Activist pressures weigh on Santos’ PNG growth
Santos’ biggest growth project in Papua New Guinea is expected to suffer a delay of up to six months in reaching a go-ahead for construction as activist pressures weigh on lender appetite amid a tight market for engineering contractors.
The final investment decision on the $US12 billion ($18.2 billion) Papua LNG project, led by France’s TotalEnergies, is now likely towards the end of 2024, rather than in the first half, delegates at a PNG resources and energy conference heard in Sydney.
The Papua LNG project will be fed with gas from the remote Elk and Antelope fields in the Gulf Province. Colin Packham
However, at the same time, ExxonMobil, a partner in Papua LNG, revealed major growth ambitions in the country centred around the huge Wildebeest gas prospect that could extend PNG’s growing role in global LNG well past mid-century.
PNG’s presence in LNG kicked off with the start-up of the PNG LNG plant in 2014 and is being continued by the development of the Angore and P’nyang gas fields, and by Papua LNG.
“As this potential pipeline of opportunities progresses, not only does it mean over a decade of construction activity continuously in the country, but it also means that PNG will solidify its role as a global energy supplier well beyond 2050,” said Tera Shandro, ExxonMobil’s new managing director in PNG.
The major’s comments underscore the longer-term upside in Santos’ PNG business that has attracted Woodside Energy’s attention. Santos is a partner in Wildebeest, which reportedly could hold 30 trillion cubic feet of gas, about triple the resource of PNG LNG.
Woodside and Santos revealed last week they were discussing a potential $80 billion merger, with the PNG assets regarded as the main drawcard for the larger player.
PNG Petroleum Minister Kerenga Kua said he was confident in PNG’s long-term role in gas, but pointed to difficulties around financing and contractor availability that were slowing progress at Papua LNG.
“These two challenges, availability of contractors and their costs, and the ability to finance, can impact on work schedules,” he told the conference, adding that agreements with landholders in the region of the Elk-Antelope gas fields that will supply the LNG plant near Port Moresby are also needed.
“It will be in 2024, and maybe more towards the end of 2024, for FID (final investment decision), which is still acceptable to the government.”
Mr Kua said the funding environment for LNG had changed significantly in the last 10 years, with banks now deterred by climate change advocates from backing what was always regarded as a “blue chip” investment.
He called for a balanced approach to the energy transition, pointing to other countries’ development of coal and nuclear sectors that posed greater threats to the global environment.
PNG Prime Minister James Marape said this week that PNG’s “carbon negative” status – due to the carbon sinks provided by its rainforests and coastal ecosystems – should be a drawcard for investors, including in gas.
“You shut down your coal mines, and then you can lecture me on climate change,” he said.
Meanwhile, TotalEnergies’ director of corporate affairs in PNG, Richard Kassman, confirmed the French major’s commitment to a final investment decision for Papua LNG next year, with production targeted for 2028.
He said the marketing in Asia for LNG from the 5.6 million tonnes-a-year project was “well advanced” and that TotalEnergies was in “strategic dialogue” with financiers.
ExxonMobil commercial director Johanna Boothey suggested the Wildebeest exploration could lead to another gas project for PNG that was bigger than either PNG LNG or Papua LNG. The exploration is part of a “three Ws” play that includes the Whale and Whitetail prospects.
“Wildebeest has the potential to commence construction immediately after the completion of P’nyang,” she said.
“This will further extend construction activities in PNG from the eight years we previously talked about to 13 years. This has the ability to accelerate the PNG economy towards the 200 billion kina ($81.5 billion) target by the government.”
The Marape government aims to expand GDP to 200 billion kina by 2029, representing a more than doubling since Mr Marape took office in 2019, underpinned by gas and mining projects.
“Angore, Papua, P’nyang and then the now-famous ‘W’ – Wildebeest – doesn’t the future of LNG in Papua New Guinea look bright,” Ms Boothey said.
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