Papua New Guinea's national government on May 22 signed a US$10 billion (38 billion kina) LNG gas project agreement with a consortium that includes one of the world's largest companies, ExxonMobil, placing PNG on the global commercial scene.

The project will underpin the PNG economy for the next 40 to 50 years, as it has the potential to earn more than 130 billion kina in income for the government and landowners over a 30-year period once LNG export begins.

The gas agreement was signed by the governor-general, Sir Paulias Matane, and Petroleum and Energy Minister William Duma and the project's joint venture participants which include ExxonMobil, Oil Search, Santos, Nippon Oil, MRDC and Eda Oil.

The agreement outlines the fiscal and legal framework by which the LNG project will be regulated through its lifetime.

The agreement was formally presented to the prime minister, Sir Michael Somare, at a ceremony in parliament May 22 where executives of the joint ventures, members of the diplomatic corps, members of parliament and invited guests attended.

The prime minister said the agreement is a major achievement and provides a clear indication of the government's commitment to the project.

Sir Michael said its potential impact is significant as it could double the GDP of PNG and provide a big boost to the average income of the PNG workforce.

"Papua New Guineans should be proud. We have now become the 16th nation in the world to have a substantial LNG project in place," Sir Michael said.

He said the PNG LNG project is world-class and will show the global community that PNG is an ideal place to invest and do business.

ExxonMobil project executive Peter Graham said the gas agreement has set out the fiscal regime and legal framework by which the PNG LNG project will be regulated.

Graham said ExxonMobil, which has a 41.5-percent interest in the project, is pleased to have the gas agreement executed.

"We look forward to working with the PNG government and our joint venture participants to maximum the value of the resource and long- term sustainable benefits to the community," Graham said.

The project is set to enter front end engineering and design (FEED) stage. The FEED team will comprise personnel from ExxonMobil, the joint ventures and the FEED contractors based in PNG, Australia, the United States and Japan.

The FEED stage will pursue LNG sales agreements, secure necessary permits and licences, and undertake the financial planning necessary for investment decision.

Oil Search managing director Peter Botten said they were happy that the agreement has been executed. Oil Search has a 34-percent stake in the project.

The PNG LNG project includes all development components including the processing facilities, pipelines and LNG plant facilities.

Other stakeholders are Santos 17.7 percent, AGL 3.6 percent, Nippon 1.8 percent, landowners 1.2 percent and Eda Oil 0.2 percent. Interests will change when the PNG state's nominee join as an equity participant at a later date.

[Peter Graham described the project as "the single biggest [LNG] project in the world" and said the project agreement was reached in a record time of 11 months, the Papua New Guinea Post-Courier web site reported.]

(C) 2008 BBC Monitoring Asia Pacific. via ProQuest Information and Learning Company; All Rights Reserved

Related Project
PNG LNG Project
Facility Type: LNG Owner: ExxonMobil; Oil Search Limited; Santos; Nippon Oil Exploration; AGL; MRDC); Eda Oil
Scope: New Construction Location: Port Moresby Papua New Guinea