"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".
- Papua New Guinea National Goals and Directive Principles
Tuesday, 3 March 2015
in General Energy News 03/03/2015 Total will join existing LNG operator ExxonMobil as a leader of LNG development in PNG, which started exporting gas last year from Exxon’s $US19 billion ($24.3 billion) project. Total will join existing LNG operator ExxonMobil as a leader of LNG development in PNG, which started exporting gas last year from Exxon’s $US19 billion ($24.3 billion) project. Photo: Michele Mossop Total SA has been appointed to run the Papua New Guinea Elk-Antelope gas venture, setting the French oil major up as a direct rival to US giant ExxonMobil. The move, which follows the resolution last month of a dispute over Total’s entry into Elk-Antelope, is expected to accelerate development toward a new LNG export project in Papua New Guinea, separate from Exxon’s $US19 billion ($24.3 billion) PNG LNG venture, which started export shipments last May. Oil Search, which owns stakes in both PNG and Elk-Antelope, had disputed the right of its Elk-Antelope partner InterOil to bring Total into the PRL 15 permit holding the gas fields, which some say could be the biggest gas discovery in Asia in the past decade. However, after losing the arbitration in February, Oil Search pledged not to appeal and to work toward the smooth development of Elk-Antelope, one of the few potential LNG projects in the Australian region expected to be economic even at current low oil prices. Oil Search managing director Peter Botten said on Monday the election of Total, an experienced LNG operator, to run the PRL15 venture “will help facilitate the completion of appraisal and the timely development of the world-class Elk-Antelope fields.” Bernstein Research analyst Neil Beveridge said that with Total in charge, Elk-Antelope was more likely to move forward “in a timely and efficient way”, which was positive for both InterOil and Oil Search. Oil Search shares still slid 0.5 per cent to $8.12. Still to be sorted is whether Elk-Antelope will be developed as a totally separate project from PNG LNG, as a separate project but on the same plant site, or as an expansion of the Exxon-led venture. Mr Beveridge said he now expected Total and its partners to push for the development of a stand-alone two-train LNG project separate from PNG LNG. “With Total now appointed as operator, there is now an experienced LNG company with the experience to lead the partnership towards a development decision in 2018,” he said, adding that the venture would gain credibility in the eyes of government, financiers and customers. PNG Prime Minister Peter O’Neill had made it clear the government wanted to see Total take the helm at Elk-Antelope, providing a counter-weight to the dominance of Exxon in the nation’s fast-growing LNG sector. The partners are still drilling at Elk-Antelope to determine how much gas is in the fields, with reserves expected to be certified by the end of the year. Mr Beveridge said that a two-train LNG project would need 7 trillion to 8 trillion cubic feet of “2C” resources. The current resource estimate at the fields is put at 9.1 trillion cubic feet by InterOil and 5.3 tcf by Oil Search. However, early results from two appraisal wells being drilled at the field, Antelope-4 and Antelope-5, have raised optimism the resource could be larger. A separate prospect to the south of the main field, Antelope Deep, will be drilled later this year and could add to the resource estimate. “With PNG one of the most competitive regions for LNG (in term of cost) we believe that the probability of monetisation is high pending confirmation of gas reserves,” Mr Beveridge said. Source: Sydney Morning Herald
Thursday, 5 February 2015
The PNG LNG Project has reached financial completion, unlocking a windfall of $US807 million ($A1.036 billion) for ASX-listed joint venture partner Oil Search. Oil Search said the first distribution to JV partners would see it receive a a payment of $US700m, which represented its share of cash flow, net of operating costs and the funding of debt service reserve accounts, generated by the Project since it came on-stream in the first half of 2014. A further $US107m payment from cash currently held in escrow by Oil Search to support its lender obligations during the construction phase of the PNG LNG project will also be released and flow back to Oil Search. The PNG LNG Project is a gas-export joint venture between Oil Search and Exxon Mobil Corp based in Papua New Guinea. Oil Search managing director Peter Botten said the cash will help the company's growth activities, "in particular, LNG expansion and development, which remains attractive based on the current oil price outlook." "Reaching financial completion is a major milestone for the Project, which has now been operating very reliably, and at levels above expectations, for more than eight months," Mr Botten said. The company has said previously it would consider boosting dividend payments to shareholders once the cash starts rolling in. But like many rivals grappling with tumbling oil prices, it faces a tricky decision determining how much cash to conserve for growth projects and how much to return to shareholders. The PNG LNG project shipped its first cargo in May and the joint venture partners are looking for more natural gas to potentially underpin a 50 per cent increase in its size that will cost billions more dollars to execute.
