Papua New Guinea LNG production predicted to double within 10 years, reports Fitch Research


BMI’s Raphael Mok predicts a big jump in LNG production.

Papua New Guinea’s LNG exports will more than double over the next 10 years, as a result of the planned expansion works, according to Fitch Solutions’ Senior Country Risk Analyst, Raphael Mok. But, he tells Business Advantage PNG, the government must address landowners’ backlash against royalty payments.

The doubling of LNG exports from PNG from 2014-2017 has lifted PNG to be Asia’s fourth largest LNG exporter and is on track to surpass Indonesia by 2019, according to Raphael Mok, Senior Country Risk Analyst with Fitch Solutions, a subsidiary of Fitch ratings agency.

‘PNG’s low-cost, high-quality gas and easy access to a number of high-growth gas demand markets in the region remain the subject of intense investment interest to international oil companies,’ he says, noting plans to further develop the P’nyang, Elk-Antelope and Western Province gas fields.

The PNG LNG project is due for a three-train expansion over the coming years, as ExxonMobil, Total and OilSearch pool their gas resources together to support an integrated expansion of the facility, as opposed to building a second standalone project.

‘Feed gas is likely to come from the combined assets of the two firms in the Western Province.’

The plan will see PNG LNG’s export capacity expanded to 16 mtpa at an estimated cost of US$13 billion.


Three new LNG trains are planned, one underpinned by gas from P’nyang and two based on gas from Elk-Antelope. The Front-End Engineering Design (FEED) works at both fields are expected to commence in the second half of 2018, and a final investment decision is due by 2020-2021.

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Mok says the possible standalone Western LNG project is less certain. Horizon Oil and China’s Balang International are considering a proposed 1.5 mtpa LNG export project off Daru Island.

Feed gas is likely to come from the combined assets of the two firms in the Western Province, including the Stanley, Elevala, Ketu, Tingu, Puk Puk, Weiman, Douglas and Langia fields.

‘Initial royalty payouts started in September 2017, though further progress is required.’

He notes the two companies continue to be on the look out for more gas to support a slightly larger facility.

But, overall, he says, the country’s susceptibility to ‘persistent civilian backlash … drags on its appeal as an investment destination, and this will need to be addressed in order to ensure stable export flows and future growth’.


Mok says despite a 2009 agreement that landowners of the PNG LNG project were due to receive a 2 per cent royalty payment by 2014, once it had properly vetted the clans exerting claims over the project site, ‘the PNG government has dragged its feet on the clan-vetting process, achieving no meaningful ‘progress to date.

‘Initial royalty payouts started in September 2017, though further progress is required, with the majority of landowners still largely disgruntled and production activities at the Hides, Angore and Juha fields continuing to be at risk as a consequence.

‘Globally, PNG faces competition from new LNG suppliers.’

Indeed, in June 2018, armed civilian groups vandalised wellhead and pipe construction equipment at the Angore site, leading Exxon and OilSearch to reassign workers and suspend operations.’

Globally, Mok says PNG faces competition from new LNG suppliers across North America, Russia, the Middle East and Africa.

But PNG’s low cost structure, coupled with established trade ties with major Chinese buyers and geographical proximity to South Asia and Southeast Asia’s emerging gas markets ‘will serve as key advantages to its LNG exports remaining competitive’, he says.


Meanwhile, Fitch Solutions analysts say the main beneficiaries of proposed tariffs by China on US$60 billion worth of imports of US LNG are likely to be Qatar, Australia and Russia.

‘A 25 per cent import tariff, amid a backdrop of strong government rhetoric against U. energy imports, is likely to see US LNG priced out of the lucrative Chinese gas market,’ they told CNBC.

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