Papua LNG Design Phase Expected to Start Next Year

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Oil Search reaffirmed plans to enter front-end engineering and design (Feed) work for Papua LNG in 2022. The benefits of Papua New Guinea's proximity to large Asian LNG markets look poised to overcome the project's recent difficulties. Oil Search owns a 22.8% stake in the Total-operated two-train 5.4 million ton/yr Papua LNG, which decided earlier this year to proceed separately from Exxon Mobil's PNG LNG expansion (LNGI Feb.9'21). The decision to go solo has prompted the need to revise engineering designs for Papua LNG. Oil Search said in an quarterly update that the joint venture is now reviewing markets and finalizing revised pre-Feed engineering ahead of making a Feed decision in 2022 (LNGI Nov.12'20). The Australian-listed firm is also a partner of the neighboring plant, PNG LNG, whose output averaged 8.5 million tons/yr in the first quarter. That is below the average output of 8.8 million tons/yr in 2020. Oil Search said this was due to a brief shutdown of Hides gas field, which is the key source of gas to PNG LNG. Oil Search is keeping its full-year production guidance unchanged at 25.5 million-28.5 million boe despite plans for maintenance at PNG LNG. Scheduled service programs for both trains at PNG LNG are still expected to proceed during the second quarter, while a major maintenance shutdown of Oil Search's operated facilities has been deferred from 2021 to next year because of Covid-19 restrictions affecting resources. The company's average realized LNG and gas prices rose to $7.10/MMBtu in the first quarter, up from $5.99/MMBtu in the prior quarter, boosted by higher seasonal winter demand and spikes in Asian spot LNG prices (LNGI Jan.6'21).

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