Papua New Guinea will be heavily reliant on its liquefied natural gas exports for many years to come. Rod Myer considers how PNG’s aspirations may be affected by global trends.

The PNG LNG plant under construction. Credit: ExxonMobil

Papua New Guinea is beginning to reap the rewards of its nascent LNG industry but the potential for LNG in PNG is far greater than that with the government and the petroleum industry looking to a range of potential new projects that many hope will be the foundation of the nation’s growth into the future.

The PNG Government has positioned itself to participate in the expected boom with the creation of the National Petroleum Company of PNG to hold its stakes in petroleum projects.

Remember, PNG is not alone in its LNG ambitions.

The next wave of LNG

PNG LNG is only one of a number of potential LNG export projects for the country.

US group InterOil has won preliminary approval from the PNG Government to pursue its Gulf LNG project, while Talisman Energy is driving an ambitious plan to aggregate a number of gas deposits in Western Province to create a third major LNG project.

Smaller players are also enthusiastically exploring how to get in on the boom.

Global competition

The question that needs to be answered for PNG is whether the LNG industry is sustainable. This will determine how many of the potential projects are actually built and how profitable the industry is in the long term.

Remember, PNG is not alone in its LNG ambitions.

Australia is currently building AUD$180 billion worth of LNG projects across its northern regions. The US is experiencing a boom in unconventional gas, mainly found in shale deposits, which has the potential to turn it into a major exporter.

China is also believed to have massive shale gas reserves of some 21 trillion cubic metres and there is talk of a Russian gas pipeline running into China. So the question is: will all this potential supply flood the Asian LNG markets?

Geoff Appleton ExxonMobil’s Asia Pacific marketing chief says no. Speaking at the recent PNG Mining and Petroleum Investment Conference, he pointed out that global LNG trade has doubled in 10 years with the Asia-Pacific region accounting for 60% of it. The world’s population should rise by 25% to almost nine billion by 2040 and demand for natural gas will grow 60% by 2040, with the Asia-Pacific becoming its largest single market.

Demand for gas will be particularly driven by power generators as Asian giants, like China and India, continue to industrialise and coal becomes increasingly unattractive in a carbon-conscious world.

Increased exploration

And the industry is certainly putting its money where its mouth is.

Oil Search Limited, a partner in the PNG LNG project, more than doubled its exploration efforts in PNG to $144 million last year and expects to grow that further to $200 million this year. The company is also exploring in the Gulf of Papua, as it sees a strong future for LNG.

‘During 2012, Oil Search and its partners made significant headway in finding additional gas to underpin potential LNG expansion in PNG,’ said Oil Search’s Managing Director Peter Botten in a recent statement on the company’s 2012 financial results.

“The P’nyang South 1 gas discovery in PRL 3 resulted in a material increase in estimated gas resources at P’nyang. The PRL 3 JV, led by ExxonMobil, has initiated and is now well advanced with concept selection studies. We are targeting to finalise the optimal development concept in 2013.”

Rod Myer is a writer on business, energy, infrastructure and sustainability.