Tuesday, 4 November 2014
By Christine Forster | November 4, 2014 12:01 AM It seems there might still be some twists and turns in the long saga of InterOil’s Papua New Guinea LNG project, with analysts speculating that arbitration proceedings launched by Oil Search are ultimately aimed at replacing joint venture partner Total with ExxonMobil. Oil Search clearly sees itself as the key player in the Pacific nation’s emerging gas sector, by virtue of its 29% stake in the new ExxonMobil-led PNG LNG facility near Port Moresby and its significant equity position in the InterOil project. Oil Search, with its strong operating history at PNG oil and gas fields, also enjoys a good relationship with the PNG government, one of its major shareholders. ExxonMobil’s $19 billion PNG LNG project started ahead of schedule in April. The foundation development comprises two LNG production trains with total capacity of 6.9 million mt/year, fed by a gas pipeline from the Hides and other fields in PNG’s Highlands. Separately, InterOil’s LNG project is based on gas discovered in the Elk-Antelope fields, covered by the PRL 15 permit in PNG’s Gulf province. The project has gone through several iterations over the past six years as InterOil, under previous management, sought to bed down a development plan that would meet criteria set out by the PNG government. A key requirement was that there be a proven LNG producer on board. As part of that process, InterOil in 2013 held several months of exclusive but ultimately unsuccessful negotiations with ExxonMobil over the use of Elk-Antelope gas to underpin an expansion train at the operating PNG LNG project. Shell was also involved in the talks. But Total eventually emerged with the prize, unveiling a deal in December 2013 to acquire a 61.3% stake in PRL 15, subject to several conditions including the acquisition of the minority interests in the permit. That agreement, however, was superseded in February this year when PNG-based Oil Search swooped in on a 22.8% stake in the permit by buying out Pacific LNG Group for $900 million plus contingency payments. In late March, InterOil announced a revised deal under which Total purchased a 40.1% stake in PRL 15 for $401 million down, plus $73 million when a final investment decision is taken on the Elk-Antelope LNG project, and $65 million when the first LNG cargo is shipped. Under the terms of the transaction, Total will make additional payments depending on the eventual size of the certified gas resource, scaling from $1.6 billion at 7.2 Tcf up to $3.5 billion if it’s as big as 11.8 Tcf. Oil Search has challenged the Total buy-in, claiming that its own purchase of Pacific LNG Group’s interest vested it with pre-emptive rights in the joint venture. Both InterOil and Oil Search are claiming confidence that they will prevail in the dispute, set to go to the London Court of International Arbitration for a ruling in late November. A decision is expected during the first quarter of 2015. Hong Kong-based analysts with Bernstein Research, which previously dubbed Oil Search’s purchase of the stake in Elk-Antelope an “inspired move,” are now suggesting the arbitration is designed at opening the door for ExxonMobil. “In our view the arbitration is aimed at replacing Total with ExxonMobil to achieve a more timely and efficient development of Elk-Antelope,” they said in a recent note. Whatever the outcome, cooperation with ExxonMobil is clearly on Oil Search’s agenda as it strives for final investment decisions on expansion at PNG LNG and the development of Elk-Antelope by the end of 2016. While InterOil is planning appraisal drilling at Elk-Antelope, the PNG LNG partners are working to firm up the P’nyang and Hides Deep gas resources as potential supplies for an expansion train at their project. According to Oil Search, around $3 billion of potential capital cost savings and about two years production acceleration could be achieved through coordinated development of PNG’s undeveloped resources. Oil Search Managing Director Peter Botten said it was “more challenging” to achieve an FID on a stand-alone Elk-Antelope project in the projected 2016 time frame. “That’s one of the reasons why we are encouraging cooperation between the joint ventures,” he told journalists last month. According to Botten, cooperation could range anywhere between the development of a second entirely stand-alone project at Elk-Antelope, to a completely integrated development with PNG LNG. Either way, he has forecast that Oil Search is likely to be participating in a total of five LNG trains in PNG by the early 2020s. For its part, however, InterOil appears to be firmly focused on a stand-alone development at Elk-Antelope. In its latest briefing for analysts it reiterated it was planning to develop its Elk-Antelope gas as PNG’s second major LNG project. InterOil cited analyst estimates putting the potential cost of an Elk-Antelope development at $2,051/mt of LNG capacity, compared with the $2,324/mt cost of the PNG LNG project. Bernstein agreed that Elk-Antelope was expected to be significantly lower in cost than PNG LNG on the basis that it would not require an airport in PNG’s Highlands or inter-field infrastructure. In addition, the pipeline would be 50% shorter and over a considerably easier route, and the project could take advantage of synergies from being built on a brownfield LNG site. But the Bernstein analysts added: “Given the likelihood of a two-train development at Elk-Antelope and the capacity of PNG LNG to accommodate only three trains, the synergies with Elk-Antelope on cost and schedule could be overstated.”
