By ROSS KELLY
BRISBANE -- ExxonMobil prefers to use natural
gas fields in Papua New Guinea owned by InterOil to expand
the country's $19 billion PNG LNG gas export project, rather
than build a second export facility, a senior Exxon executive
Exxon last week began exclusive talks with Houston based
InterOil to invest in the latter's gas assets in Papua New
Guinea. However, it didn't specify at the time whether the
assets would underpin a new LNG plant, or support an expansion of the PNG LNG
project that's already under construction.
"We are interested in it because it could potentially
provide an expansion of our existing facility,"
Mark Nolan, Exxon's Vice President, Middle East and Australia,
Choosing not to build a second LNG plant could put Exxon at
odds with Papua New Guinea's government, which wants to
encourage as much investment as it can in the impoverished
nation to stimulate economic growth. Expanding existing LNG
projects is usually cheaper and less
labor intensive than building them from scratch because some
essential infrastructure such as roads and pipelines is already
Papua New Guinea's government had insisted that InterOil
bring in a company with experience in building and operating a
multibillion dollar LNG plant. Relations have warmed in recent
months as it became clearer that InterOil was closing in on a
preferred development partner.
The PNG LNG project, which counts Australia's Oil Search Ltd
and Santos Ltd as shareholders, is currently being built with
processing units, known as trains. The foundation stage of
the project is more than 80% complete and on track to ship its
first LNG cargoes to Asian customers next year.
Exxon and partners have already found more resources in
Papua Guinea that could underpin an expansion of PNG LNG to three
trains, including the recent P'nyang discovery, so Mr. Nolan's
comments are the strongest sign yet that Exxon may be able to
expand it to four trains.
Exxon has estimated that it would need another 4 Tcf or 5
Tcf of natural
gas to add another train to PNG LNG.
"The resource will determine the size of the project, and, at the end of the day,
the market will as well," Mr. Nolan said.
Wood Mackenzie, a United Kingdom-based consultancy,
estimates Papua New Guinea has 26 Tcf of natural
gas, roughly equivalent to United States consumption
of the clean burning fuel in a year. That likely underestimates
its true potential, as Papua New Guinea has only been lightly
explored for oil and gas up to now.
Dow Jones Newswires