Ann: PNG LNG Project approved by Co-Venturers , page-8

Canberra backs PNG liquefied gas project with $547m loan
MATHEW MURPHY
December 9, 2009

THE Australian Government will lend up to $US500 million ($A547 million) to the $US15 billion Papua New Guinea liquefied natural gas project, which will now proceed subject to the signing of final off-take agreements and financing.

Trade Minister Simon Crean said PNG's largest single private investment would provide a significant boost for Australia as well, with Australian exporters identified as preferred tenderers for $US1.2 billion of contracts and with the potential to snatch a further $US3 billion of work.

The ExxonMobil-led project, agreed to at a ceremony in Port Moresby yesterday, will produce 6.6 million tonnes of gas annually for export from 2014, generating more than $30 billion for PNG's economy over the life of the project.

Mr Crean said Australia would help PNG establish a national wealth fund, similar to the Future Fund, through an agreement aimed at ensuring ''effective and transparent governance of the liquefied natural gas project revenue''.

''The loan of up $US500 million is to be provided to the project sponsors through Australia's Export Finance and Insurance Corporation,'' Mr Crean said.

PNG's Government, through its Independent Public Business Corporation trust, and local landowners, through the Mineral Resources Development Company, will take a 16.6 per cent and 2.8 per cent stake in the project respectively.

That changes the interests of the joint venture participants. ExxonMobil now owns 33.2 per cent, Oil Search 29 per cent, Santos 13.5 per cent, Nippon Oil Exploration 4.7 per cent and Petromin PNG Holdings 0.2 per cent.

The president of the ExxonMobil Development Company, Neil Duffin, said major works would begin next year once the remainder of the gas was sold.

In the past few days the joint venture partners have sold 2 million tonnes a year for 20 years to China's Sinopec, and 1.8 million tonnes over the same period to Tokyo Electric Power Company.

Deutsche Bank expects the remaining 2.8 million tonnes a year to be sold to CPC Taiwan and Osaka Gas early next year.

''With global demand for liquefied natural gas forecast to nearly triple by 2030, the Papua New Guinea liquefied natural gas project will be an important supply source to meet this future demand,'' Mr Duffin said. ''The supply of cleaner-burning natural gas will also be critical in helping reduce global emissions.''

Anti-poverty group Jubilee Australia will meet Mr Crean tomorrow to raise concerns that the development could have destructive consequences for PNG.

PNG's Prime Minister, Sir Michael Somare, said the joint venture partners had shown ''significant confidence in our country'' and that landowners would reap the benefits.

In May, the PNG Government, four provincial and 10 local governments reached an agreement with landowners under which they will receive more than 20 billion kina ($A8.3 billion) over the 30-year life of the project.

Oil Search shares fell 6¢ to $5.84, while Santos dropped 7¢ to $14.68.