Monday, 3 November 2014
Originally aired on Dateline Pacific, Tuesday 28 October 2014 An Australian academic says Papua New Guinea's latest monetary policy statement contains some worrying signs that the country could be heading down a slippery slope. TRANSCRIPT An Australian academic says Papua New Guinea's latest monetary policy statement contains some worrying signs the country could be heading down a slippery slope. Paul Flanagan, a visiting fellow at the Australian National University, says a bond agreement to fund a large government deficit effectively amounts to printing money which could lead to hyperinflation. He also says the government is pegging its fortunes too much on the LNG gas project. Mr Flanagan told Jamie Tahana next month's budget will be critical. PAUL FLANAGAN: The devil really seems to be in the detail and even in some things that seem to be a good news story are actually starting down potentially a very slippery slope that may damage PNG's long-term development. JAMIE TAHANA: What kind of things in particular? PF: The announcement was that the Treasury, the PNG Treasury, and the Bank of Papua New Guinea would cooperate in a way that sounded very positive. And this was that if the PNG Treasury was having difficulty in raising the finance from the private sector to fund the very significant budget deficit in PNG at the moment, then the Bank of PNG would buy up those Treasury bonds and would then sell them on to the PNG public. And while this sounds like a good idea for cooperation in reality it is essentially printing money and this is because it seems as if the Bank of PNG is having to purchase, then it is hard to get detailed information, but it could be up to on occasions in some weeks 100 million kina, these bonds. But they're only able to sell 1 million kina of these bonds to the PNG public and that means the other 99 million kina has to be printed. JT: So nobody is buying them, basically? PF: That's right. Rather than dealing and trying to reduce the deficit, or going and looking for raising those funds in international markets, the step seems to have been going down this very worrying path of printing money. It's a worrying path because printing money leads to inflation and if it continues there is a risk of hyperinflation. And hyperinflation can be devastating for development and the economy and especially damaging for the poor. JT: How at risk is PNG of hyperinflation? PF: These are just very, very early days. And it's only a couple of recent developments that have started raising some very early warning bells. So one of those is indications that essentially money will start being printed to fund the deficit, the second one was an intervention in the exchange rate where it looks as if the kina has moved away from a market-related exchange rate system and certainly local businesses are talking about growing amounts of exchange rate rationing so local businesses can't get the funds to be able to pay for the imports they need for their businesses. But it's only a few months on - a critical thing is the budget that will be handed down in November and if that keeps to the medium-term fiscal strategy of reducing the budget deficit from around 7 percent back down to 2.5 percent then hopefully the private markets will be able to fund that and this current risk that I am talking about will hopefully be a very very short-lived experiment. JT: The LNG project that has been touted many times as a great hope - as a way to address the deficit - to increase spending on things like healthcare, education and staff. But we have seen recently it has been very slow to get off the ground. Do you think hopes are being pegged too much on the LNG project being the great bringer of success for PNG? PF: This is something that confuses me in part because the PNG treasury has over the last two years been producing graphs that indicate that PNG LNG revenue is vital but it is vital because it distinctly replaces declining revenues from the OK Tedi mine and the Kutubu oilfield. So PNG needs this money but it is only in line with the revenues and the share of the GDP that they have been getting previously. So this is important money but it is not a huge goldmine that allows the government to do everything that it would like to do. There will still be some tough choices in this budget and there's a tough road of development for a long time still.
