Basin review, Markets, Offshore, Projects

Papuan possibilities

In April 2008, Papua New Guinea (PNG) Prime Minister Sir Michael Somare announced “The commercialisation of gas resources of our country will be the number one priority of this government.”?

Since then the Government has committed to the development of gas through establishing a Ministerial Gas Committee and an inter-governmental taskforce assisted by the Gas
Co-ordination Office to co-ordinate PNG’s resources in dealing with project proponents.

Four consortiums have expressed interest in LNG projects to be located in the country.

PNG LNG Project

ExxonMobil’s PNG LNG Project has the potential to become the largest project ever undertaken in PNG.

The project will involve the integrated development of the Hides, Angore and Juha gas fields as well as associated gas from the Kutubu, Agogo, Gobe and Moran oil fields. Gas will be transported to a two train LNG plant near Port Moresby via a pipeline approximately 700 kilometres.

A final investment decision is expected for the initial two LNG trains in early 2010, with the 6.3 million tonne per annum (MMt/a) project to be completed by early 2014.

A recent report by UBS stated that the project has enough defined resources to support a third LNG train, which could be online by 2017.

The project joint venture partners – ExxonMobil, Oil Search, Santos, Nippon Oil, Minerals Resource Development Company and Eda Oil – have awarded contracts for project services and early works to the Eos joint venture and the Clough Curtain joint venture respectively.

The Eos joint venture, comprising WorleyParsons and Kellogg, Brown and Root, will provide engineering, training, in-country support services and integrated project team services for construction and project management, following the completion of its current front-end engineering and design (FEED) contract.

FEED and design activities are expected to be completed by the end of the third quarter of this year, when engineering, procurement and construction bids are also due.

The Clough Curtain joint venture will undertake the construction of roads, bridges, wharf, laydown and camp areas, in addition to the construction of other critical infrastructure. The joint venture is a partnership between Clough’s subsidiary Clough Niugini and Curtain Bros Papua New Guinea Limited.

Liquid Niugini Gas LNG Project

Liquid Niugini Gas – a joint venture between InterOil and Pacific LNG Operations – has proposed to build and operate a 4-5 MMt/a LNG processing facility with first supply planned to commence by 2012.

The plant will be located at Napa Napa, adjacent to InterOil’s refinery in Port Moresby. The joint venture also has an option to increase to a two train 9 MMt/a facility. The project also involves the construction of a 36 inch diameter,
385 km gas pipeline from the Elk/Antelope Gas Field to the plant to transport
1,600 MMcf/d of gas.

In December 2008, the joint venture reached an agreement with PNG Government entity Petromin regarding funding the development of the
Elk/Antelope Gas Field in exchange for project participation.

Most recently, Petromin and InterOil signed a Heads of Agreement (HoA) for commercial co-operation with China National Offshore Oil Corporation (CNOOC) for the project.

The HoA was executed in Beijing following official talks between Chinese Premier Wen Jiabao and PNG Prime Minister Sir Michael Somare, and allows for CNOOC to discuss the terms on which it will provide financing for Petromin’s equity in the project.

“For Petromin and the people of Papua New Guinea, this is a major project where the benefits will flow throughout the national economy. Petromin, as the national petroleum and mining company, will hold equity in the gas field and the LNG plant for the benefit of all the people of Papua New Guinea,”? Petromin Managing Director Joshua Kalinoe said.

Rift Oil LNG Project

Rift Oil and FLEX LNG have signed a HoA for a 1.5 MMt/a floating LNG (FLNG) project offshore PNG.

The two companies will work together to monetise gas reserves from Rift’s Petroleum Prospecting Licenses (PPL) 235 and 261, located onshore in western PNG. PPL 235 contains the Douglas gas discovery.

FLEX will provide the floating liquefaction unit for the project, with start-up targeted for the first half of 2012.

Samsung Heavy Industries has been contracted by FLEX LNG to build four ships. The vessels will be designed to be moored in the vicinity of suitable gas resources and be capable of processing and storing gas from sale to conventional bulk LNG transport vessels.

“PNG is a country with considerable undeveloped gas resources and we are excited about the possibility to develop a floating liquefaction project together with Rift,”? said FLEX Chief Executive Officer Philip Fjeld.

“By selecting a floating liquefaction solution LNG production could start several years earlier compared to a traditional onshore project.

“Both parties will also be open to processing third-party gas reserves that are commercially stranded and that can be tied into the project,”? he said.

The joint venture partners have completed a feasibility study into the gas pipeline required to export gas from its licences to a FLEX LNG production vessel located in the Gulf of Papua in water depths between 30 metres and
70 metres.

The study considered the infrastructure needed for a 1.5 MMt/a LNG facility and a 3 MMt/a facility, requiring gas flow rates of 300 MMcf/d and 600 MMcf/d respectively. The study showed that a pipeline could run from the gas fields in PPL 235 toward the Bamu River and then southeast to a location in the Gulf. The approximately 300 km long pipeline would be 20 inch for the 300 MMcf/d and 26 inch for 600 MMcf/d.

LNG Ltd PNG LNG Project

LNG Ltd has proposed a 1 MMt/a LNG project to be developed either onshore or offshore PNG.

The company is considering an FLNG option in collaboration with companies that specialise in the design and development of FLNG production vessels.

The second option involves an onshore project which would be based on the design of the company’s proposed Gladstone “˜Fisherman’s Landing’ LNG Project that is to be located in Queensland.

LNG Limited Managing Director Maurice Brand said “The overall objective in PNG is to secure, as soon as possible, an initial gas supply of 150 MMcf/d of gas, over a 15-year period, in order to develop a 1 MMt/a LNG project.”?

He said that the facility would be designed to provide for additional similar sized LNG trains in line with any increased gas supply availability.

LNG Ltd owns ten per cent of Petroleum Retention Licence (PRL) 10, containing the Uramu Gas Field with approximately 370 Bcf of recoverable resource. The company said that PRL 10 is also strategically located to deliver gas into an offshore or FLNG project.

PNG excitement

With these projects on the drawing board and increasing investment in PNG’s gas, the country is being recognised as a location to develop exciting new gas prospects.

In January this year, the Australian Government outlined funding for major oil and gas projects through its Supplier Access to Major Projects (SAMP) Program. This included the award of $203,700 to Queensland’s Industry Capability Network to assist Australian companies in gaining access to supply opportunities in regard to PNG LNG projects.

The Government said that it aims to establish strong relationships with project teams so that Australian gas industry suppliers are given timely advice on upcoming opportunities in the area.

In addition, a recent report by Wood Mackenzie noted projects such as ExxonMobil’s PNG LNG Project as having sufficient momentum to give participants confidence to sanction investment.

ExxonMobil Development Company Vice President Al Hirshberg said “We…will be working with Government and the community to ensure that PNG gains long term, sustainable benefits from the project. The use of local content including the training and development of a local workforce and suppliers will be a strong focus for the project.”?

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