PNG LNG To Boost Crude Exports

BMI View: Papua New Guinea is expected to experience a strong upsurge in oil production following the start up of the PNG LNG project. While the principle increase in hydrocarbon output will emanate from natural gas production, condensate output from the Hides, Angore and Juha fields supplying the LNG terminal will be mixed with current crude production. As a result, we anticipate crude exports from PNG to double by 2015.

ExxonMobil's Papua New Guinea (PNG) liquefied natural gas (LNG) facility is due to deliver its first cargo in July 2014. The LNG project is one of the largest foreign investment programmes in PNG and is expected to significantly boost both exports of gas as well as GDP as the project ramps up. We anticipate natural gas exports over the next five years to reach almost 15bn cubic metres (bcm), which is likely to increase further by 2020 if Total moves ahead with the development of the Elk/Antelope complex. We also expect real year-on-year GDP growth to be over 7.5% a year to 2018, largely as a result of a booming hydrocarbon sector.

Gas Exports & GDP Growth Up
Natural Gas Exports (bcm) & Real GDP Growth (%)

Oil Exports Set To Rise

The ramp-up of natural gas production to supply the PNG LNG terminal is also due to be accompanied by a significant level of condensate output. The Hides, Angore and Juha, which will supply the PNG LNG project, are condensate rich and expected to produce around 20,000 barrels per day (b/d) of liquids alongside the approximate 10bcm of gas output a year. The new condensate volume is due to be blended with the existing crude output, largely produced from the Kutubu, Moran and Gobe fields.

These three field complexes are currently producing around 28,000b/d and are in decline. With the majority of investment in the PNG hydrocarbon sector now being focused on natural gas, less has been invested in boosting the oil industry. That said, work to bring new wells on the Mananda field could see a further 5,000b/d of crude output added over the next three years or so.

The condensate output from the Hides, Angore and Juha fields due to begin in the summer of 2014 is therefore expected to boost oil production by around 75% from current levels. Furthermore, an advancement of Talisman's Stanley Condensate Project could add around 4,000b/d of condensate in the next couple of years, essentially doubling oil output. If Total moves forward with the development of the Elk/Antelope prospect, this could further increase from 2020.

Condensates To Drive Oil Production Growth
PNG Oil Production ('000b/d)

The strong growth in oil output is expected to lead to an increase in oil export volumes, particularly as domestic oil consumption is not forecast to grow considerably. Despite strong GDP growth over the coming years, we are expecting a slowdown in oil demand from mining industries with gold prices currently trending downwards ( see, 'Gold To Average US$1,150/oz In 2014', December 20 2013).

Oil Exports To Double By 2015
PNG Net Oil Exports ('000b/d)

Net oil exports are therefore due to more than double from 2013 levels over the coming years, rising from a little under 10,000b/d in 2013 to around 25,000b/d by 2018.

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Related sectors of this article: Oil & Gas, LNG, Upstream, Production, Oil Market
Geography: Papua New Guinea