PNG LNG to See $3.3 Billion Cost Increase, 300,000-Metric-Ton-Per-Annum Production Capacity Increase

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Researched by Industrial Info Resources Australia (Perth, Australia)--ExxonMobil Corporation's (NYSE:XOM) (Irving, Texas) Papua New Guinean subsidiary, Esso Highlands Limited (Port Moresby, Papua New Guinea), recently announced an increase in the estimated cost of the Papua New Guinea LNG (PNG LNG) project. The company also announced an increase in production capacity for the foundation phase project, from 6.6 million to 6.9 million-metric-tons per year.

The PNG LNG project's estimated total cost has grown from $15.7 billion to $19 billion for a number of reasons. Construction and drilling costs increased after facing significant setbacks following work stoppages that were attributed to issues with land access and community disruption. The weather played a contributing role in delaying the project, with the rainfall average for the past two years higher than usual. Foreign exchange played the largest role in increasing the overall project cost.

Construction began in the Papua New Guinea highlands and at the LNG plant site near the capital, Port Moresby, in early 2011. The project remains on schedule for completion in 2014, when long-term LNG supply agreements with China, Japan and Taiwan will begin. The expected operational life of the project is 30 years.

Natural gas will be extracted from the Hides, Angore and Juha fields and processed at the Hides Gas conditioning plant. The gas will then be transported via a 700-kilometer pipeline that traverses subsea and onshore from the Southern Highlands to reach the PNG LNG production plant, which is 20 kilometres from Port Moresby. Esso Highlands also will utilize natural gas drawn from its oilfields currently in operation.

The full project is now 70% complete, and includes the two-train LNG production plant and associated infrastructure, the upstream development, onshore and offshore pipelines, and the Komo Airfield. Construction of the 407-kilometer subsea pipeline is complete with the six-month commissioning phase to be finalized by the beginning of December. At the LNG plant site, all of the major process equipment and the pipe rack modules that form the 2.4-kilometer LNG jetty have been installed. Foundations are being laid at the Hides Gas conditioning plant, and drilling is underway on two of the eight production wells.

Industrial Info has been reporting on the PNG LNG project since mid-2009. For more information, view December 18, 2009, article - Esso Highlands Approves EPC Contracts for $15 Billion Papua New Guinea LNG Project.

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