged an application for a development licence in August 2013 and a decision is expected shortly.

National Petroleum Company

The state-owned National Petroleum Company of PNG signed a Memorandum of Understanding in June with Indonesia’s petroleum giant Pertamina to identify oil and gas opportunities in PNG and Indonesia.

The two-year agreement will see a joint working party identify potential exploration sites, particularly the border region between PNG and Indonesia.

The chairman of NPCP, Frank Kramer, has also said the company is looking at other potential regional partners, such as Malaysia’s government-owned Petronas company, for similar joint venture deals. Any gas projects are likely to be years away, however.

Global LNG capacity to double

East Africa (Mozambique and Uganda) and North America are emerging as potential global LNG providers over the next five years or so, according to Greg Anderson, and could have an impact on prices. Asian buyers may want to renegotiate the terms of long-term contracts, he says, particularly as Mozambique and Uganda have easy access to the region.

If the number of proposed global LNG projects come to fruition, global LNG capacity will double by 2025, according to Dale Nijoka and Foster Mellen, analysts with Ernst & Young.

They say a broad consensus of industry analysts/observers sees average annual growth of around 5-6% per year until 2020, with demand coming from Japan, South Korea, and Taiwan.

There is considerable speculation in the United States about the extent to which the US Department of Energy will approve the export of LNG, as the industry and politicians debate whether it is in the national interest for America to export LNG or become self-sufficient.

Andrew Williams, Senior Energy Analyst with RBC Capital Markets, Melbourne, told Business Advantage PNG that any entry by North America into the global LNG market will simply go into the mix of available LNG sources.

He says more LNG availability has the potential to influence prices for PNG, ‘but where PNG has an advantage is that its gas is wet’, meaning it contains compounds like butane and methane which can be separated and sold on their own.


  1. John Koivi says

    I strongly agree with Bravo for his comments. We have a very large number of young generation from grade 10-12 doing nothing NO JOBS!!
    So I say why cant we put all these young generation into institutions collages technical schools and give them a trade. Most important we can create a local labor force that within 10 years can be a professional workforce. We still have a lot mines still to be developed and we need to start NOW!!

  2. Bravo Obo says

    Please prioritize in considering the applications from grades 10 & 12 leavers who are doing nothing in the streets all around the country by providing them any job opportunities . Train them and make them to be a useful person in the community after the LNG winds down.This will be the legacy of human resource from LNG Project.

  3. grape dele says

    Interested in new oil sites in middle fly-western

  4. Really interested for LOGISTICS & SHIPPING jobs with the 2nd LNG project..

  5. Philip Mago says

    Interested in any updates for the PNGLNG sites projects.

Leave a Reply