PNG LNG eyes multi-year spot contracts

The ExxonMobil-operated US$19 billion PNG LNG project is looking at multi-year contracts for spot sales of the chilled fuel as the project is producing above the nameplate capacity, according to Oil Search that has a 29 percent share in the JV.

The PNG LNG project is producing 7.7 million tonnes per annum (mtpa), 12 percent above the nameplate capacity of 6.9 mtpa. It is currently in the recertification process for all of the PNG LNG fields, which according to Oil Search will result in a larger reserve base that could underpin long-term contracts for future spot LNG cargoes.

“At the moment, as we go to the recertification process for all of the PNG LNG fields, those are relatively short-term type of spot sales that we are looking at which may cover four to eight cargoes,” Julian Fowles, Oil Search’s executive general manager for PNG, told analysts on a conference call on Tuesday after the company announced its first-half results.

However, with a positive outlook on the recertification, the JV would “certainly be looking at longer term strips of sales – contracts that would be potentially a number of years that would cover a substantial portion of the spot volumes that we have since we are currently producing above nameplate capacity,” Fowles said.

PNG LNG sold eight spot cargoes in the first half of this year, out of which six were delivered to Japanese customers, Fowles said,  adding that this reflects the “desire of our premium customer for our high heating value gas.”

“We have also been selling spot cargoes to other customers beyond our long-term contract customers that have traditionally been our primary buyers of spot cargoes. We have other customers now becoming used to PNG LNG product, and that is also good for future marketing of longer-term spot cargoes.”

The PNG LNG project commenced production of LNG in April 2014 and since then it had delivered 205 cargoes of the chilled fuel.

The LNG project includes gas production and processing facilities in the Southern Highlands, Hela, Western, Gulf and Central Provinces of Papua New Guinea.

There are over 700 kilometres of pipelines connecting the facilities, which includes a gas conditioning plant in Hides and the two-train liquefaction facility near Port Moresby.

According to Oil Search, there is enough gas for two more LNG trains, and also a third one if the next drilling campaign is successful.

Besides ExxonMobil and Oil Search, other JV participants are Santos, National Petroleum Company of PNG, JX Nippon Oil and Gas Exploration, Mineral Resources Development Company, and Petromin PNG Holdings.

LNG World News Staff