SYDNEY (Dow Jones)
A US$15 billion gas export project in Papua New Guinea backed by ExxonMobil Corp. (XOM) is moving closer to a proposed expansion of its capacity to meet booming Asian energy demand, and steal a march on rival developments in Australia and Indonesia chasing the same market.
Oil Search Ltd. (OSH.AU) said Tuesday it has acquired new acreage around the Papuan Gulf that could feed at least a 50% increase in the project's size. PNG LNG, as the venture is known, aims to ship 6.6 million metric tons a year of liquefied natural gas to customers in China, Japan, and Taiwan.
Global energy giants are investing billions of dollars in natural gas development in the Asia-Pacific region that can capitalize on a major shift by regional economies like China and India away from coal and crude oil consumption to cleaner-burning fuels.
LNG is natural gas cooled and pressured to a liquid form so it can be transported by ship.
Projects in Australia and Papua New Guinea have an advantage over rival developments in the Middle East because tankers carrying gas cargoes don't have to pass through the Malacca Strait near Singapore, a potential choke point.
Exxon, which is the biggest shareholder in the PNG LNG project with a 33.2% stake, declined to comment on potential expansion at PNG LNG.
"ExxonMobil routinely evaluates upstream opportunities around the world and as a matter of routine we do not comment on commercial discussions," an Exxon spokeswoman said.
Oil Search, which has a 29% interest in PNG LNG, said the joint venture may move forward drilling work scheduled for 2012 at the Hides field in the Papua New Guinean highlands that could supply extra gas.
"Hides appraisal drilling timing continues to be discussed, with a focus on commencing the programme in the second half of 2011," Oil Search said in a statement.
Sydney-based Oil Search said it has invested in four additional exploration licenses in and immediately onshore from the Papuan Gulf and increased its interest in the Pandora discovery there to 24.1%.
"While still at an early stage, the initial interpretation of the first phase of offshore seismic acquired in 2010 has highlighted a number of interesting leads," Oil Search said, adding that drilling at these new sites is expected to commence in late 2011.
The PNG LNG project's first two production trains are scheduled for completion in early 2014. Expanding the size of the project will consolidate the venture's status among the leading energy suppliers to Asia.
Close to a dozen LNG terminals are planned for construction in Australia and Papua New Guinea. PNG LNG and the Chevron Corp-operated (CVX) Gorgon LNG project in Western Australia state are leading the pack, having already committed funds, locked in buyers and commenced early work ahead of starting major construction this year.
Oil Search saw a 14% increase in revenue for the year ending December to US$583.5 million, helped by higher oil and gas prices. Annual production of 7.66 million barrels of oil equivalent, or BOE, beat internal guidance of 7.2 million-7.4 million BOE.
Oil Search forecast 2011 output of 6.2 million-6.7 million BOE as some facilities are shut in during the second and fourth quarters to allow for work on PNG LNG.
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