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Papua LNG seals deal

Agreement with Papuan New Guinean state is an important milestone for an unusual project

Total and its partners, ExxonMobil and Australian-listed independent Oil Search, signed a gas agreement in April with host country Papua New Guinea, aimed at defining the fiscal framework for the Papua LNG Project.

This gas agreement allows the partners to start the front-end engineering design (FEED) study, ahead of a planned final investment decision (FID) in 2020.

Papua LNG is, in simple terms, a 5.4mn t/yr plant, consisting of two trains of 2.7mn t/yr each. However, as shown in Fig1, it is slightly more complicated than that.

It will share facilities with ExxonMobil's PNG LNG plant at Caution Bay, benefitting "from the brownfield synergies with existing liquefaction facilities", according to Total chairman and CEO Patrick Pouyanne. But, more than that, it will share both feedgas with PNG LNG and export facilities. Barring two trains being designated as Papua LNG and three-two current and one planned—as PNG LNG, it is, to practical purposes, the same facility.

It is not uncommon for different trains within a project to have different commercial arrangement. Or, for example, in Qatar, different stages of a project, with discrete shareholders, to share some infrastructure and even allow some substitution. But the PNG/Papua symbiosis within the same site, designated as two entirely separate projects is unique.

Working in tandem

As if to emphasise the co-dependence, the next milestone is to ink the gas agreement for the P'yang PL3 gas field-which will help feed the expansion train at PNG LNG-so that it and the PNG LNG T3 can be integrated into the same FEED study.

A glance at Fig1 shows, though, that, while the projects are distinct at a feedstock stage, all five trains will produce into an entirely communal post-liquefaction infrastructure. LNG produced from the two Papua LNG trains fed by the new Elk and Antelope fields and from the three PNG LNG trains will be interchangeable.

Total operates the Elk and Antelope onshore fields and is the largest shareholder of the PRL-15 permit in which they are located with a 31.1pc interest, alongside partners ExxonMobil (28.3pc) and Oil Search (17.7pc), post the state's farm-in right of 22.5pc.

PNG LNG is delivering stand-out performance, according to a March update from junior partner Oil Search. It reports that average throughput in the second half of 2018 was 8.8mn t/yr, some 30pc above its nameplate capacity of 6.8mn t/yr. And expectations appear to be that this will continue.

The partners have signed two deals above the 6.6mn t/yr sold under 20-year long-term contracts to Japanese and Chinese buyers, inking a three-year 0.45mn t/yr deal with PetroChina starting in July last year, and a 0.45mn t/yr five-year deal with BP, with the major taking the PetroChina volumes too in the last two years.

In effect, for five years, PNG LNG is committed to a total of 7.7mn t/yr of contracted supply from a supposed 6.8mn t/yr plant. On top, it is negotiating terms for another 0.45mn t/yr supply deal, and expecting to sell remaining excess volumes on top of that into the spot market.

Fig 1: Setting a precedent: Infrastructure at the planned PNG LNG project - Source: Oil Search
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