Journal: LNG operators in PNG have advantage

 OPERATORS of liquefied natural gas in Papua New Guinea will have an advantage over LNG developers in places such as Australia, where labor is more expensive.

The Wall Street Journal reported that buyers were eager to diversify their supply sources to protect against the possible disruptions. 

Supplies in Asia were expected to rise substantially in the coming years as a result of the US shale-gas boom.

Analyst John Hirjee at Deutsche Bank estimated that Exxon’s plant in the country would generate a return on investment of 19% over its life, potentially making the project one of the most lucrative in the Asian-Pacific region. 

For Oil Search, which recently began exploring for oil in Iraqi Kurdistan, adding a third processing unit could be a quick way to increase earnings as investors question how it will maintain sharp gains in its stock price. The company’s shares have almost doubled in price in the five years since construction on the LNG project began.

For the government, a decision to invest in new processing facilities would inject much-needed cash into the economy. Spending on the foundation stage of the project is already set to more than double the country’s gross domestic product, according to some estimates.

Large investments in the country have led to quarreling between tribal landowners and lawmakers over how the proceeds should be divided. 

Chief executive officer Peter Botten Botten, a longtime resident of the country, said he was optimistic that rewards from the project would be distributed equitably. 

“The government has made the right moves in terms of setting up sovereign-wealth funds and various mechanisms for benefits distribution, but it’s early days,” he said. 

“Part of the solution is that the private sector works with government to help deliver services like health.”