Damon Evans, BRISBANE: ExxonMobil is on track to expand its $19 billion Papua New Guinea liquefied natural gas (PNG LNG) project, and, separately, to take a final investment decision on what would be the world’s largest floating LNG (FLNG) plant off Australia.
The US supermajor is primed to at least double its two-train 6.9 million tonne per year (t/y) PNG LNG export project if exclusive negotiations to use InterOil’s Elk and Antelope gas resources as feedstock prove successful.
ExxonMobil’s head for Middle East and Australia, Mark Nolan, told reporters that the size of the resource, now estimated at between 4 trillion and 5 trillion cubic feet, will determine the size of the expansion. Analysts believe the Elk-Antelope gas could underpin at least one LNG processing train. As part of the agreement more drilling will be carried out to fully appraise and certify the fields.
PNG LNG is 80% complete and due to start up next year. ExxonMobil and its partners, Santos and Oil Search, are currently considering other expansion options, with a decision on a third train expected soon.
Drilling of the highly prospective new petroleum system in the Gulf of Papua could provide feedstock for a fourth, and, potentially, a fifth train.
Speaking to reporters at the Australian Petroleum Production and Exploration Association’s annual conference, Nolan said that it was yet to be decided how the InterOil gas fields would fit in with the possibility of a third or fourth train.
“Where all that comes together and how much we expand, I’m not sure,” he said.
He added “the expansion options look attractive to us, so I wouldn’t expect we wait too long”.
Canadian independent Interoil said it would still have the option of either developing a second LNG project in the Gulf Province using gas from licence PRL-15 – home to the Elk/Antelope fields – and potentially other discoveries, such as Triceratops, or pursuing further development with ExxonMobil.
Nolan also reaffirmed his company’s commitment to developing the Scarborough gasfield off Western Australia with an FLNG scheme that will have nearly double the production capacity of Shell’s pioneering Prelude vessel, which is under construction in South Korea.
ExxonMobil’s floater will have an LNG processing capacity of between 6 million and 7 million t/y.
Nolan said ExxonMobil has spent the last three to four years “qualifying the technology” for FLNG and that the focus had shifted to “optimising” this component.
However, he added the development still remains challenging from a cost perspective.
ExxonMobil has not provided any capital cost estimates but some analysts predict it could be between $16 billion and $19 billion.
Upstream challenges include the remoteness of the field, which lies almost 300kms offshore in waters 3000 metres deep. Scarborough’s gas is dry, without any of the liquids that help improve project economics.
Nolan added that the field is “a shallow broad field, so there will be expensive horizontal drilling”.
The operator and 50:50 project partner BHP Billiton aim to take a final investment decision in 2014 or 2015.
ExxonMobil’s move follows in the wake of Woodside’s recent to decision to pursue FLNG for the Browse LNG project as soaring costs make greenfield onshore plants commercially unattractive in Australia.
“When we look around the world, we look at the most attractive place to develop – Australia has some great advantages but it has some significant disadvantages in labour cost and labour productivity,” Nolan told the conference.
He joined other industry heads in warning high costs were making Australia an unattractive place to invest, adding that these issues drive development decisions.
FLNG ships are built in Asian shipyards thereby avoiding the soaring cost inflation experienced by onshore projects in Australia.
