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Future of LNG projects in question as PNG government throws ExxonMobil curve ball
Papua New Guinea’s government has put the brakes on negotiations with ExxonMobil regarding the P'nyang gas field, which is a key feed gas source for the company’s PNG LNG Expansion project. The negotiations are rumored to have deteriorated around the levels of government-take and domestic gas obligations sought by the PNG government for P’nyang, which are believed to be significantly higher than those imposed on its sister project, Total’s Papua LNG development. The failure to strike a deal in this round of negotiations will also delay Total's Papua LNG project, as the two developments were set to be jointly developed with shared infrastructure. These two gas developments are part of planned projects that will double the country’s gas production from 8 million tonnes per annum (tpa) in 2019 to 16 million tpa by the early 2030’s. Given the delay in reaching FID and conducting EPC works, Rystad now expects the Papua LNG project to be delayed until 2026 and the PNG LNG expansion to be pushed out to 2029.
Figure 1: Papua New Guinea LNG production split by project
Source: Rystad Energy UCube, Rystad Energy Research
|Australian Government Flags LNG Electrification to Save QLD Gas Supply |
On February 8th 2020 the Minister for Energy and Emissions Reduction in Australia announced his department would allocate A$1.5m to study the electrification of Liquefied Natural Gas (LNG) export facilities on QLD’s Curtis Island, in an effort to free up gas supply for the domestic market and reduce carbon emissions.
There is currently 25 million tonnes per annum (mmtpa) of LNG capacity on Queensland’s Curtis Island. Rystad expects these facilities use approximately 8% of their gas throughput for power generation. Therefore, if these LNG facilities were converted to run on electricity from the grid, it could save approximately 100 petajoules (PJ) per annum of gas supply.
At this stage, the government has only indicated it is considering a partial electrification of Curtis Island, saving just 12 PJ’s per annum. However, Rystad expects any study conducted to highlight the advantages of full-scale electrification.
Figure 2: Curtis Island LNG Feed Gas Requirements (Mtpa)
Source: Rystad Energy UCube, Rystad Energy Australasian Analytics
|Australasian M&A activity set to soar in 2020 |
2019 brought mixed results for Australia in terms of mergers and acquisitions (M&A) in upstream oil and gas. Rystad Energy estimates that the total value of deals done in 2019 amounted A$2.36bn, ~74% lower than 2018’s total of A$8.98bn. The majority of 2019’s deal value was derived from the A$2.1bn Santos-Conoco transaction, meaning there wasn’t much else in terms of M&A for Australia in 2019. However, much like the actual weather of the country, this mini deal-drought appears to be breaking, with a huge storm of M&A opportunities identified for 2020. Western Australia is at the heart of the action, accounting for most of the Deals in Play (DIP) and offshore assets will again dominate onshore in terms of deal value. Driven largely by a divestment trend amongst majors, Rystad Energy expects total deal value to cross A$15 billion milestone in 2020 in Australia.
Figure 3: Production profile of potentially traded assets by lifecycle category
Source: Rystad Energy UCube, Rystad Energy Research & Analysis
Australian East Coast Gas Production 2019-2020
For a field level breakdown of oil and gas production in the region, please see Rystad Energy’s UCube or Analytics products.
Figure 4: 2019-2020 East Coast Gas Production (million cubic feet)
Source: AEMO, Rystad Energy Research
Table 1: 2019-2020 East Coast Gas Production (million cubic feet)
Source: AEMO, Rystad Energy Research
Australian Gas Cost Curve
To see which assets are feeding into the below cost curve, please see Rystad Energy’s UCube.
Figure 5: 2020 Australian Gas Cost Curve (USD/kcf), Cumulative Production (Mmcfpd)
Source: UCube, Rystad Energy Research
Short-Term Gas Price Forecast
For medium and long-term gas price forecasts, or for a price series not shown below, please see Rystad Energy’s UCube, Analytics or Gas Markets products.
Table 2: Short Term Gas Price Forecast
Source: GasMarketCube, Rystad Energy Research