ExxonMobil's PNG LNG project cost jumps to $19 bn

Global oil and gas giant ExxonMobil Corp, operator of the Papua New Guinea Liquefied Natural Gas (PNG LNG) project, has advised its local partners that the cost of the project has further shot up to $19 billion, up 21 per cent from last year's estimate of $15.7 billion.

ExxonMobil's subsidiary Esso Highlands Ltd said that the $3.3-billion cost increase is due to cost of foreign exchange, severe weather conditions and disputes with landowners.

The project's co-venturers Oil Search with a 29-per cent stake and Santos with 13.5 per cent interest will have to shed out approximately $430 million combined in additional equity for the project which is being funded 70 per cent by debt and 30 per cent by equity.

However, a 5-per cent capacity increase to 6.9 million tonnes per annum (mtpa) from the original 6.6 mtpa and a 30-per cent rise in LNG price since project funding started in 2009 are expected to make up for the higher investment, according to PNG LNG project executive Decie Autin.

The LNG project, 70 per cent completed, is on track to commence shipment of first cargo to customers in China, Japan and Taiwan in 2014.

The largest single factor which contributed to the cost increase is foreign exchange with $1.4 billion followed by delays due to work stoppages and land access issues accounting for $1.2 billion, and $700 million due to unprecedented torrential rainfall in the region in the last two years.