OIL Search has reported that significant progress has been made on a proposed LNG expansion in PNG, with a positive key meeting of joint venture partners recently held to discuss the preferred downstream development concept for expansion.

“Productive, high level meetings were recently held between Oil Search, ExxonMobil and Total to discuss the results of the downstream development options that were received by the PRL 15 joint venture partners last December,” Oil Search managing director Peter Botten told the company’s shareholders.

“The partners have reached broad agreement on the preferred development concept, which will be presented to the PNG Government and other PNG LNG and PRL 3 joint venture partners for endorsement. The development concept that will be proposed is likely to comprise the construction of three LNG trains, with total capacity of approximately 8 MTPA.

“Two of these trains are likely to be dedicated to Papua LNG, supplied with gas from the Elk-Antelope fields, with an additional expansion train underpinned by gas from the existing PNG LNG fields and the P’nyang field.

“We expect negotiations on cost sharing arrangements and the principles governing integration to commence shortly, which will enable the completion of downstream and upstream technical studies.

“Oil Search expects that discussions with the PNG Government on project gas agreements will commence late in the first quarter/early second quarter of 2018, with a decision on the Front End Engineering and Design phase in the second half of 2018, subject to partner approvals and progress on Government negotiations.

“It is expected that LNG from the Papua LNG Project will be equity marketed. In preparation, we have recently established an office in Japan, staffed by a highly experienced team, with collectively more than 70 years in LNG marketing. We are increasingly confident about the demand outlook for LNG from PNG, with a material shortfall in supply developing in the early 2020s, and will be targeting key NE and SE Asian markets for offtake agreements,” Mr Botten said,

The PNG oil and gas industry veteran said Oil Search’s key objectives for 2018 included completing the negotiation of cost sharing and integration agreements between the PRL-15, PRL-3 and PNG LNG joint ventures.

Other key LNG expansion actions to be undertaken include:

  • Negotiating gas agreements for LNG expansion volumes with the PNG Government.
  • Completing technical studies supporting integration.
  • Commencing equity marketing of Oil Search’s share of expansion LNG.
  • Commencing  discussions with prospective lenders on joint project financing.
  • Making a decision on Front End Engineering and Design (FEED).
  • Progressing the Associated Gas Expansion (AGX) opportunity, to increase the volume of gas being provided to the PNG LNG Project from the Kutubu, Agogo and Moran fields, to support PNG LNG expansion.