PNG gas project gets boost with $1.86b sales
PNG gas project gets boost with $1.86b sales
Associated Press, Sydney, Australia
Plans to build a A$2.5 billion (US$1.86 billion) pipeline to carry natural gas from Papua New Guinea to Australia received a major boost Tuesday when an Australian energy company signed a conditional agreement to buy gas over 20 years.
Australian Gas Light Co. pledged to buy A$4.5 billion ($3.35 billion) worth of gas from the PNG Gas Project, part-owned by ExxonMobil Corp., over two decades.
The agreement means that Exxon has signed up enough customers to virtually guarantee that work on construction of a long- awaited 3,000-kilometer (1,865-mile) pipe from Papua New Guinea's Southern Highlands to Australia could get underway early next year.
Last week, Aluminum refiner Alcan signed a 20-year agreement to take gas from the project.
"While there are additional volumes available, our marketing focus now is on converting these arrangements to binding sales contracts capable of supporting a project sanction decision in early 2006," said Exxon vice president of gas and power marketing Rob Franklin.
AGL also entered into a conditional agreement with Oil Search Ltd, one of the companies involved in PNG Gas to take a 10 percent stake in the project for $300 million.
AGL managing director Greg Martin said the ultimate decision to start work on the pipeline still lay with the project sponsors, but he was confident it was going ahead.
"This announcement today, with that made by Alcan last week, will substantially progress this project forward," he said.
Exxon has a 39.4 percent stake in PNG Gas Project while resource company Oil Search, which is listed on the Australian and Papua New Guinea stock exchanges, has a 54.2 percent stake. MRDC, a company representing Papua New Guinea landowners has 3 percent and Nippon Oil Exploration Limited owns a 3.4 percent cut.
Analysts described the AGL deal as pivotal for PNG Gas, which has been in gestation for more than a decade.
"The biggest hurdle has always been capturing markets," said Morgan Stanley energy analyst Stuart Baker. "Now it looks like they have enough gas volumes in broad terms, so it is hard to see it not occurring."