Could Papua New Guinea’s second gas project get the green light in 2025? In an exclusive interview with Business Advantage PNG, Arnaud Berthet, Managing Director of TotalEnergies EP PNG, outlines the Papua LNG project timeline and the activities left to complete on the road to FID.

The Papua LNG project is moving closer to a final investment decision. Credit: TotalEnergies

A final investment decision (FID) on the Papua LNG project is likely in the next 12 months, according to TotalEnergies EP PNG Managing Director Arnaud Berthet.

“A lot of activities need to be performed, but these were presented to the authorities last week and it is doable, so we are very confident in delivering FID within 2025,” Berthet said in a wide-ranging interview with Business Advantage PNG.

Papua New Guinea’s second gas project was expected to reach an FID in early 2024, but it was postponed in April because of what Berthet called an “absolutely unacceptable” level of capital expenditure proposed by engineering, procurement and construction (EPC) contractors.

As a result, TotalEnergies and its joint venture partners are preparing to reopen bidding to a larger group of contractors, with offers expected in the second quarter of 2025.

Berthet said this would reflect the growing number of qualified EPC contractors for oil and gas projects – particularly in Asia.

“We have found that the quality gap that we had some decades ago no longer exists,” he said, adding that “the more competitors we have, the more we will have the capability to bring the price down.”

“Papua LNG is perfectly located to serve the Asian markets, [being] a short distance from Japan, China and South Korea.”

Early works on hold

Berthet confirmed that early works were paused in September after “more than two years”, a move he said was necessary in order to focus on immediate priorities.

Arnaud Berthet, Managing Director of TotalEnergies EP PNG. Credit: TotalEnergies

“In September, we decided to focus on another aspect which is critical for the re-bid phase, which is geotechnical and geophysical campaigns both onshore and offshore to assess the quality of the soil,” he said.

This will give more comfort to the contractors designing the foundations of the project’s gas conditioning plant in Gulf Province.

“Typically, if you don’t give them proper and rigorous data, they will make huge provisions on the earthworks,” says Berthet. “This provision will then be reflected in the cost of the offers we receive, which we definitely want to avoid.”

Securing buyers and finance

According to Berthet, TotalEnergies is focusing on four simultaneous “workstreams” in its bid to achieve FID in 2025 – of which design optimisation and the re-bid phase is one.

Securing buyers for the 5.6 million tonnes per year of LNG that the project is expected to produce is a second workstream – with Southeast Asia as the target market.

“This is one of the main advantages of this project. It’s perfectly located to serve the Asian markets, [being] a short distance from Japan, China and South Korea,” Berthet said.

“We can offer our customers very good prices from within a country [PNG] which has proven to be effective in delivering gas to these customers.”

Additionally, the project will need financing, which Berthet confirmed will come from a combination of debt and equity. He noted that Papua LNG will be fully compliant with the International Finance Corporation’s Sustainability Framework, including a commitment to the highest standards of environmental and social performance.

“We are now considering other opportunities for the landowner company to be more embedded in the project.”

Sharing the benefits with PNG

The fourth workstream is obtaining a Petroleum Development Licence. This will itself require the completion of four different processes: an environmental permit, involving the Conservation & Environment Protection Authority (CEPA) and other relevant bodies; the development scheme, which requires approval from the Ministry of Petroleum; a national content plan, which Berthet said had been unchanged since its approval in September 2023; and the development forum, which will map out a benefit-sharing agreement with landowners.

Jerilai Pujari Holding Limited (JPHL), the landowner company TotalEnergies is supporting, has already signed joint ventures with other local companies, covering the provision of security, camp management, equipment rental and labour, Berthet noted.

“We are now considering other opportunities for the landowner company to be more embedded in the project,” he said.

Berthet said TotalEnergies was not sitting around waiting for FID to interact with communities, and he noted that the firm had already spent money on building schools, providing water tanks and delivering health programs.

“It’s our responsibility as operator of the Papua LNG project to build trust and confidence with these local communities. Ultimately, they are hosting us, so we owe them this positive impact,” he said.

Papua LNG in brief

Papua LNG is a liquefied natural gas (LNG) project led by TotalEnergies, with a 37.55 per cent interest, and including ExxonMobil (37.04 per cent), Santos (22.83 per cent) and JX Nippon (2.58 per cent).

The estimated US$10 billion project will effectively involve two parts. Upstream, Total Energies will build nine production wells, a water injection well, a carbon dioxide reinjection well and a gas processing plant. A 320 km pipeline will then bring the processed gas to ExxonMobil’s LNG plant outside Port Moresby, where it will be processed for shipment by up to three new electrical LNG trains. The project will have an LNG export volume of 5.6 million tonnes per year.

As Papua New Guinea’s state nominee, Kumul Petroleum Holdings and the Mineral Resources Development Company have an option to take up to 22.5 per cent interest in Papua LNG, which it is expected to formally exercise at the time of a final investment decision.