THIS year will likely see further support from the Papua New Guinea government to expedite upstream investments to stem the downturn of the massive PNG LNG project coming on stream, according to research and consultancy firm Oxford Business Group (OBG).

In a February economic update on PNG, OBG said a wave of new developments in the country’s upstream energy sector was under way.

Apart from construction of the ExxonMobil-led PNG-LNG export facility, OBG said exploration of new fields was picking up pace with oil and gas company Oil Search eyeing options for the large-scale exploitation of discovered and undeveloped gas resources at P’nyang, Juha North, Uramu, Barikewa, Kimu, Flinders and Hagana.

P’nyang, which holds an estimated 2.5-3 trillion cubic feet of gas, may be on-line in 2015, subject to government approval.

Meanwhile, smaller players are moving into the market, highlighted with China National Offshore Oil Corporation entering through a tie-up with junior exploration outfit UMC Energy, while Australia’s Horizon Oil will bring PNG’s Stanley Gas project on-line later this year in collaboration with Canada’s Talisman Energy.

“Downstream products from this operation are likely to be funnelled toward local industry, a growing area of demand that the government is keen to feed,” OBG said.

Indonesia’s state-owned oil and gas company Pertamina has also signalled an interest in the market, signing a memorandum of understanding (MoU) with PNG in mid-2013 to investigate studies and partnership possibilities.

Over to the sector’s biggest event this year, the US$19 billion PNG LNG project is on track to begin first sales in the second half of 2014.

The project, which includes two trains with a combined export capacity of 6.9 million tonnes per annum, will draw upon fields with reserves of more than 9 trillion cubic of gas.

But OBG said the PNG economy was likely already feeling the downturn from the project’s imminent completion, meaning that the prospect of diversified and more numerous oil and gas projects was now much more attractive.

At its height in 2012, the PNG LNG project employed 21,220 people and had spent US$4 billion in-country as of the end of September 2013.

The next major LNG export project set to be in the spotlight following the completion of PNG LNG is the 3.8 million tonne per year Gulf LNG project, being spearheaded by Canada-based InterOil.

But OBG said the project’s fate remained uncertain in light of a deal signed with France’s Total in December which would see the petroleum giant purchase a 61.3% stake in InterOil’s Petroleum Retention Licence 15, which includes the Elk-Antelope gas fields, as well as the right to develop an LNG export terminal, pending a final investment decision.

“While the move to partner with an energy major was expected and indeed required by the government as a condition of its approval for the Gulf LNG project, the choice of Total was coolly received by the markets, and InterOil’s stock fell sharply in December,” OBG noted.

“With no apparent obligation to move forward with the LNG facility – bringing the Elk-Antelope gas to market may prove more challenging, or at the very least, involve delays.”

The government, meanwhile, appears eager for quick results, with OBG citing PNG Petroleum and Energy Minister William Duma as saying: “We have seen this project delayed for more than four years since we signed the gas agreement in 2009. We expect InterOil and Total to fast track this project.”

The state’s insistence in moving the project along in a timely fashion is related both to growing domestic demand and PNG’s strategic position, OBG said.

“The country is well-placed to serve Asian markets, which are expected to lead a 30% increase in global energy use and a 60% increase in demand for LNG by 2040,” OBG said.

Meanwhile, another major, Royal Dutch Shell, is also active in the country and was considered in the running for the Gulf LNG partnership.

With companies rushing to get a slice of PNG’s prospects, OBG said the government would indicate support to expedite prospective upstream investments.

“PNG now has a substantive, skilled labour pool familiar with the demands of conventional LNG technology,” OBG said.

“With all eyes on the Asian century ahead, PNG’s energy sector is set to grow.”