Business
PNG LNG Project of Exxon Costs Spike to $19 billion
Exxon Mobil told that its ongoing LNG project in New Guinea (Papua) is facing a spike in the cost by $3.3 billion. This is the recent Asia-Pacific project to be affected by cost hikes as rivalry is set to develop from the new gas supplies in Africa and North America.
Over 20% increase in cost of the project to $19 billion was attributed to the adverse rates of foreign exchange and delays that were caused by discontented land workers as well as land owners. This hike in cost has stepped in after the costs to grow liquefied natural gas (LNG) projects in the bordering Australia to supply to the Asian market also increased.
Exxon wrote to its partners, stating that the project will be according to the same plan for start-up and gas delivery in the year 2014 and predicted capacity of production had been raised to 6.9 million tons a year, indicating a hike by 5%.
This PNG LNG project is the poor country’s largest-ever development of resources and could hoist GDP by 20%.
Papua New Guinea has battled to draw foreign investment to use its plentiful natural resources, owing to indistinct regulations and corruption.
The shares of the project’s 2 Australian partners Santos and Oil Search dropped 5.2% and 2.4% respectively.
Sydney-based City Index Group’s chief market analyst, Peter Esho told that the international groups joint venture with the Australian firms into these projects were beginning to experience the high cost environment.
LNG plants infamous for operating missing and over-budget schedules. Around 3 out of 7 ongoing projects in Australia have proclaimed increased of an average of around 20%, while one more is holding a review of cost and schedule.
The Australian developments have mainly experienced increases in costs, owing to high Australian dollar, tough rivalry for resources, and increased costs of labor.
The high demand from some of the Asian nations has assisted to lift the outlook of LNG projects in Asia-Pacific region, but the war is also heating up with fresh supplies scheduled to emerge from East Africa and North America.
Oil Search told the hike in the estimated value at PNG LNG was significantly ahead of the higher end of its anticipations. The company told that it anticipated the hike would be sponsored in line with the current finance terms of the project of 30% by equity contributions and 70% by debt from the project partners.
