PNG LNG enters FEED

By OGJ editors
HOUSTON, May 26 -- The ExxonMobil-led Papua New Guinea (PNG) LNG joint venture has signed a gas agreement with Papua New Guinea, paving the way for an LNG project in the country.

The agreement outlines fiscal terms and legal obligations under which the JV will operate. These terms include a 30% tax rate and an additional profits tax that would apply after a 'certain level of return has been achieved.'

The signing means that ExxonMobil can begin front-end engineering and design (FEED) work for the project, a process expected to take about 16 months to complete. During this period the JV will be pursuing LNG sales agreements and securing project debt funding plus all permits and licenses needed.

On this basis, a final investment decision for the project is expected late in 2009 with first LNG cargoes planned for 2013.

Interest holders are ExxonMobil 41.6%, Oil Search 34.1%, Santos 17.7%, AGL Energy 3.6% and Nippon Oil 1.8%. Landholder interests have 1.2%.

The agreement is likely to speed up gas agreement discussion between the government and the country's other LNG project proposal known as Liquid Niugini Gas which is backed by InterOil, Merrill Lynch, and Clarion Finanz. Elk field in the southern highlands will provide the gas source.