Oil Search Ltd., partner in an Exxon Mobil Corp.-led liquefied natural gas project in Papua New Guinea, said committed spending on the venture has reached $1 billion and a final investment decision is likely by year-end.

A development ruling by the partners is expected “sometime in December,” Peter Botten, managing director of Oil Search, which has a 34 percent stake in the venture, said in an interview in Sydney. Irving, Texas-based Exxon owns 41.5 percent.
The $12.5 billion project is forecast to double the size of Papua New Guinea’s economy, and is among more than 12 planned in the South Pacific nation and Australia targeting rising Asian LNG demand. First LNG sales are due by late 2013 or 2014, ahead of a rival plant proposed by InterOil Corp., which is seeking partners for a $6 billion venture.
“As it stands, Oil Search is the only game in town in getting LNG out of the country,” Adrian Wood, an analyst at Macquarie Group Ltd., said by phone in Sydney. Papua New Guinea “is very under-explored” for gas, he said. “There is significant potential for material new discoveries.”
Port Moresby-based Oil Search rose 0.3 percent to close at A$6.48 in Sydney after earlier dropping as much as 2.5 percent. It has advanced 39 percent this year, compared with a 27 percent gain in the benchmark S&P/ASX 200 Index.
The project will triple Papua New Guinea’s exports and more than double its gross domestic product, Oil Search says on its Web site. Talks have started to supply LNG to Tokyo Electric Power Co. and Osaka Gas Co., while China Petroleum & Chemical Corp. is a potential customer, Exxon said June 22. Taiwan’s CPC Corp. said June 23 it may buy gas from the venture.
------------‘Awful lot of work’
The partners are negotiating to convert gas sales accords into binding contracts, Botten said. Talks will take place in November with banks and credit agencies for financing of the company’s share of costs, he said. “There’s an awful lot of work to do between now” and the development decision, he said.
The partners plan a two-unit plant near Port Moresby, with annual capacity to produce 6.3 million metric tons of the fuel, according to the venture Web site. LNG is natural gas chilled to liquid form for transport by ship to destinations not connected by pipeline.
The project partners “should have a clear idea” on the cost of the project at the end of next month or early November after receiving bids for the main contracting and construction contracts, Botten said.
Adelaide-based Santos Ltd. has 17.7 percent of the venture and Tokyo-based Nippon Oil Corp. 5.4 percent. Miles Shaw, Port Moresby-based spokesman for Exxon, couldn’t immediately be reached by phone or e-mail for comment.
(Source: Bloomberg)