February 22, 2023

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New Papua LNG Design Set to Lower Costs, Emissions

Papua New Guinea's proposed second LNG export project, Papua LNG, has undergone a redesign as French TotalEnergies intensifies efforts to expand liquefaction capacity to serve key Asia-Pacific markets.

Total and partners Santos and Exxon Mobil are now evaluating a four-train design using electric drive for the 5.6 million ton per year export project, which is slated to be built alongside — and integrated with — Exxon’s existing 8.3 million ton/yr PNG LNG plant, Santos executives said Wednesday. Previously, the companies were eyeing a two-train concept using conventional turbines.

The new design is expected to deliver “significant” capital expenditure savings, says Santos CEO Kevin Gallagher.

Gallagher added that the project looks “very attractive” and that additional details would be provided when the front-end engineering and design (Feed) work starts for the downstream part of the scheme, which is expected this quarter.

The partners are looking to reach a final investment decision (FID) on Papua LNG at the end of the year or in early 2024, with first gas in 2028. That marks a small slip in the project’s timeline, which previously targeted FID by end-2023 with start-up by end-2027.

New Design

Papua LNG's new concept comes as part of a broader industry push toward electric drive to improve reliability and efficiency, reduce operating costs and cut emissions relative to facilities using conventional steam or gas turbines for the main refrigeration process.

Adapting this design at Papua LNG is particularly notable, though, given the partners’ existing plans to also incorporate carbon capture and storage.

Costs for the project under Papua LNG’s initial two-train design were initially estimated around $12 billion-$14 billion, but operator Total pegged costs at around $10 billion during a September PNG Energy Summit when pre-Feed studies of design alternatives were reaching completion.

PNG Backfill?

Papua LNG will be fed by the Elk-Antelope gas fields onshore Papua New Guinea, although sending some supplies to also partially feed the exiting PNG LNG plant are also under consideration Gallagher explained. PNG LNG will need new gas supply to maintain plateau production past 2026-27.

The plant, which has constantly been producing above capacity since start up in 2014, is processing gas from the Hides, Angore and Juha fields. Additional gas comes from Kutubu, Moran and Gobe oil fields, as well as the South East Hedinia gas field.

The P’nyang gas field was initially planned to backfill PNG LNG, but the project has been long delayed.

In any case, production from the Elk and Antelope fields is expected to peak at 170,000 barrels of oil equivalent per day, with 875 million cubic feet per day of gas and 10,000 barrels per day of condensate destined for export.

Initial gas in place is estimated at 6.2 trillion to 7.5 trillion cubic feet, including 5.8% CO2.

The first development phase will consist of two production wells at Elk and six at Antelope.

A second phase is slated for four years later, starting with the two wells drilled at Elk converted to inject native CO2 in the reservoir. An infill drilling campaign comprising five wells would take place at Antelope around the same time.

Current Shareholding Structure in Key PNG Assets
PNG LNGPapua LNGP'nyang Field (PRL3)Elk-Antelope Field (PRL 15)
Exxon Mobil33.20%*28.70%48.99%*28.70%
Santos42.5017.7038.5117.70
TotalEnergies--31.10*--31.10*
Kumul Petroleum16.8022.50----
JX Nippon4.70--12.50--
PNG State Back-In Right------22.50
Mineral Resources Development Co.2.80%------
Created with Highcharts 9.0.0(million tons)PNG LNG EXPORTS20142015201620172018201920202021202220230246810Source: Kpler

Marc Roussot, Singapore

Tellurian Still on the Sidelines

Tellurian's 2022 year-end results show an improved bottom line but limited forward progress on the long-delayed but fully permitted Driftwood LNG export terminal in Louisiana.

The company has set its sights on an 11 million ton/yr Phase 1 for Driftwood using an integrated gas-and-LNG model that has a relatively high buy-in cost on the front end but cost certainty of supply going forward.

