Oil Search Resumes Production At Papua LNG Project

Australian Oil Search—partner of Exxon in the PNG LNG project—said it had resumed oil production at the Kutubu field after a prolonged shutdown. By the end of the month production from Kutubu should return to its regular rate, the company said as quoted by Reuters.

Gas production is yet to resume but the condensate processing facilities at the Kutubu field are ready to receive the gas, Oil Search also said.

An earthquake of a 7.5 magnitude led to the suspension of oil and gas operations in Papua New Guinea at the end of February. The epicenter, although in a remote area, was close to the PNG LNG project, and all operations were suspended as a result of the disaster. The project operator, Exxon, has said it hoped operations will resume in full by the end of April.

On Sunday, Reuters reported that a full LNG tanker from Indonesia had reached its destination at the PNG LNG. The cargo was ordered by Exxon to keep the liquefaction plant cold so it could restart operations without delay once everything else has been fixed and the flow of gas resumes.

The PNG LNG project is the biggest source of state revenue for Papua New Guinea. Earlier this year, Exxon and partner Total announced plans to double the project’s capacity to 16 million tons of LNG annually, which would put the Papua project on par with some of the largest LNG projects in Australia.

The expansion will cost US$13 billion and the additional capacity should come online in 2023 or 2024 when demand for LNG in Asia is expected to hit new highs amid a slowdown in new production capacity additions.

The cost of the extension might seem pretty hefty, but it is much below the US$19.5-billion price tag on the initial liquefaction plant and export terminal.

By Irina Slav for Oilprice.com

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