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LNG plans on PNG

January 29th, 2009 · 5 Comments

A must read..

The argument goes that the present downfall in energy prices, combined with the credit crisis, could very well frustrate many big projects, like InterOil’s (actually, Liquid Niugini’s) planned LNG facility (InterOil is one-third owner of Liquid Niugini).

While recognzing the difficult environment, we were never too worried about this:

  • The first planned delivery is in 2014, the world economy, and energy prices will have recovered way before
  • Yes, the credit crisis is a problem, but it’s mostly marginal projects, projects that are only viable at high energy prices like unconventional souces (tarsand, shale gas, coal seam gas, etc.). IOC’s gas resources have many competitive advantages, which we set out here.
  • Likely financiers are big oil companies and/or Asian utilities, parties with deep pockets and relatively unharmed by the credit crisis. Big oil companies do not have many opportunities to add to their reserves these days, big finds are scarce, and political developments are impeding much exploration (many countries with the best exploration opportunities are keeping these for local companies or not investing at all)

Here is a new article from Petroleum News about LNG plans on PNG.

Blair Price
Thursday, 29 January 2009

Petroleum majors from around the world are targeting PNG’s untapped gas reserves.

The country is much closer to Asian markets than Australia is, and several new LNG export proposals have emerged in recent months.

The latest entrant to PNG’s growing LNG sector is Italian major Eni SpA.

Eni chief executive Paolo Scaroni boldly said the company could build four LNG trains under the new long-term partnership agreement made with the PNG government last October.

Eni could soon be followed into PNG by an Indian consortium.

Much has been said about East Asia’s growing and premium-priced LNG demand, but India is also increasing its reliance on gas, and the nation’s largest LNG importer is also reportedly considering its own LNG infrastructure in PNG.

Petronet LNG, a consortium of Indian firms GAIL, Indian Oil Corporation and Bharat Petroleum (12.5% each), along with Gaz de France (10%), the Asian Development Bank (5.2%) and small and institutional investors (32.8%), has been seeking LNG and other gas assets around the world.

According to Indian press reports, Petronet is not only in negotiations with up to three operators in PNG but is also considering a 5 million tonne per annum liquefaction facility of its own in PNG in order to secure gas exports to India.

The reports did not disclose the operators’ names, but said the international companies involved are from the United States, Canada and Australia.

The US and Canadian companies would almost certainly be PNG LNG operator ExxonMobil and Liquid Niugini operator InterOil, respectively.

The Australian company would probably be Oil Search, a major partner in PNG LNG rather than an LNG operator in its own right, which currently operates all of the nation’s producing oil and gas fields and is working to ascertain the sheer size of its own gas resource base.

But it could also possibly be LNG technology junior Liquefied Natural Gas Ltd, which has floated plans for a small-scale LNG plant in PNG.

The reported negotiations also cover farm-in opportunities that could potentially involve several juniors keen on inking deals.

Boutique LNG for PNG

LNG isn’t just for the big players. In fact, junior companies are eyeing up several LNG-related opportunities.

Small-scale LNG projects are becoming increasingly viable and PNG could be an early leader in this sector.

One such proposal for PNG includes Perth-based Liquefied Natural Gas Ltd’s plan for a 1.3 million tonne per annum LNG plant either on Umuda Island in the Gulf of Papua or on a nearby purpose-built floating structure.

However, this has been put on hold as LNG Ltd concentrates on developing an LNG project in Gladstone, Queensland, in partnership with Arrow Energy.

But as one door closes in PNG, another opens.

Foreland basin explorer Rift Oil and Norwegian floating LNG specialist Flex LNG have signed a heads of agreement to jointly develop and market Rift’s onshore PNG gas reserves using a floating liquefaction unit.

Flex, a Norwegian floating LNG specialist, said the project is expected to produce about 1.5 million tonnes of LNG per annum with start-up targeted for the first half of 2012.

“By selecting a floating liquefaction solution, LNG production could start several years earlier compared to a traditional onshore project,” Flex chief executive Philip Fjeld said.

In October, London-based Rift announced a total tested flow rate of 71 million cubic feet per day from the three reservoirs struck by its Puk Puk-1 discovery well in Petroleum Prospecting Licence 235, in PNG’s Western Province.

While further testing of Puk Puk-1 in the company’s wholly owned PPL 235 in Western Province is underway, Rift’s internal mid-case reserves for the three structures in the permit is close to 700 billion cubic feet.

The same permit also holds the Douglas gas field, which was discovered in 2006 and has estimated reserves of about 798 billion cubic feet.

Rift says it is confident it can deliver more than 1 trillion cubic feet to any potential customer.

Small-scale floating LNG remains its preferred option, but the company says other possibilities are also being considered.

PNG looks likely to have at least three projects operating within the next few years, and perhaps as many as five such developments shipping export cargoes before the end of the next decade.

It would be exciting for PNG if one or both of an Eni or a Petronet LNG project was developed.

But for now the frontrunners in Papua New Guinea’s LNG race are the two large schemes already under development – the PNG LNG and Liquid Niugini Gas ventures.

In next week’s PNN – the two big PNG liquefied natural gas projects: PNG LNG and Liquid Niugini Gas

Tags: IOC · Natural Gas

5 responses so far ↓

  • 1 Darcy Patten // Jan 29, 2009 at 9:01 pm

    Thanx STP.

    I just found this but for some reason can’t post on the yahoo boards. Could you please add for me. Thanx!

    Oh yeah, btw it states over 3100ft of vertical pay!!!!

  • 2 rory mcgowan // Jan 29, 2009 at 9:08 pm

    Stpioc: what is your timing on getting back into IOC? The well results? Probably not. Should we put a buy stop order at 22.50 hopeing that a signed deal will move the stock up and you will be sweeped in before the announcment? The stock market is to wild to just buy and hold is’nt it? Otherwise this stock with all this good news should be around $50.00

  • 3 rory mcgowan // Jan 29, 2009 at 9:55 pm

    What would a 3rd resvoir type mean?

  • 4 admin // Jan 29, 2009 at 10:35 pm

    To be honest, Rory, timing is too difficult, in our view. We think that over time, buying at the present levels will not lead to any regrets, as the fundamentals seem to get better and better, and energy prices and stock markets will recover at some point..

    We are very intrigued by that “third reservoir”, it suggests that besides Elk and Antelope, there could be a third reservoir with a pay zone.

    Very interesting indeed!

  • 5 rory mcgowan // Jan 29, 2009 at 10:41 pm