Exxon and Total have agreed to double the export capacity of their LNG project in Papua New Guinea, Oil Search, which is a minority partner of the supermajors in the project, said. Analysts estimate that this expansion will cost US$13 billion and will put PNG LNG on par with Australia's biggest LNG projects.
The expansion will bring the export capacity of PNG LNG up to 16 million tons of gas per year and will involve the construction of three more trains to source gas from the Total-operated Elk-Antelope field and from the P'nyang field, operated by Exxon. The final investment decision is expected next year.
The aim is to have the additional capacity in place by 2023 or 2024, when demand for LNG in Asia is seen to hit new highs amid a slowdown in new production capacity additions.
Oil Search's managing director Paul Botten told media that the cost of the expansion would be much lower than the US$19.5 billion it cost to build the first phase of the project, but noted that the estimate for the expansion is only preliminary and the actual cost may be different.
Reuters quoted Bernstein analysts, who calculated the cost for a ton of additional capacity at US$1,600. This is less than 50 percent of the costs of Chevron's giant Gorgon LNG project in Australia.
There has been a veritable race to build LNG capacity in response to rapid growth in demand, and forecasts that this demand growth will persist. In its first LNG Outlook last year, Shell projected the growth rate at 4-5 percent for the period between 2015 and 2030. The volume of LNG trade, Shell said then, will jump by 50 percent between 2014 and 2020.
More recent forecasts support this, with worries about an LNG glut being alleviated by expectations that the glut will be short-lived. Most recently, the IEA said it expected the oversupply to peak in 2020, after which the market would gradually start tightening as demand catches up with production.
By Irina Slav for Oilprice.com
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