Papua New Guinea's planned three-train liquefied natural gas expansion is targeting start-up from 2027 as the project has hit a two-year delay due to the impacts of Covid-19.

Supermajors ExxonMobil and Total have already demobilised the majority of their LNG expansion technical and commercial staff from the country as the effects of the coronavirus pandemic and low oil prices took hold.

Oil Search, one of the partners in the expansion effort, revealed in its latest financial results that, due to the impact of Covid-19 on the global economy, the market window for major new LNG supply had "moved back a few years".

Oil Search managing director Keiran Wulff said: "There's been more than 92 (oil and gas) projects globally that have had FIDs (final investment decisions) delayed as a result of Covid."

In terms of the impact on global LNG demand "what you're seeing is a two-year slip in demand deferral due to Covid", he said.

The PNG expansion involves three new liquefaction trains at the existing PNG LNG facility near Port Moresby, each with capacity to produce 2.7 million tonnes per annum.

Two of the trains will receive gas from the Total-operated Elk-Antelope fields (also known as the Papua LNG project) and one will receive output from the ExxonMobil-led P'nyang field.

"The key issues for PNG LNG expansion are demand timing and fiscal certainty and the important point about PNG LNG is that going forward it's clear that projects which are lowest cost and those that are brownfield will be favoured. PNG LNG expansion has both of those," Wulff added.

He emphasised there is no consideration being given to using the Elk-Antelope or P'nyang fields to provide extra or backfill into the existing trains at PNG LNG.

"We're comfortable that a lot of projects have been delayed and PNG LNG expansion is well placed to capture that 2027-plus window," he added.

Total's Papua LNG project has already secured government approval to proceed in the shape of the Papua LNG Gas Agreement.

However, the P'nyang field does not yet have a gas agreement although discussions are ongoing between ExxonMobil and the PNG government aimed at alignment on terms for the field development that are fair and balanced for all stakeholders, said Oil Search.

The PNG government has made no secret of its desire to secure much better financial terms for the P'nyang project than from Papua LNG and the original PNG LNG project.

In June 2020, the government implemented a new set of laws designed to boost the state's negotiating power on field development agreements, starting with P'nyang.

LNG

PNG LNG expansion faces delay