With the signing of the Papua LNG gas agreement with Papua New Guinea’s government imminent, Managing Director of Total PNG Ltd, Jean-Marc Noiray, shares his thoughts on the US$10 billion Papua LNG project with Business Advantage PNG.

Total’s Jean-Marc Noiray. Credit: BAI

The Papua LNG project, based on the Elk-Antelope gas reserves in Papua New Guinea’s Gulf Province is ‘progressing in all its aspects,’ Jean-Marc Noiray tells Business Advantage PNG.

Total and the other partners in the venture—ExxonMobil and Oil Search—are about to sign the long-anticipated final gas agreement with the PNG Government, tentatively scheduled for 5 April.

This agreement will set out the project benefits and returns among stakeholders: namely the government, the developers and local landowners.

While a Final Investment Decision (FID) on the project isn’t expected until the fourth quarter of 2020, works on front engineering and design (FEED) will commence shortly after the signing of the gas agreement.

Noiray says the project’s pre-FEED studies are completed, which paves the way for the crucial FEED stage to begin.

‘Synergies with the existing ExxonMobil-led PNG LNG project are critical.’

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‘We will be contacting the market, tendering where we need to tender and preparing all FEED contracts to be kicked-off by middle of this year,’ says Noiray.

If FEED proceeds according to schedule, and the final investment decision is made as planned, the first gas should flow from the Elk-Antelope field in the fourth quarter of 2024.

Synergy

Synergies with the existing ExxonMobil-led PNG LNG project are critical to the commercial success of Papua LNG.

Noiray tells Business Advantage PNG that Papua LNG will build, own and operate two LNG trains, which will be added to the two existing ExxonMobil trains at the PNG LNG Plant near Port Moresby.

A third, identical additional train will be added simultaneously, to cater for additional gas, which is expected to come from PNG LNG partners’ operated blocks.

‘It will give us a more significant volume on the market.’

In addition to the trains themselves, new common facilities such as power generation, an LNG tank and export facilities will be added to the existing site.

Map of LNG sources in PNG Credit: Oil Search

Those additional common facilities will be shared: two thirds to Papua LNG, one third to PNG LNG. Noiray describes it as a capital investment synergy.

‘The second benefit is that, by providing a bigger project to the market, you can attract more competition for the construction,’ he notes.

‘All that enables us to develop the third train and our new Papua LNG liquefaction facilities at a competitive cost.’

Marketing the gas

Total reached in 2018 an agreement with state-owned Kumul Petroleum to jointly market their gas from Papua LNG.

‘It will give us a more significant volume on the market,’ notes Noiray.

‘We are very glad about this collaboration, which enables us to bring on board a key future partner.

‘Because as soon as we have reached FID, Kumul will enter in the joint venture.

‘National content must not be done without taking into account very strongly the competency and competitiveness of the contender.’

‘This is like a prequel of what we are sure will be a good story. Already, in our marketing office in Singapore, two marketing engineers from Kumul are working hand-in-hand with our marketing teams.’

Noiray describes the gas market as ‘difficult’ and highly competitive. But he says the signing of the gas agreement and the commencement of the FEED process will stimulate confidence with buyers.

‘The fastest growing market is China. Everybody expects India to start putting more weight on LNG to cope with their pollution. We will see if that materialises.’

Obligations

The gas agreement contains provisions for supplying some of the gas for domestic use, and mandates work for local contractors.

Noiray tells Business Advantage PNG that Total is keen to meet both provisions.

‘The principles of local content and domestic gas agreements are not new; we have been practicing them successfully for years—for example in Indonesia, where both were high on the agenda.

‘We want as a company to contribute to help the local communities.’

‘The key is to maintain fair access to the market and fair access for the competition.

‘National content must not be done without taking into account very strongly the competency and competitiveness of the contender.’

Local communities

Noiray says there are two main challenges with the project: the geographical remoteness of the gas reserves, and maintaining a good relationship with the local community.

‘We want as a company to contribute to help the local communities.

‘I am proud that, even though we are only at the study stage, we have started—not on our own, with other entities, with the government—to try to bring modest, but I hope pragmatic, solutions to improve the lives of our nearby communities.’