Tuesday, 21 October 2014
Japan's imports of LNG remained at a near-record average of 11.85 billion ft3/d in the first eight months of 2014, according to recently released trade statistics from Japan's Ministry of Finance. Increased LNG imports are occurring amid continued shutdowns of nuclear power plants following the Fukushima meltdown and subsequent increased use of fossil fuels in power generation. Higher levels of LNG imports in 2014 are underpinned by continuous growth in gas-fired power generation, the ready availability of spot LNG supply because of weak demand in Europe and Asia (particularly in South Korea) and lower short-term prices. Higher consumption of fossil fuels for power generation following the nuclear meltdown contributed to already high energy costs and led to record trade deficits. Japanese utilities have been reducing the share of crude oil and heavy fuel oil in the power generation mix, while increasing coal consumption with the start-up of new coal-fired plants. In 2013, coal consumption for power generation increased by 16% over 2012, and reached a record 40 million t in the first eight months of 2014. LNG consumption also remains at near-record levels, supported by more than 2.5 GW of new gas-fired power generating capacity commissioned in 2014 and a growing demand in the industrial sector driven by oil-to-gas substitution. At present, all of Japan's 48 nuclear reactors (which generated 34% of the country's power in 2010) remain offline, and the timeline for their restart remains uncertain. Last month, Japan's Nuclear Regulatory Authority approved a safety report of two reactors – Kyushu Electric Power Company's Sendai reactors No. 1 and 2 – bringing them a step closer to a restart in the next few months. However, strict safety standards for nuclear plant restarts combined with strong public opposition to nuclear power may delay the restarts of the plants. Since 2012, the increase in Japan's LNG consumption has averaged around 2.3 billion ft3/d compared with 2010. That increase is nearly equal to the total LNG import volume of the world's third-largest LNG importer, China, which imported 2.5 billion ft3/d in 2013. The incremental supply to accommodate Japan's increase was diverted primarily from Europe, where LNG consumption declined by 4.1 billion ft3/d (48%) in 2013 compared with 2010. Increased use of existing liquefaction capacity, particularly in Qatar and Australia, also contributed to the incremental supply. Additionally, the commissioning of the Papua New Guinea liquefaction plant in May, which coincided with lower demand in Europe, contributed to more spot supply available to Asian buyers. In South Korea, warmer-than-average winter temperatures and near-full storage levels going into summer prompted the Korean Gas Corporation to seek buyers or swap partners for 20 - 40 cargos to manage lower-than-expected demand. Reduced competition from South Korea increased supply and reduced prices in Asia Pacific markets. These factors contributed to lower average LNG import prices in Japan in the second half of the year, and were coupled with higher LNG import volumes. Japan's spot LNG prices averaged US$ 13.77/million Btu in June-August and declined to US$ 11.30/million Btu in September. While Japanese spot prices have been trending lower in the second half of 2014, they still remain significantly above natural gas prices in other regions
Tuesday, 7 October 2014
5:38 am 08/10/2014 Papua New Guinea's Prime Minister has welcomed the commitment of the French company, Total to advancing the Elk-Antelope Liquefied Natural Gas project in Papua New Guinea. Peter O'Neill has received an update on the company's national engagement from Total's visiting Vice-President Arnaud Breavillac and fellow Total executives during their visit to PNG this week. The recent revised agreement between InterOil and Total paves the way for Total to bring its LNG expertise to develop PNG's second LNG project. Mr O'Neill says progress on Elk-Antelope gas fields in the East Papuan Basin is being made and Total is committed to working with the government, joint venture partners and stakeholders. Subject to continued feasibility studies, the project is expected to further establish PNG as a major gas energy hub. Total has described the PNG interest as a significant project in its global portfolio and an ideal opportunity to grow its business in the Asia-Pacific region. Total is the fifth-largest publicly-traded integrated international oil and gas company in the world. Joint venture partners for the Elk-Antelope LNG project are Total, InterOil, Oil Search and the Government of PNG.
