EXXONMOBIL PNG will provide gas from the PNG LNG project for electricity generation in Port Moresby under a memorandum of understanding (MOU) which will also see a petroleum development licence issued for PRL 3.

Under a timeline established in the MOU, signed with the Papua New Guinean government, a final investment decision on a third LNG train is to be taken by the end of the 2017 calendar year at the latest.

The agreement also details the provisions for an LNG expansion project, including the award of the development licence and associated pipeline licenses for the field.

PRL 3 operator Esso PNG P’nyang, an ExxonMobil subsidiary, would commence preparations to drill a P’nyang appraisal well within two years of the awarding of the petroleum development licence, it said.

Project partner Oil Search said licensees of PRL 3, which targets the P’nyang gas field, were in the process of finalising their development licence application, which was set to be offered before the end of the first quarter of 2015.

“Preparations are underway for appraisal drilling and development engineering studies, which will commence this year,” the company said in an announcement.

“P’nyang will provide additional long-term gas reserves for power generation and project expansion, including expected bottlenecking of the existing trains and a third LNG train,” Oil Search said.

In his announcement, Papua New Guinea Prime Minister Peter O’Neill said the government was exploring opportunities to increase the LNG production sector.

“The appraisal of the P’nyang field is the logical next step towards the ongoing expansion of LNG production in Papua New Guinea,” he said.

The MOU will also see ExxonMobil supply up to 20 million cubic feet a day of domestic natural gas to the nation for 20 years, with 25 megawatts of this electrical power to go to Port Moresby by June.

Mr O’Neill said this sufficient gas would be provided by the end of the year under the MOU to supply and additional 50 megawatts into the market – taking the total to 75 megawatts.

“With existing demand in Port Moresby being around 150 megawatts per day, against supply of 130 megawatts, the additional electricity generated from natural gas will assist with covering current demand,” Mr O’Neill said.

“This capacity will increase to meet future power requirements that are expected to rise to up to 200 megawatts per day in the coming years as the city continues to expand.”

In an announcement, ExxonMobil said this would be for an interim period as the government moved to improve the capacity and reliability of the country’s power supply by providing more long-term power generation options.

The remainder of the gas supply will be used to fuel a new state-owned gas-fired power generation unit expected to be located near the LNG Plant outside of Port Moresby.

The agreement in also addition to an existing ExxonMobil commitment to provide 4 million cubic feet of gas per day in the Highlands for domestic power generation.