Exxon to Export LNG from PNG by Mid '14

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U.S. oil and gas giant ExxonMobil Corporation (XOM) has announced that its long delayed Papua New Guinea (PNG) liquefied natural gas (LNG) project will start exporting LNG by mid 2014.

The PNG LNG project is on track and will commence operations ahead of schedule and below its $19 billion budget. The project has brought online a gas conditioning plant in PNG’s highlands. The gas is drilled at the site and a 292-kilometer (180 miles) onshore pipeline has been placed. The first of the two units at the LNG plant are also ready.

First cargoes, which were earlier anticipated by October, are now expected by mid year. By the year end, the project will be fully operational.

The project, which has been under construction for the past five years, got continuously delayed due to record wet weather, steep terrain and community issues. These resulted in slowing down of the work and escalated the costs by about 25% from its original budget of $15 billion.

The most difficult part was the construction of a high pressure gas pipeline above ground that had to be later covered with 1 meter (3 feet) of dirt to conceal it for safety and security.

A spot cargo is likely to be the first shipment rather than PNG LNG’s Japanese, Chinese or Taiwanese customers, who have contracted to take 95% of the LNG plants 6.9 million tons of annual gas production. ExxonMobil and its partners – Oil Search Ltd, Santos Ltd, Japan’s Nippon Oil Corp, the PNG government and local landowners – are planning to expand the plant. The decision regarding where to source the additional gas supply for the expansion is yet to be taken.

Preferably, the partners want to take the gas from PNG’s biggest undeveloped fields Elk and Antelope controlled by another PNG company – InterOil Corp – and France's Total SA (TOT).

ExxonMobil carries a Zacks Rank #3 (Hold). Other stocks worth considering in the industry include Range Resources Corporation (RRC) and Helmerich & Payne, Inc. (HP), all with a Zacks Rank #1 (Strong Buy).
 

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