The selection of the two key sites to develop Papua New Guinea’s Elk Antelope LNG fields was a difficult task, requiring a full set of studies to reach a decision, according to Philippe Blanchard, the Managing Director of Total PNG, the lead operator of the project.

Total’s Philippe Blanchard

The partners in PNG’s second LNG plant have chosen Caution Bay near Port Moresby as the LNG site for the project, while the site of the upstream processing plant will be located near the Purari river in Gulf Province, about 360 kilometres north-west of the capital.

The project will be known as Papua LNG.

Philippe Blanchard has told Business Advantage PNG that several options for both sites were investigated and ‘choosing them was not a simple decision but based on multiple criteria’.

He says, though, that the decision marks ‘a milestone’ as  it allows the joint venture partners to carry out environmental and societal studies, and perform more detailed surveys on each location while working with local communities.

The LNG plant at Caution Bay, about 20 kilometres north of Port Moresby, ‘will also maximise the opportunity to pursue potential synergies with the PNG LNG project,’ says Peter Botten, Managing Director of Oil Search, which has a stake in both projects.

‘We will have to discuss with the PNG LNG joint venture partners and see in which ways there can be potentially cooperation and/or synergies,’ says Blanchard.

To date, no forward sales have been made for product from Papua LNG. ‘We have to work to identify potential buyers and negotiate agreements with them. This process will take some time,’ he said.

‘Buyers market’

Location of the two LNG sites. Credit: Oil Search

Meanwhile, Citigroup analysts have told investors they expect a ‘buyers’ market’ continuing for several years, assuming long-term LNG sales contracts will be priced at 13.5 per cent of crude oil prices, rather than the typical 14 per cent.

‘We think the outlook for LNG markets is weak until CY22/23, with Chinese buyers over-contracting, Korean LNG demand declining with the start-up of new coal/nuclear generation and uncertainty remaining around deregulation/nuclear restarts in Japan,’ Citi analyst Dale Koenders said in a report, quoted by Fairfax.

Analysts had been forecasting world LNG markets would be back in balance by 2021, but now expect supply and demand coming back into balance perhaps by 2023.

Selection of the final development concept, including the size and capacity of facilities, is expected in early 2016 when appraisal of the Elk-Antelope field has been completed.