Papua New Guinea LNG project increases capacity, capital cost

The ExxonMobil Corp.-led Papua New Guinea LNG project has increased its output capacity to 6.9 million tonnes/year of LNG from 6.6 million tpy. However, the estimated capital cost of the development has risen sharply from the December 2011 cost update of $15.7 billion to a new figure of $19 billion.

The capacity increase has been achieved through what ExxonMobil calls “system-wide optimisations and minor modifications” to the project.

ExxonMobil said the largest single contributor to the cost increase is foreign exchange rates. There have also been delays due to work stoppages through community disruptions and land access problems. These have led to increased drilling and construction costs.

In addition, the ever-present challenges of logistics in the Papua New Guinea highlands and unpredictable weather patterns have contributed to the increase. Rainfall in particular exceeded historic norms for a substantial part of the last 2 years.

Nevertheless the project remains on schedule to start LNG production in 2014. Drilling has begun on two production wells, and the offshore pipeline in the Papuan Gulf between the Kikori Delta and Port Moresby has been completed. At the LNG plant site near Port Moresby, all major process equipment and all pipe-rack modules on the LNG jetty have been installed. All piling is complete and foundations are now being laid at the Hides gas conditioning plant in the highlands.

Construction progress is on schedule at the Komo airfield. The runway asphalt is currently being laid while the movement of materials along the Highlands Highway to Hides is ahead of schedule.

ExxonMobil says despite the cost overruns, the project economics have been helped by the 5% increase in plant capacity as well as the 30% increase in commodity pricing since project funding was put in place in 2009.

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