The complex business of PNG LNG market

By: Andrew A Arthur

After 200 shipments of LNG from Papua New Guinea and still we have not seen an profit nor have we seen any developments in Papua New Guinea!

This just one of the many comments by frustrated landowners and citizens in Papua New Guinea about the commercial viability of the PNG LNG.

Recent protests by landowners of Portion 152 for unpaid royalties also aired the same sentiments.

But why is there a delay on any inflows into the Government coffers and into the Government operating accounts to fund the national budget??

There are many answers to that but the root cause is how the agreement was structured and who gets what percentage and how did they fund their share percentages.

See below the share structure of the PNG LNG agreement;

  • Exxon Mobil (US) 33.201%
  • Oil Search (Aus) 29.003%
  • Santos (Aus) 13.532%
  • Nippon Oil Exploration (Japan) 4.680%
  • PNG Govt (NPC + Petromin) 16.779%
  • Landowner 2.805% 

Inorder to take up shares in the PNG LNG, you need to fund your percentage in those shares. PNG Government had to take an IPIC loan of over $1billion to fund its shares. All other parties would have done the same and taken out loans.

When the gas are sold, the parties start repaying their debt, these would equate to at least 3-7 years of loan repayments until they start to earn a profit from the sale of the gas.

It is estimated that by 2017, Papua New Guinea Government would be turning some profit in the 2nd quarter of the year when major loan repayments are done.

Papua New Guinea is on track to seeing huge profits from the sale of its LNG….

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Japan is major LNG buyer
By: Post Courier -1st March 2017
JAPAN is the largest buyer of liquefied natural gas in the region and is ready to share its experience of LNG and expand into the Asia-Pacific LNG market.
Yuki Sadamitsu from the Japanese Ministry of Economy, Trade and Industry, said Japan remains the largest buyer of LNG in the rapidly growing LNG market in Asia.
Mr Sadamitsu made these remarks in his keynote address yesterday at the Petroleum and Energy Summit at the Stanley Hotel in Port Moresby.


“Japan remains to be a large buyer of LNG for the foreseeable future.
“LNG demands will be larger than the government estimate.
“Japan is ready to collaborate with global, especially Asia-Pacific partners to develop and expand the LNG market.
“This of course, includes cooperation between the energy producing and the consuming countries,” he said.
Japan is a consumer of mixed energy sources such as fossil fuel, oil, coal, LNG and others and is looking at reforming its energy market.
“Japanese LNG market is under drastic reform of liberalisation,” Mr Sadamitsu added.

As part of Japan’s strategy for LNG market development, they are looking at three pillars which are tradability, infrastructure, and price discovery including market expansion to move forward.
“If you look globally, Asia is the most rapidly growing LNG market.
“Asia LNG import will almost double by 2030.
“We, the Japanese government and companies are ready to cooperate with Asian countries to share know-how of LNG and expand the Asia-Pacific LNG market.
“We will work on the LNG strategy for Asian countries this year,” Mr Sadamitsu said.

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