MELBOURNE: First production from the A$16 billion (K40.65 billion) Papua New Guinea liquefied natural gas project is on track to flow in 2014 after the development cleared its last financial hurdle with the signing of its final long-term sales agreement.
The final deal converts an earlier agreement to a binding sales and purchase contract.
Energy giant ExxonMobil, which has a 33.2% stake in the project and operates it via its subsidiary Esso Highlands Ltd, announced financial closure last Friday.
“Finalising all sales and purchase agreements with LNG buyers and completing the financing arrangements with lenders are major milestones for the project,” Oil Search managing director Peter Botten said.
Oil Search has a 29% stake in the project.
“A total of US$14 billion (K38.89 billion) of debt funding has been secured for the project, with commitments from key export credit agencies, commercial banks and lending from co-venturers,” he said.
“Securing this financing during one of the most difficult financial markets seen in modern history was a major achievement.”
The project will supply four major LNG customers in Asia through long-term sales, including Taiwan’s CPC Corp, Osaka Gas Co Ltd and The Tokyo Electric Power Co, in Japan, and Unipec Asia Co Ltd, a subsidiary of China Petroleum and Chemical Corp (Sinopec).
Partners in the PNG LNG project in December announced the US$15 billion (K41.67 billion) project would go ahead, conditional on sales and purchasing agreements being signed-off and finance being secured.
Other partners include the PNG Government with 16.6%, Santos Ltd with 13.5%, Nippon Oil Exploration with 4.7%, PNG landowners, who hold 2.8%, and Petromin PNG Holdings Ltd, with 0.2%.
The PNG LNG development includes gas production and processing facilities in the Southern Highlands and Western provinces of PNG, liquefaction and storage facilities north-west of Port Moresby on the Gulf of Papua, and over 700km of pipelines.
Santos chief David Knox also praised the project’s financial completion.
“PNG LNG will provide Santos with long-term production and cash flows,” Knox said in a statement.
“Our share of project production is expected to be approximately nine million barrels of oil equivalent per annum at plateau including LNG and associated liquids,” he said.
The existing sales and purchase agreements now account for all of PNG LNG’s production capacity of 6.6 million tonnes per year for 20 years from the start of production expected in 2014.
Deutsche Bank analyst Damian Pearson said most investors had been expecting the final agreements to be signed-off.
“It is all done and dusted, so that is good news,” Pearson said. – AAP