Papua New Guinea has exported liquefied natural gas (LNG) since 2014. The LNG sector is important to PNG's economy with US$2.95 billion in exports in 2020, and accounting for 5.25% of the GDP in 2019. On a global scale, PNG is a minor player, with 0.08% of world reserves. In 2020, PNG was ranked 16th on the list of gas exporting countries.

There are five LNG projects in PNG; only the Hides Project is fully operational. An agreement was made between the PNG government and a consortium of companies to develop the second project: the "Elk/Antelope" field. These companies cooperate under the Papua-LNG project. The development of the third project, the "P'nyang Gas Field", is in an advanced planning stage. The fourth LNG project in development is the "Western Gas" field. The fifth Pasca gas field is offshore. The benefits of LNG development for the country is a controversial issue. Government participation in the projects is controversial and has been a dominant theme in PNG politics in the past decade. It became a major issue in the events leading to the resignation of Peter O'Neill as prime minister.

Liquid Niugini LNG (PNG LNG)

The Hides gas field is the main field operated by PNG LNG and was discovered in 1987 by BP, who sold it to Oil Search. Originally, the idea was to transport the gas through a pipeline to Australia. Chevron was the big fossil fuel company that would carry it forward. It came close to a production phase but the project was dropped in 2007 after Australian customers dropped out of the conditional sales agreements.The history of the PNG-Queensland LNG pipeline Available at:https://www.pipeliner.com.au/2016/03/16/the-history-of-the-png-queensland-pipeline/ Posted on: 16/03/20 Accessed on: 3/03/2019 At present Australia exports a manifold of LNG compared to PNG and the project would not be of interest for that market anymore. In 2008, ExxonMobil assumed leadership to develop a gas project sourcing the Hides gas field to export LNG to the Asian market. The project was completed in 2014 after rapidly completing planning and construction phases:

2008 (a): Cooperating partners came to an agreement. Shareholding in LNG/PNG is distributed as follows: ExxonMobil (32.2%); Oil Search (29%); Kumul Petroleum Holdings, representing the PNG government, (16.2%); Santos (13.5%); Mineral Resources Development Company (MRDC), representing landowners, (2.8%); JXTG Nippon Oil & Energy (4.7%). Santos bought Oil Search in 2021 and thus their share in LNG/PNG rose to 42.3%. Santos intends to sell part of its stake in LUN/PNG as it does not want to be exposed in Papua New Guinea and it wants to leave ExxonMobil as the major partner. Prime Minister Marape as well as minister Kerenge Kua indicated that they want to expand government shareholding in LNG/PNG. They expect to acquire a stake for a low price or potentially via a loan.

2008 (b): The fiscal and legal environment was established through a Gas agreement between the participating partners: ExxonMobil, Oil Search, Santos, Nippon Oil, the IPBC, MRDC and the government of PNG. It also laid down the proposed government equity in the project. 2008 (c): An economics impact study was commissioned by ExxonMobil from the Australian consulting firm Acil-Tasman. It outlined many beneficial effects of the project for PNG. 2008 (d): At the end of the year the FEED (Front End engineering and Design) stage was reached. 2009 (a): In October agreement was reached on environmental impact with the PNG government, The environmental impact statement was based on 16 studies. 2009 (b): Final agreement among partners paving the way for production. 2010: Sales and marketing agreements were completed with four major customers: JERA (for the Tokyo Electric Power Company); Osaka Gas, Sinopec (China Petroleum and chemical Corporation); CPC Corporation, Taiwan 2011: Financing arrangements with the lenders to the project completed. The project was heavily geared. Loan capital (US$14 billion) was much bigger than share capital (US$3.3. billion)LNG published share participation in percentages but not in actual amounts of US$. However, the government of Papua New Guinea borrowed US$ 1.681 billion to buy a stake of 16.8%. Exxon Mobil's share is 33% and therefore will be roughly US$3.3 billion. "IPIC deal a major PNG government achievement" Available at: http://www.pngindustrynews.net/storyView.asp?storyID=9637514&section=Wantok&sectionsource=s14035&aspdsc=yes Posted on: 17/9/2012; "PNG LNG project overview" Available at: http://www.oilsearch.com/Our-Activities/PNG-LNG-Project.html Accessed on 4/11/2016. These loans were sourced in the first place from export credit agencies and were therefore government-guaranteed (US$8.3 billion). Commercial Banks were the second source for loan capital (US$1.95 billion). Third, Exxon Mobil, the company executing the project, lent money (US$3.95 billion)."PNG LNG Project financing" Presentation at USEXIM annual conference 11/3/2010. Available at: https://www.exim.gov/sites/default/files/events/annual-conference-2010/PNGLNGProjectFinance.pdf Accessed on: 4/11/2016;"Project Finance for LNG Project in Papua New Guinea: Contributing to Stable Energy Resource Supply to Japan by Supporting Development of New LNG Supply Source" Available at: https://www.jbic.go.jp/en/information/press/press-2009/1216-7217 Posted on: 16/12/2009 Accessed on 4/11/2009 2009-2014: The construction of the LNG project consisted of a distinct number of sub-projects. Seven gas fields supply the project; the primary field is the Hides gas field in Hela Province. It required drilling eight boreholes 3600 m deep. A gas conditioning plant was built in Hides where the gas is separated from oil and water. The gas is then transported to the coast for shipping, which required a pipeline of 450 km to the mouth of the Omati River. This pipeline was extended under water for 407 km to Caution Bay near where the LNG processing plant is in Port Moresby. At Caution Bay, gas is chilled to -161 °C to liquefy it for transportation. Two processing plants – called trains – were built. Two huge storage tanks were built auxiliary to this. A loading pier for LNG tankers was constructed. The Hides gas field produces a mixture of oil and gas (condensate). The oil is separated in the highlands and transported in a separate pipeline to Oil Search's loading facilities for the oilfield at Lake Kutubu: the Kumul Marine Terminal offshore in Gulf Province. The construction of these projects was in extremely difficult terrain consisting either of very steep mountain ranges in the highlands or swamps near the coast. The project built at Hides a special long runway that could take the Antonov An-225 Mriya – the largest cargo planes in the world – to bring in material as road transport could not cope with this. Oil Search acquired the management contract for the Hides installations and Exxon Mobil managed the installations at Caution Bay.

