Exxon Mobil recently shipped its first liquefied natural gas cargo from the Papua New Guinea LNG project months ahead of schedule. Production from the first LNG train started last month. Recently, the second train also started producing liquefied form of the cleaner burning hydrocarbon fuel as additional upstream wells came online. This start-up falls in line with Exxon Mobil’s current strategy of boosting the proportion of liquids (crude oil, natural gas liquids, bitumen and synthetic oil) and LNG in its portfolio for better margins.
Lower Costs
Exxon holds a 33.2% operating stake in the $19 billion PNG LNG project. It is a 6.9 million ton per annum integrated LNG project operated by Esso Highlands Limited, a subsidiary of Exxon Mobil Corporation. It is expected to produce over 9 trillion cubic feet (tcf) of gas and 200 million barrels of associated liquids over its life. The gas is being sourced from the Hides, Angore and Juha gas fields, and from associated gas in the Kutubu, Agogo, Moran and Gobe Main oil fields. After being liquefied at the LNG plant, the gas is loaded onto ocean-going tankers to be shipped to the key Asian LNG markets.
The share of LNG in global natural gas trade has grown steadily over the past few years, primarily due to the fact that natural gas imports by Asian markets, which rely mostly on LNG (~80%), have been growing at a much faster rate than the rest of the world. Therefore, being located closer to the center of demand is a key advantage for the PNG LNG project over many other upcoming projects around the world, as lower transportation costs reduce the total per unit cost of delivered LNG. By our estimates, shipping LNG from PNG to Japan would cost anywhere between $0.5 to $1 per million British thermal units, cheaper than the upcoming LNG projects on the U.S. Gulf Coast and East Africa. (See: What’s Driving The Global LNG Demand)
Apart from lower shipping costs, the PNG LNG project also boasts of lower development costs. At $19 billion, the project’s total cost comes out to around $2.75 billion per million ton per annum of LNG capacity. In comparison, the Chevron-operated Gorgon LNG project in Australia, which is under construction currently, is expected to cost around $54 billion or $3.46 billion per MTPA of LNG capacity. So, the PNG LNG project gives Exxon the low-cost advantage in the Asia-Pacific region.
End of Quote Besides lower costs & a good return from the associated liquids, the demand from Japan, South Korea and China is going to grow massively at the expense of coal & oil. Cheers Mattocks
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