Santos Joins LNG Consortium for Papua New Guinea Project
by Asia Pulse Pte Ltd
April 11, 2007
Santos Ltd has joined an ExxonMobil-led consortium looking to exploit vast gas
resources in Papua New Guinea through a proposed $A8 billion
(US$6.6 billion) liquified natural gas (LNG) development.
Oil producer Santos will work with ExxonMobil, Oil Search
Ltd and Nippon Oil to jointly progress a detailed
study of a stand-alone LNG project in PNG.
The consortium is investigating the viability of a
stand-alone LNG operation after shelving its troubled $8
billion PNG-to-Australia gas pipeline project in February.
Santos managing director John Ellice-Flint said the
decision to join the consortium would give the company more
exposure to the expanding LNG market.
"Santos is committed to working with the PNG government,
ExxonMobil and the other project partners to progress LNG
development options in a timely manner, and in a way which will
maximise the value of the large contingent gas resources in
PNG," he said.
The consortium is expected to spend about US$60 million
(A$72.73 million) evaluating the merits of a five million to
6.5 million tonne per annum LNG facility.
The facility could cost up to US$7 billion (A$8.49 billion)
Santos said the Hides gas and condensate field was expected
to underpin the gas volumes required, with additional gas
potentially sourced from the nearby Juha and Angore fields.
The three fields hold a combined gas reserve estimated at
about 7.5 trillion cubic feet.
"Santos has been involved in exploration and production in
PNG for more than thirty years and we look forward to playing a
role in evaluating the LNG development option for our gas
resources at the Hides field," Mr Ellice-Flint said.
The evaluation is expected to be completed by the end of
2007, with first LNG shipments targeted for 2012 to 2013.
Oil Search managing director Peter Botten said the study
represented a step forward to the exploitation of the vast gas
"This agreement represents another step forward in the
commercialization of the large PNG gas resources through the
development of a world scale LNG industry in PNG," he said.
"We see these studies as highly complementary to our other
gas commercialization efforts in PNG."
As part of the agreement, Santos will reimburse Oil Search
to the tune of $9 million for costs incurred on initial work to
develop the fields, while Oil Search will pay ExxonMobil $3.7
million for similar work.
Fat Prophets analysts Gavin Wendt said ExxonMobil while
would probably prefer the facility to be bigger than the
proposed five million to 6.5 million tonnes per annum, the
development would still be material for the company.
"The most important thing is they want to know there is
enough gas there at Hides to be able to supply base case
offtake and then grow it from there," he said.
"I think the idea is it may well start at that point and
ratchet upwards to something they could incrementally add on to
as contracts were added."
Santos shares rose one cent to $10.26 while Oil Search
gained five cents to $3.55.
(C) 2007 Asia Pulse Pte Ltd.
PNG LNG Project
ExxonMobil; Oil Search Limited; Santos; Nippon Oil Exploration; AGL; MRDC); Eda Oil
Port Moresby Papua New Guinea