Future bright for oil, gas

Business, Normal

The National, Tuesday July 24th, 2012

THE future is bright for Papua New Guinea, as long as it can successfully transform its unused gas reserves into exportable LNG, according to Business Monitor International’s (BMI) Papua New Guinea Oil and Gas Report Q3 2012.
“The first (LNG) scheme is proceeding apace and there are encouraging signs that the second project is attracting buyers for its output, although delays to its planned start-up seem inevitable,” the report said.
“Oil production is falling and imports are rising, but the timely arrival of LNG revenues should transform the economy from 2015.”
The report said the main trends and developments for PNG’s oil and gas sector were:
l    Two major LNG projects were currently being developed in PNG. The first is the US$15.7 billion ExxonMobil-led PNG LNG project, which was granted final approval in December 2009.
Once completed, the project could treble PNG’s exports and boost its GDP by at least 20%. A landslide disrupted development activity last January but the project is said to be on track for first gas deliveries in 2014;
l    InterOil has signed three preliminary gas sales deals that could clear the way for its proposed US$6 billion Gulf LNG project.
Shipments from the new facilities could begin in 2015, with the first customers including Hong Kong-based Noble Group, Gunvor Singapore and China’s ENN Energy.
The scheme has the potential to be enlarged, but there are indications that the initial plant will not reach full capacity until 2016;
l    Oil consumption is forecast to rise by around 5% per annum to 2021, implying demand of around 64,400 barrels per day (b/d) by the end of the forecast period. The net import requirement would therefore be about 39,600b/d by 2021;
l    Oil Search’s total oil and gas production for the first quarter of this year was 1.46 million barrels of oil equivalent (boe), or around 16,044boe/d, compared with 2011 fourth quarter production of 1.64mn boe.
As foreshadowed in the company’s 2011 final results, production was impacted by a 16-day planned facilities shutdown for work related to the PNG LNG project.
Total oil sales for the quarter were 1.25 million bbl, or 13,736b/d;
l    While Oil Search continues with an active exploration programme in an attempt to halt a decline in output, BMI is assuming PNG’s oil volumes will be no more than 25,000b/d by 2021, unless fresh accumulations are brought into play; and
l    By 2021, the net crude oil import requirement is expected to rise to 39,400b/d, costing some US$1.4 billion at an assumed Opec basket oil price of US$97bbl.

Gas exports are forecast to rise towards 21bcm by 2021, bringing in potential LNG revenues of US$10.3 billion.
Potential petroleum export revenues for 2021 are therefore estimated at US$9.26 billion, with LNG export revenues dwarfing the cost of rising oil imports.
At the time of writing IBM assumes an Opec basket oil price for this year of US$111.47/bbl, falling to US$107/bbl next year.
BMI’s Papua New Guinea Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Papua New Guinea’s oil and gas industry.