LNG project No.2 signed

Main Stories, National

The National- Thursday, February 3, 2011


THE second LNG project in PNG, led by InterOil Ltd, has set a tentative date for its first gas shipment at the end of 2013, one year ahead of the ExxonMobil-led PNG LNG project.

This was revealed by partner Liquid Niugini Gas Ltd (LNGL) chief executive officer Henry Aldorf yesterday at the signing of the project funding and construction agreement and a shareholders agreement between LNGL, South Pacific InterOil (SPI 208), Energy World Corporation (EWC) and Gulf Governor Havila Kavo.

The signing was witnessed by Prime Minister Sir Michael Somare, Petroleum and Energy Minister William Duma, Finance and Treasury Minister Peter O’Neill and Internal Security Minister Mark Maipakai.

Yesterday’s event essentially marked the launch of construction of the US$4 billion three million tonne per annum (mtpa) land-based LNG plant in Gulf. It would be developed in two phrases –  2mtpa and 1mtpa expansion.

These agreements followed an announcement last September of a partnership between Pacific LNG Operations Ltd and EWC.

Aldorf explained that the LNG plant would be built economically, compared with other new LNG projects and would provide the Asian market with clean energy.

He said this was due to a new financial modular that was developed with other partners to ensure the second LNG would deliver in record time. 

He thanked the partners involved in the project and the landowners and provincial and national governments for their assistance in making the project come to reality.

InterOil chairman and SPI 208 director Phil Mulacek explained that the timeline for the project was set to start selling the LNG from the Elk Antelope fields, beginning at a cost of US$450 million per million tonne.

EWC CEO Stewart Elliott said the project could be seen as having two parts – hardware and software.

“The hardware refers to the equipment, pipelines, the plant and the LNG shipment and finding new markets in Asia.

“We are looking to develop a receiving terminal in the Asian market to cater for the 20 million tonnes of gas we produce,” he said.

The software part involved the people of Gulf who had been in close contact with the company from the beginning, because they wanted the project to improve their lives.

Elliott said no one has opposed the project because they see the benefits they will get including business opportunities, education and other infrastructure facilities.

“You have our assurance that we will do our utmost to care for the people,” he said.

The partnership was that SPI 208 would be in charge of the Elk Antelope fields while LNGL would construct the pipelines and would also work with EWC to build the LNG plant off the coast of Gulf.

The plant would process an estimated 2.25 trillion cubic feet (Tcf) of natural gas over 15 years.

In return for its commitment to fully fund the plant, the agreements provided that EWC was entitled to a fee of 14.5% of the proceeds from the sale of LNG, less agreed deductions and subject to adjustments based on timing and execution.

The agreements provided a framework for the possible expansion of the plant’s capacity to 8mtpa of LNG.

In monetary terms, Mulacek explained that since it would cost US$450 million per million tonne, this would be US$450 million multiplied by the 8mtpa the LNG is capable of producing, which should be around US$4,000 million (US$4 billion).