ExxonMobil (NYSE:XOM), which operates the PNG LNG export complex in Papua New Guinea (PNG), has sealed a gas agreement with the PNG government that provides a clear framework for development of the P’nyang field to backfill existing liquefied natural gas (LNG) infrastructure. However, major development activities are unlikely to start before 2027.
“The signing of the gas agreement marks a major milestone for the project, setting out the fiscal framework and supporting project scoping and evaluation,” project partner Santos (ASX:STO) said in a statement today.
“Subject to a final investment decision (FID) by the P’nyang participants, the ExxonMobil-operated P’nyang project would deliver LNG through new upstream facilities in Western Province linked to existing infrastructure, including our world-class PNG LNG plant near Port Moresby,” added Santos.
“I thank the PNG Government and the government of Western Province for their partnership with the P’nyang participants to move towards P’nyang project development, which is proposed to commence following delivery of the Papua LNG project,” said Santos chief executive Kevin Gallagher.
Readul Islam, an Asia upstream specialist at Rystad Energy, told Energy Voice, that “progress at P’nyang is somewhat significant since it means we’re hopefully fully moving ahead after the impasse in PNG’s hydrocarbon development, that was triggered by the PNG government’s demands for improved fiscal terms back in 2020 from both P’nyang and Papua LNG developments.”
However, “one outcome of the discussions over the past two years has been that the P’nyang project has become decoupled from the Papua LNG development — rather than a three-train integrated development in concert with P’nyang, Papua LNG has moved on as an independent two-train project, with P’nyang arguably relegated to a backfill/debottlenecking role at PNG LNG,” added Islam.
Therefore, “for reserves booking purposes, P’nyang FID could be taken by 2024, but actual capital outlays for advanced project engineering and actual construction activities for a P’nyang development could be years away. Our current base case doesn’t see major development activities starting at P’nyang before 2027,” said Islam.
Principal analyst Jocelyn Vaskas at energy research company Wood Mackenzie told Energy Voice that “completion of the P’nyang Gas Agreement finalises the government negotiations for PNG expansion and provides clarity on the PNG LNG backfill sequence. P’ynang will be next in the queue after the recently sanctioned Angore gas field and Papua LNG, which is expected to enter FEED this year. The Angore project will supply the existing LNG trains from 2024. Whereas Papua LNG FID is targeted in late-2023 and it’s not expected to start up until the late-2020s. We believe the P’nyang Gas field will follow Papua LNG with an FID in the mid-2020s and first gas at the end of the decade.”
Following the successful merger of Oil Search, Santos owns a 42.5% share of the PNG LNG project, more than ExxonMobil, and will most likely sell down its interest.
ExxonMobil holds 33.2% interest in PNG LNG and is widely seen as the most likely to buy any share put up for sale by Santos. France’s TotalEnergies (EPA:TTE), which is developing the Papua LNG project in PNG, is also seen as a potential buyer.
The P’nyang gas field is within PRL3, located in the Western Province of Papua New Guinea. Santos has a 38.5% interest in P’nyang.