By BARNABAS ORERE PONDROS
THE US$15 billion (K42 billion) PNG LNG project, the biggest resource development ever undertaken in Papua New Guinea, has been given the green light by the operator Esso Highlands Ltd.
The company, a subsidiary of ExxonMobil Corp, and its partners yesterday made the announcement to proceed with the development of the project.
The announcement made headlines around the globe from Sydney to Wall Street in New York and across the Asia-Pacific region.
ExxonMobil vice-president Jack Williams Jr flew in from Houston, Texas, to make the announcement in Port Moresby.
“I am pleased to announce that we will proceed with the project,” he said.
He made the declaration just after 2pm, in the presence of project partners, LNG customers and senior Government ministers and departmental heads.
The project has made good progress to date and the challenge at hand is to deliver first gas by 2014, despite extending several financing deadlines.
The project will have the capacity to produce 6.6 million tonnes of LNG a year and has the potential to transform PNG’s economy by doubling its gross domestic product (GDP).
The decision, described as historic, officially makes PNG a key player in the global energy market, and a supplier of liquefied natural gas to markets in China, Japan and other potential customers.
The project is considered by analysts as a frontrunner from among a dozen rival developments in the region.
At the PNG LNG project sanction ceremony yesterday, Prime Minister Sir Michael Somare expressed confidence that PNG had the potential to become the world’s 17th LNG exporting nation.
Sir Michael, who has played a key role in guiding the lead-up to the final investment decision (FID), appreciated the confidence shown by ExxonMobil in the Government’s ability to deliver on time.
“This included the task of gaining landowner support for this venture,” he said.
The Prime Minister added that the PNG LNG project had helped improve PNG’s international standing significantly in recent times.
“Particularly in world financial markets,” he said.
Sir Michael also appreciated the collective effort by all stakeholders in ensuring the FID was reached yesterday.
Esso Highlands managing director Peter Graham said the project partners would continue to work with the Government and lenders to secure all necessary approvals which focus on specific management plans associated with the implementation facilities.
He also echoed Sir Michael’s remarks that all stakeholders now have a challenge ahead, which is to deliver the first gas by 2014.
Oil Search boss Peter Botten reiterated this and said the FID was the result of the combination of a supportive Government and fiscal stability, amongst others “coming together at the right time to commit to PNG LNG”.
“This day represents the starting line of a long journey the challenge is now to deliver first gas in 2013-14,” he reiterated.
PNG LNG has signed binding agreements for the sale of a combined 3.8 million tonnes of LNG annually to China Petroleum and Chemical Corp (Sinopec) and Tokyo Electric Power Co (Tepco).
Preliminary agreements with Osaka Gas Co and Taiwan’s State-owned refiner CPC Corp are yet to be set into binding contracts.
These are expected to take place early next year.
The PNG Government has backed into the project through the acquisition of a 19.6% stake, meaning ExxonMobil now has 33.2%, Oil Search 29.0%, Santos Ltd 13.5%, Nippon Oil 4.7%, PNG landowners 2.8% and Petromin PNG Holdings Ltd 0.2%.
With the FID made, Esso Highlands Ltd plans to commence major construction work on PNG LNG next year, despite concerns about labour shortages and other issues.