Monday, 6 October 2014
October 1, 2014 David Lennox What's new? An announcement by Santos in April heralded the start of production at its Papua New Guinea Liquid Natural Gas facility (PNG LNG). The first commercial cargo of LNG was shipped to Japan in May. PNG LNG cost $US19 billion ($21.5 billion) to develop, with completion reached within a revised budget and ahead of schedule. Santos holds a 13.5 per cent interest in PNG LNG. Other participants include Oil Search with 29 per cent, ExxonMobil with 33.2 per cent, the PNG government with 16.8 per cent and others at 7.5 per cent. The PNG LNG facility is the processing hub for the Southern Highlands that now host oil and natural gas fields. The first oil field was discovered in 1992, and has since grown to some seven producing fields with numerous prospects still being developed and explored. The PNG LNG facility will produce some 9 trillion cubic feet of natural gas and 200 million barrels of liquids over an expected 30-year life. Annually, PNG LNG will produce about 6.9 million tonnes of LNG in its current two processing train configuration. Santos' Peluang gas field in East Java, in which it has a 67.5 per cent interest, also came on stream in March. The field is expected to produce around gross 25 million standard cubic feet of natural gas at its peak per day. The two start-up events had an immediate impact on Santos, with average daily production on a barrel of oil equivalent per day (boepd) basis surging to an average 164,000 for July, up from the 141,000 boepd average for the June quarter 2014. Outlook Production will surge through 2015, as new production from PNG LNG and Peluang are incorporated into the reported operational volumes. The better volumes will provide Santos with some revenue protection in what could be a volatile oil and natural gas pricing environment. Certainly, the reduction in capital costs to build PNG LNG and the replacement of the cash outflow with revenue should have a positive impact on Santos's financial performance, including strengthening an already impressive balance sheet. The benefits flowing from PNG LNG should end the 30¢ dividend plateau, with the company flagging its intention regarding dividends. The 2014 interim dividend was increased by 5¢ to 20¢, the first rise in three years. While PNG LNG will have an impact on 2015, Santos will in 2016 experience a replication of 2015, as its Gladstone LNG (GLNG) project moves into production. Santos holds a 30 per cent interest in the GLNG project. Santos remains on track to achieve 2014 production guidance of 52 million to 57 million boe. Price Over the past 12 months, during which time Santos has been building two LNG projects, its share price has traded in a broad sideways channel. Support though has been found at $13.20 and resistance at $15.25. Global events concerning the environment, and a growing sea change in energy usage toward natural gas is generating significant investor interest in Santos, with its natural gas exposure. Add PNG LNG now in production and GLNG coming on stream in 2015, and the financial benefits generated by these two projects; a challenge on the $15.25 resistance could be expected in the months ahead. Worth buying? Santos appears to be well positioned to participate in Asia's growing energy requirements now and in the years ahead. With its pipeline of long-life energy assets in Asian, Santos is in an enviable position to meet this increasing demand. While Santos' long-life assets also have the capability to deliver energy into Asia over the medium to long term.