The company estimated that the upstream and pipeline costs for the ExxonMobil-led project would be about $5 billion, while the plant would cost about $4.5 billion.
It is currently involved in a detailed $60 million pre-front-end engineering design study to evaluate the technical and commercial merits of the LNG facility, which will source its gas feedstock from the Hides, Juha and Angore fields.
Additional gas may also be sourced from the Kutubu, Gobe, Moran and Agogo fields.
Oil Search chairman Brian Horwood said during the company’s annual general meeting that the company’s focus was to fast-track developments that maximise the long-term value of gas resources.
“We strongly believe that PNG has all the pre-requisites to become part of an elite group of countries worldwide that supply LNG.
“We have the resources, we are ideally located, close to the fast-growing markets of South-East Asia and we have a supportive government that is pro-gas development.”
Partners in the initial cost-sharing agreement are ExxonMobil (49%), Oil Search (32%), Santos (17%) and Nippon Oil (2%).
Petroleum Development Licence 2 participants – including Oil Search as operator with a 60.5% stake – also have an option, up until the end-June, to take part in the studies. This will increase Oil Search’s stake in the LNG project to 37%. The PDL 2 participants own several gas fields in PNG including Kutubu and Moran.
Oil Search has also been talking with British major BG Group on another possible 3-4MMtpa LNG facility centred in the Kutubu field, and drawing gas from Juha and possibly other nearby fields in the Oil Search portfolio.
The company also acknowledged the challenge from Toronto-listed InterOil’s Liquid Niugini Gas joint venture, saying that it is in a race to develop the first LNG plant in the country.
InterOil’s joint venture with Merrill Lynch and Clarion Finance is looking at a possibly two-train plant capable of producing up to 9MMtpa.
InterOil had said it expected the facility, which would be next to its existing refinery, to start supplying LNG by 2012.
Oil Search said it was continuing to develop plans to create a gas-based petrochemical industry in PNG, parallel with its LNG options.
It added that further work on the development of an industrial park near Port Moresby was ongoing with a range of partners including Mitsubishi, Itochu and Oswal.
“There are considerable economic advantages to PNG from the current LNG and petrochemical plants proposals, when compared to the export of raw gas to Australia under the PNG Gas project.
“These developments will see the gas being processed in-country and will generate significant investment and job opportunities, both during the construction phase and thereafter,” Horwood said.
However, he warned that considerable effort was needed on the part of the upstream joint venturers, landowners and PNG Government in order to move any of the plans forward.
“We need a strong, experienced and committed operator, a sound technical development plan and an economic and fiscal framework which ensures equitable benefits distribution to all key stakeholders in PNG,” Horwood said.
“It is paramount that all these issues, including government and landowner participation and fiscal terms, are resolved in a timely manner, so the progress of these projects is not delayed.”
This year's SEAAOC conference, to be held in Darwin from May 30 until June 1, features presentations on PNG gas commercialisation options, including LNG.