Project achievements The construction of PNG/LNG is a major engineering achievement: it was a massive project in difficult terrain. The project was completed ahead of schedule in 2014, though there was an expenditure overshoot of US$3.3 billion. The project required PNG citizens to be extensively trained: 10,000 citizens during the time of construction. The project employed 2,600 citizens after construction and they constituted 82 percent of the workforce; 22 percent were women. The project produced above-planned capacity: The original design of PNG/LNG aimed at a capacity of producing 6.9 million tons energy (MTE) per annum, but the actual output has after the first year of production consistently been above that. In 2017 production was 8.3 MTE. It dropped to 7.4 MTE in 2018 because damage due to an earthquake . This was followed by another record year in 2019 producing 8.5 MTE.OilSearch What we do LNG/PNG project. Available at: https://www.oilsearch.com/our-business/png/png-lng-project No date posted Accessed: 8/06/2022 Production in 2021 was 7.7 MTE The project is an inexpensive producer. According to an analysis by consulting firm Wood Mackenzie and Credit Suisse, the project's break-even price of around $7.40 per million British Thermal Units compares favorably to an average over $10 per million BTU for eight recent gas projects in the region. The project does focus on more than the major Hides gas field. Project gas is sourced from seven fields: The Hides, Angore, and Juha gas fields belong to the LNG/PNG concession. Only Hides is fully operational (2022). Angore is in development. Development on Juha has still to be started and the Oil Search-operated Kutubu, Agogo, Moran, and Gobe Main oil fields, provide approximately 20% of PNG LNG Project gas. Gas is also purchased on a third party basis from the SE Gobe field.march PNG LNG project Conventional Gas Field, Papua New GuineaOil Search what we do: operated production Available at: https://www.oilsearch.com/our-business/png/operated-production Posted in 2016 Accessed 1/6/2022 Gas field reserves were re-evaluated in 2016, which resulted in an estimated increase of 50% when compared with the estimates made before construction in 2009. The size of the Hides field is now estimated between 9 and 11 trillion cubic feet. The life expectancy of the field is estimated to be thirty years from 2014.

Negative aspects of the project

Disappointing economic effects. ExxonMobil commissioned a study to Australian consulting firm ACIL-Tasman to calculate the benefits and costs to PNG; they projected large gains for the PNG economy as a result of the project. However, in a study commissioned by Jubilee Australia, two Australian economists – Paul Flanagan and Luke Fletcher – compared the predictions of this report in 2018 with actual outcomes. They found an actual fall in employment, household incomes, employment, government income, and imports where the ACIL-Tasman study predicted increases. GDP was expected to double as a result of LNG/PNG in the ACIL-Tasman study, but the researchers found a mere 10% growth. The Jubilee study has been criticised because the researchers did not produce a credible counterargument: What would have happened in the absence of the PNG LNG project and to what extent are the observed effects related to PNG LNG? Prime Minister Peter O'Neill rejected the Jubilee report and claimed low energy prices as the main factor. ExxonMobil responded by mentioning the social and economic benefits of the project such as stimulating entrepreneurship and supporting local communities.