Nippon Oil boosts stake in PNG LNG

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Dec. 20 -- Nippon Oil Corp. has purchased AGL Energy Ltd.'s entire 3.6% stake of the PNG LNG gas production and liquefaction project off Papua New Guinea, increasing Nippon's share to 5.4% from 1.8%.

The PNG LNG project, led by ExxonMobil Corp., is designed to liquefy natural gas at a local facility and export 6.3 million tonnes/year of LNG, starting in third-quarter 2013 (OGJ Online, Dec. 18, 2008).

The agreement with AGL Energy also stepped up Nippon Oil's interest in two Papua New Guinea producing oil fields, increasing its share of output to 8,000 b/d from 2,000 b/d.

$10 billion sought
The sale to Nippon Oil is a plus for the project, especially after recent reports that ExxonMobil, due to the current global financial crisis, has been searching for $10 billion in financing for the LNG venture.

"At a time when we are seeking to borrow more than $10 billion on the international money market, it would be foolish of me to stand here and tell you that this project is—and will remain—completely immune from the fallout of the current financial crisis," ExxonMobil's LNG venture manager Peter Graham told an investors conference.

"We continue to look for ways to protect this project from the global financial uncertainties, and I emphasize we're still targeting fourth-quarter of 2009 for that all-important financial investment decision," Graham said.

Financial boost
In November, the PNG LNG project received a financial boost when the government concluded a $1 billion agreement with Abu Dhabi's state-owned International Petroleum Investment Co. (OGJ Online, Nov. 5, 2008).

"This is an exceptional deal in the current global financial climate," PNG's Minister for Public Enterprise Arthur Somare said of the agreement with IPIC.

According to Somare, the IPIC loan "should also assist the project developer, ExxonMobil, in its efforts to conclude LNG marketing arrangements and to raise the 70% debt finance required for this Kina 40 billion ($16 billion) venture."

Following the AGL Energy sale, the PNG LNG project consortium includes ExxonMobil subsidiary Esso Highlands Ltd. 41.5%, Oil Search 34%, Santos 17.7%, Nippon Oil 5.4%, MRDC 1.2%, and Petromin PNG Holdings' Eda Oil 0.2%.

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