Papua New Guinea’s PNG LNG project: who gets the money?


The first shipment of gas from Papua New Guinea’s PNG LNG project has left for Japan this week, highlighting the potential billions of dollars of income for the project’s partners. Business Advantage PNG looks at where that income will go.

Spirit of Hela_web

The ‘Spirit of Hela’ LNG tanker is now on its way to Japan with PNG’s first LNG shipment. Credit: ExxonMobil

Six years in the making, the PNG LNG project is expected to boost Papua New Guinea’s economy by a massive 15% in first year of production. Over the 30-year life of the project, the PNG LNG project will produce more than nine trillion cubic metres of gas, about 6.9 million tonnes per year.

How much income?

Shareholding in the PNG LNG Project.  * The Independent State of PNG also owns 10% of Oil Search Limited.

Shareholding in the PNG LNG Project.
* The Independent State of PNG also owns 10% of Oil Search Limited.

The total projected income from the project is US$31 billion. Of the one-third expected to remain in PNG, the vast majority is paid as tax revenue, dividends, royalties and infrastructure tax credits to the National Government, provincial governments and landowners, with around 10 per cent paid as operational costs.

Peter Botten, CEO of venture partner Oil Search Limited, told Business Advantage PNG, the company expects to earn in excess of US$1.5 billion (K4.2 billion) per year from the project.

The PNG Government expects its annual revenues from PNG LNG to be US$600m (K 1.7 billion) to US$ 775m (K 2.2 billion) until early next decade and then, with the development costs depreciated, to rise raise rapidly to around US$1.58 billion (K4.5billion).

Distributing the benefits

‘The big problem is whether the country uses the revenue from PNG LNG to improve living standards here and equally distribute the benefits,’ says Jenny Hayward-Jones from the Sydney-based Lowy Institute. ‘It seems to be going well, but you wouldn’t want to predict everything will be completely rosy.’

Former Treasurer Don Polye says the PNG Government has pre-borrowed the future revenue from the gas project to underwrite a $1.2 billion (K3.4 billion) loan from Swiss bank UBS for a 10 per cent shareholding in Oil Search, which is also an exploration partner in what is hoped will be the country’s second major gas project, Elk/Antelope.

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‘The sad story is there will not be any funds coming in because the first flow of gas, the monies coming in will be diverted to paying off the debt, the 3 billion kina debt, UBS loan, and therefore no money will go into the sovereign wealth fund,’ Polye has claimed.

His concerns are echoed Paul Barker, the executive director of the independent think-tank, the Institute of National Affairs, but PNG’s Prime Minister, Peter O’Neill, rejects them.

‘All the funds that are coming from the benefits of LNG will go straight to the sovereign wealth fund,’ he told local TV broadcaster, EMTV.

Future expansion

Of course, all projections on income are based on the estimated current reserves up in the project’s Hides, Juha and Angore gas fields. As our recent interview with Oil Search’s Peter Botten indicates, however, there is a strong likelihood of more gas being added to the project, requiring a third and possibly a fourth train. If this happens, the figures above may well increase further.

The long road to LNG: a timeline

1987    Gas is discovered at Hides in PNG’s Southern Highlands.
2004   The PNG Gas Project is considered to pipe gas to Australia from PNG.
2007    The PNG Gas Project is shelved and work starts on devising the current PNG LNG Project.
2008    Venture partners sign a gas agreement with the PNG State.
2009    Environmental Impact Statement approved by PNG Government (October). Final project approval and first sales and marketing agreement signed for the gas (December).
2010    Construction begins on the project. Project financing finalised (March).
2011     Work on LNG plant and onshore pipeline commences (April). Work on offshore pipeline commences (October).
2012    Work on Komo Airfield commences (September).
2013    First gas enters LNG plant (September).
2014    First LNG production (April). First LNG exports shipped to Japan (May).



  1. Iam lobe arawi from komo in hela province where lng is currently occurring and as far as I know komo and hela have’nt changes and also we all komo and hela students did not select for lng traning and mantaince please need consider it probely! !!

  2. sigilis r. peni says

    Good news for PNG! Thanks to the leaders for the hard work which is now finally paying off.. Regional world top class Hospitals must be built in Lae, Hagen and Rabaul and must be fully equiped with life saving equipment and fully staff to handle the demand on daily basis 24/7, 365days. I lost my dearest wife simply because Angau was unable to treat her and for a simple case of boil under her arm pit resulting in cardiac arrest with poor or nil attention at all is totally unacceptable. As a Christian family we forgave all responsible, but the family would like to see that the Government run hospitals are upgraded to minimize such unnecessary loss of life. Rural aidposts are also in need of urgent attention as 80% of PNG population silently suffer as no one really cares. Good communication network and emergency response in place (must be tested regular basis) to ensure support to the citizens of this beautiful nation PNG. Good health facilities and services means a healthy nation and complement with education, spiritual influence through the word of God, than PNG will go places and become a super power in the South West Pacific Region. Our young nation is in the hands of us, the voters so choice of leaders after every 5years is really up to the voters. Critizing leaders after giving them the mandate is unnecessary as the right place to show your frustrations and correcting your mistakes of appointing wrong/non-performing leaders is after every 5years during the elections.

    And lastly, Lae seaport facilitated LNG heavy cargo and the damage to the infrastructures especially the road system was not really support in terms of Benefit Sharing Seed Funding and Morobe Provincial Government and especially Lae City Council coped most of the blame for poor road conditions. Appreciate if some LNG benefits from its profits be shared with MPG and Lae City Council and backdated. Oh before we forget the AHI Traditional Land Owners were also forgotten, so they deserve some benefits in seed funding as well.

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