The world's largest oil and gas company, Exxon Mobil Corporation (ExxonMobil) said that the company has executed sales and purchase agreements with liquefied natural gas (LNG) customers and financial arrangements with lenders, clearing the way for the implementation of the multi-billion dollar Papua New Guinea (PNG) LNG project.

The PNG LNG project is one of the frontrunners of the several LNG projects coming up in the Australasian region, along with another oil giant Chevron Corporation-led Gorgon LNG project in Western Australia.

In December, Exxon and its partners agreed to go ahead with the PNG project anticipating future demand for clean fuel in the fast-growing Asia Pacific region, as the global economy has started to recover from the recession. (See: Exxon-led group to develop $15-billion PNG LNG project)

The proposed project is located in the Southern Highlands and Western provinces of PNG with liquefaction and gas storage facilities near the capital Port Moresby. Both the locations will be connected through a 700-km pipeline for the transportation of natural gas. The PNG LNG project is designed to produce 6.6 million tonnes per annum (MTPA) of liquefied gas annually for export to international markets.

The total cost of the project is estimated at $15 billion and first LNG deliveries are expected in 2014. Over the 30-year life of the project, an estimated 9 trillion cubic feet of gas will be produced.

The PNG LNG project will be funded through co-ventures and debt, the company said. In December, US Export-Import Bank agreed to provide $3 billion in funding for the project.

Neil Duffin, president of ExxonMobil Development Company said, ''The project team successfully negotiated this complex transaction for the project in a very difficult financial market. We believe our record of developing and operating world-class assets was a key component of this successful financing.''

ExxonMobil's subsidiary and operator of PNG LNG project, Esso Highland Limited holds 33.2 per cent in the venture followed by PNG's largest company Oil Search Limited with 29 per cent, the Independent Public Business Corporation (PNG government) with 16.6 per cent and Australian oil and gas company, Santos Limited holding 13.5 per cent among others.

The Exxon-led consortium has tied up with four major gas consumers in the region for the supply of almost its entire production from the PNG LNG project through long-term contracts. These include Taiwan's CPC Corporation for 1.2 MTPA, China Petroleum and Chemical Corporation (Sinopec) for 2.0 MTPA and Japan's Osaka Gas Company Limited for 1.5 MTPA and Tokyo Electric Power Company (TEPCO) for 1.8 MTPA.

The project had already obtained the required approval from the government's department of environment and conservation.

Confirming the support from landowners and various levels of the government, an Umbrella Benefits Sharing Agreement was also approved outlining sharing of revenue from the LNG project which amounts approximately $5.6-7.5 billion over the project life.

Exxon foresees the demand for natural gas in the region to double by 2030, consequent upon increasing energy needs and the thrust for cleaner fuel. Natural gas emits approximately 45 per cent less carbon dioxide compared to coal and 30 per cent less than oil, for generating equivalent amount of heat.

The oil giant also holds a 25 per cent stake in the Chevron-led Gorgon LNG project in Western Australia, one of the world's largest natural gas projects which received regulatory clearances from the Australian government in September. The Gorgon project is estimated to cost $37 billion for its first phase of development and expected to go on stream in 2014.

Affiliates of Exxon had already signed long-term LNG supply contract with PetroChina Company Limited (PetroChina) for 2.25 MTPA of gas and also with India's Petronet LNG for 1.5 MTPA from the Gorgon project.