Exxon Ships LNG From Papua New Guinea

Exxon Mobil's massive $19 billion LNG project in Papua New Guinea, begun in 2010, has shipped gas ahead of schedule. It is a complex project because of the physical and engineering connections among resources in the Southern highlands and underwater transmission and pipeline infrastructure, ending in an export terminal, with the first output going to a Tokyo power utility.

PNG's government has always had a complicated relationship with the Australian government, multinational corporations, and with its own citizenry's various special interests.  The nominal, lifetime production volumes of this first project are 9 trillion cubic feet of natural gas over the 30 year project life.  An economic impact study of the project was commissioned and published.

Without second level, or multiplier, effects the project is estimated to produce 3-6 billion kina of annual net benefits to Papua New Guinea over the project life.  These benefits are the government's take from public and private taxes, royalties, development levies and charges, and return on equity form a 19% stake in the project, which was funded by a controversial loan from UBS.  The costs are the additional expenditure for providing public services to the project environs and residents, both local and expat.  7,500 jobs will be created, of which 20% will be filled by local citizens.

The idea of putting the net cash flows into the creation of a sovereign wealth fund, on the Norwegian model, has been discussed ad nauseum. Were the government able to pull this off, without letting the surplus evaporate or be spent foolishly, this would be a great example for other developing countries looking for a new model for commercializing their natural resources. Other projects linked to this one are waiting in the wings. A new energy exporter has been born!  Let's hope it turns out really well.