Another gas glut? Big LNG projects gather pace in Asia

Reports that ExxonMobil is close to signing deals with three more customers for its PNG LNG project in Papua New Guinea mean that the project is now very likely to be approved in a final investment decision before the end of the year.

The deals, with two Japanese and one Taiwanese customers, if signed along with another planned contract with China, would account for the whole planned output of 6.3m tonnes per year from the project’s first two trains, as the liquefaction production lines are known. There is already talk of a third train.

PNG LNG is due on stream late 2013 to early 2014. By then, it could be joined by a second or third train at Woodside’s Pluto project on Australia’s north-west shelf. The first phase of Pluto is already well under way, and due on stream by the end of 2010.

Meanwhile Gorgon, an even bigger Chevron-led LNG project on the north-west shelf, costed at about $30bn, is expected to get the go-ahead soon. If anyone was in any doubt that it was going to receive a final investment approval, that question was settled last week, with the news that the project consortium had placed an A$500m ($400m US) construction contract. It will have to pay the bill whether or not Gorgon goes ahead.

The contract, for a village to house 3,300 builders and engineers who will be working on the project, has been awarded to Kentz, the London-listed Irish engineering group, and its Australian partners Decmil and Thiess.

Even for Chevron, Exxon and Shell, the three Gorgon partners, $400m is a tidy sum, and they won’t be planning to throw it away for no reason. Gorgon is scheduled to come on stream in 2015.

Are we heading for another gas glut in the second half of the next decade?

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