Boston, MA -- (ReleaseWire) -- 09/21/2012 -- BMI View: The future is bright for Papua New Guinea (PNG), as long as it can successfully transform its unused gas reserves into exportable LNG. The first scheme is proceeding apace and there are encouraging signs that the second project is attracting buyers for its output, although delays to its planned start-up seem inevitable. Oil production is falling and imports are rising, but the timely arrival of LNG revenues should transform the economy from 2015.
The main trends and developments we highlight for PNG's Oil and Gas sector are:
- Two major liquefied natural gas (LNG) projects are currently being developed in PNG. The first is the US$15.7bn ExxonMobil-led PNG LNG project, which was granted final approval in December 2009. Once completed, the project could treble PNG's exports and boost its GDP by at least 20%. A landslide disrupted development activity in January 2012, but the project is said to be on track for first gas deliveries in 2014.
- InterOil has signed three preliminary gas sales deals that could clear the way for its proposed US$6bn Gulf LNG project. Shipments from the new facilities could begin in 2015, with the first customers including Hong Kong-based Noble Group, Gunvor Singapore and China's ENN Energy. The scheme has the potential to be enlarged, but there are indications that the initial plant will not reach full capacity until 2016. July 2012 saw reports that Royal Dutch Shell might be interested in a major role in the project.
- Oil consumption is forecast to rise by around 5.0% per annum to 2021, implying demand of around 71,400 barrels per day (b/d) by the end of the forecast period. The net import requirement would therefore be approximately 46,400b/d by 2021.
- Oil Search's total oil and gas production for the second quarter of 2012 was 1.80mn barrels of oil equivalent (boe), or around 19,800boe/d. This was 24% higher than first quarter production of 1.46mn boe, with operations back to normal following the previous quarter's planned facilities shutdown for work related to the PNG LNG project. The Q2 performance took total production for the first half of 2012 to 3.26mn boe (17,910boe/d), down from 3.56mn boe in H111.
- While Oil Search continues with an active exploration programme in an attempt to halt a decline in output, we are assuming PNG's oil volumes will be no more than 25,000b/d by 2021, unless fresh accumulations are brought into play.
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