Exxon Mobil Corporation, as operator of the PNG LNG Project and of PRL 3, has announced that it has signed a Memorandum of Understanding (MoU) with the PNG Government with respect to the expansion of  the PNG LNG Project (see press release attached).

Under the MoU, the PNG LNG Project will supply electricity and gas for domestic power generation, providing a reliable and clean source of energy to support PNG’s urgent power needs. The agreement details the provisions for an LNG expansion project, including the award of a petroleum development licence  (PDL) and associated pipeline licences for the P’nyang gas field in PRL 3 (Oil Search – 38.51%). P’nyang  will provide additional long-term gas reserves for power generation and Project expansion, including expected debottlenecking of the existing trains and a third LNG train.

The MoU sets out an agreed timeline between the PRL 3 co-venturers and Government to a final investment decision for an additional LNG train. The commitment from the PRL 3 owners is for the sanction of the third train in the earliest timeframe, subject to completion of typical activities including appraisal, marketing, financing and development engineering on P’nyang. Under the agreement, a final investment decision is to be taken by the end of 2017 at the latest.

The PRL 3 licencees are in the process of finalising the PDL application for P’nyang which, under the MoU timeline, is expected to be offered by the end of the first quarter of 2015. Preparations are underway for
appraisal drilling and development engineering studies, which will commence this year.

Oil Search is currently updating its resource estimate for P’nyang. Preliminary interpretation of recently acquired data has indicated a larger resource base than currently booked, which is providing confidence that  the field can underpin the expansion train. The commitment under the MoU to near-term appraisal drilling will be undertaken to better quantify 1C contingent resource volumes.

Oil Search’s Managing Director, Peter Botten said:

“We are delighted that ExxonMobil, as operator of the PNG LNG Project and PRL 3, has signed this MoU. This agreement meets the needs of all stakeholders. It will deliver much needed power to the people of PNG
and provides an agreed timeline and activities for an expansion train at PNG LNG supported by P'nyang, a major gas field which is a key growth asset in Oil Search's portfolio.

The arrangement supports the PNG Government's vision to improve the delivery of long-term, reliable and

accessible power in PNG. Importantly, it demonstrates how LNG developments, such as the PNG LNG  Project, can deliver both substantial export revenues and gas-for-power solutions to the local economy, for the benefit of all of PNG. Oil Search will continue to work with, and support, the Government to deliver an integrated power solution for the nation.”