Papua LNG JV launches fully-integrated FEED
Santos on March 7 announced that Papua LNG joint venture has launched fully-integrated front-end engineering and design (FEED) for the Papua LNG project in Papua New Guinea.
Papua LNG is expected to have a liquefaction capacity of up to 6mn metric tons/year of LNG with the first production expected by the end of 2027 or early 2028.
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Following pre-FEED studies, the Papua LNG partners have selected a concept using four electric LNG trains (e-trains) with a combined capacity of 4mn mt/yr to be developed within the existing PNG LNG project site. Papua LNG has also secured access to up to 2mn mt/yr of existing liquefaction capacity from PNG LNG.
Santos said that integrating the Papua LNG midstream development within PNG LNG maximises the value of both projects and delivers increased capital efficiency by reducing upfront capital expenditure and maximising integration synergies. PNG LNG will receive an access fee, pro-rata opex sharing and ongoing processing toll revenue that compensates PNG LNG for making the capacity available.
Selecting e-trains and re-injection of reservoir CO2 will reduce the carbon intensity of the project, the company said.
Santos CEO Kevin Gallagher said Papua LNG FEED entry was consistent with the company’s strategy to backfill and sustain its core natural gas assets.
"The concept selected for Papua LNG maximises value through midstream integration with PNG LNG to deliver increased capital efficiency and lower operating costs, consistent with our disciplined operating model," Gallagher said.
The selected concept for Papua LNG is expected to have a lower capital expenditure outcome than the previous concept. Costs will be refined during the FEED phase and the project participants intend to explore project finance opportunities for a portion of the project cost, Santos said.
Santos holds a 22.8% interest in Papua LNG along with joint venture partners TotalEnergies (40.1% and operator) and ExxonMobil (37.1%). The state of Papua New Guinea may exercise a back-in right for up to a 22.5% interest at the final investment decision, which is planned for the end of 2023 or early 2024. Should Papua New Guinea exercise its full back-in right, Santos' interest in the project would reduce to 17.7%.
Santos also has a 42.5% interest in PNG LNG and in September last year announced a conditional agreement to sell a 5% interest in PNG LNG to Kumul Petroleum Holdings for an asset value of $1.4bn. Completion is subject to customary conditions including necessary regulatory approvals and Kumul securing financing. Santos became the largest shareholder in PNG LNG with its takeover of Oil Search.