Tellurian's cash reserves relative to current debt "provide a continued runway for management to work on commercializing Driftwood, though dilution concerns still linger," according to a note from Evercore ISI. Tellurian resumed talks with Indian LNG buyers in October.

Construction continues, with the company reporting that it is planning "additional site work to advance piling, pouring foundations, construction of marine offloading facilities," and other work in 2023 under what is still a limited notice to proceed with Bechtel.

"The advanced site work de-risks the project and provides acceleration options upon full notice to proceed," Telluran said in its newly released corporate presentation.

Noting the approach of the Feb. 28 expiration of Gunvor's offtake deal with Tellurian, Evercore believes that "for all intents and purposes, we are at a de facto restart on commercialization." The company "will still have to find new substantial offtake partners and material equity stakeholders. A large international oil company would seem to be the most expedient solution, but finding one has, to this point, been a daunting challenge."

Tellurian reported a net loss of $49.8 million, or $0.09 per share, for the year ended Dec. 31, 2022, compared to a net loss of $114.7 million, or $0.28 per share, for 2021.

Tellurian also increased natural gas production fourfold to approximately 225 MMcf/d in the fourth quarter compared to around 55 MMcf/d in the same period of 2021.
Michael Sultan, Washington


In Brief

Russian LNG Production Down in January

Russia’s LNG production decreased 13% on the year to 2.6 million tons in January, the federal statistics service said Wednesday.

Production decreased 7.7% versus December 2022, according to the statistics service.

Russia’s production still looks strong, despite the decrease which can partly be attributed to the unusually warm weather and high gas stocks in Europe, which kept importing Russian LNG last year despite the standoff with Moscow over the war in Ukraine.

LNG production, almost entirely exported, fell from the high levels of last year when the country’s two large plants — Novatek’s Yamal LNG and Gazprom-controlled Sakhalin-2 — operated above capacity.

New production from the recently launched 1.5 million ton/yr Portovaya facility did not help maintain Russia’s overall production at the January 2022 level.

Russia’s natural gas production, excluding associated gas from oil fields, also fell 13.5% on the year to 52.2 Bcm in January, the state statistics service said. Gas production was pulled down by a sharp drop in pipeline gas exports to Europe which offset a higher demand at home, where unlike in Europe, the winter was extremely cold in January.
Staff Reports


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India11.3111.6811.3911.6611.0510.9112.0410.6611.9711.4110.7910.5710.86
Sodegaura, Japan12.1813.2913.3113.3612.169.4113.0011.3212.8913.6411.5710.8612.29
Zeebrugge, Belgium15.2413.9013.6013.9514.8215.1114.5113.5614.4013.5914.9314.1815.01
Huelva, Spain13.3912.1111.8212.1612.9712.8212.6911.7112.5911.8113.0312.2413.04
Isle of Grain, UK14.5813.2412.9413.2914.1914.4513.9412.9113.7412.9414.2813.5314.35
Everett, US1.450.190.470.231.201.090.010.830.66-0.101.61----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback19. Sep3. Oct17. Oct31. Oct14. Nov28. Nov12. Dec26. Dec9. Jan23. Jan6. Feb20. Feb020406080Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia14.7014.33-0.37-0.37
SW Europe13.6014.020.420.42
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.102.172.072.47
NBP, UK (futures)+0.6515.1914.5416.63
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF0.6315.7815.1616.95
Zeebrugge (Belgium)0.2611.9811.72--
German NCG0.5214.1013.5815.23
NBP (UK)0.4215.3514.9316.41
US Markets
US Spot Prices
Sabine Pass, Louisiana-0.032.072.102.44
Corpus Christi, Texas----0.002.30
Cove Point, Maryland0.101.931.832.03
Elba Island, Georgia------2.22
Nymex Henry Hub Futures
Near Month0.102.172.072.47
Second Mth0.122.302.182.56
Third Mth0.122.442.322.71
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaMar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '22Dec '22Jan '23Feb '230255075100125Energy Intelligence