First production from the Papua New Guinea LNG project is now expected in the third quarter of this year, Australian joint venture partner Santos said Friday as it reported its financial results for 2013.
Santos holds 13.5% of the ExxonMobil-operated PNG LNG project, which is now more than 95% complete. Startup had previously been flagged more generally for the second half of 2014.
ExxonMobil holds 33.2% of the project, alongside Oil Search (29%), the PNG government's National Petroleum Company of PNG (16.8%), JX Nippon (4.7%) and local landowner MRDC (2.8%).
The $19 billion project comprises gas production and processing facilities in PNG's Southern Highlands, Hela and Western provinces and pipeline infrastructure to a 6.9 million mt/year LNG plant near Port Moresby. Santos said commissioning was ramping up at the LNG plant, with gas circulating in train one and the refrigeration compressors being tested.
The foundation PNG LNG project comprises two production trains, but the joint venture has been looking for gas to enable the addition of at least a third train at the liquefaction facility. "While we're confident expansion will happen, it's just a little early to predict how and when," Santos CEO David Knox said at a briefing.
The joint venture is looking to expand the reserves base in the project's Hides field and will also drill the Hides Deep prospect late this year or early next year. "If that came in, it would be potentially very big for Santos and very good for the PNG project, and in my view would allow another train to be built," Knox said.
Santos is an emerging LNG player, building on the 11.5% stake it holds in the producing Darwin LNG plant, which produces 3.5 million mt/year.
The company also has a 30% operating stake in the Gladstone LNG project in the eastern Australian state of Queensland. GLNG is currently 75% complete and remains on track for first LNG in 2015, Santos said.
The GLNG project involves the development of coalseam gas resources in Queensland's Bowen and Surat basins and construction of a 420 km underground gas pipeline to Gladstone. The liquefaction facilities on Curtis Island will comprise two LNG trains with a capacity of 7.8 million mt/year.
The project is budgeted to cost $18.5 billion from final investment decision to the end of 2015, when the second train is expected to be ready for startup, Santos said. Knox said train one would take three to six months and train two between two and three years to fully ramp up.
Meanwhile, Santos posted a net profit of A$516 million ($465 million) after tax for 2013, in line with 2012. Underlying profit after tax was 17% lower at A$504 million.
Santos' sales revenue for the year was 12% higher at a record A$3.6 billion, mainly due to higher oil and gas prices and third party crude sales. The company's earnings before interest, tax, depreciation, amortization and exploration were 7% higher at A$1.992 billion.
"The 2013 financial result reflects record sales revenue driven by higher crude oil sales volumes, and higher oil and gas prices, offset by lower interest income and higher depletion, depreciation and amortization, exploration, and other expenses," said Santos Chairman Ken Borda.
Santos' net profit was a "weak" result that was 8% below consensus, according to Hong Kong-based analysts with Bernstein Research.
"While the earnings miss was disappointing the key takeaway for us was the weak reserves bookings for their coalseam gas-to-LNG project GLNG," the analysts added. "GLNG is almost 12 months away from starting up and reserves remain well short of what is required for two trains in our view."
Santos' share of GLNG's proved reserves rose 2.6% over 2013 to 1,844 petajoules. Proven and probable reserves edged up 0.6% to 5,406 Pj.
"Right now we've got 8,000 Pj of GLNG reserves [and] GLNG third-party purchases ... plus 2C resources," Knox said. "We're connected to the east Australian gas market and Santos itself has another 11,000 Pj of resources available to it. So we are not in any way short of gas for this project," he added.
Santos is Australia's third-largest oil and gas producer behind BHP Billiton and Woodside Petroleum. The company's output for 2013, reported to the market last month, was 51 million barrels of oil equivalent.
Production for the year was down 2% from 2012. New production from the startup of the Fletcher Finucane oil project off Western Australia and higher production from Darwin LNG were offset by natural field decline in mature assets and the closure of the Sangu gas project in Bangladesh, the company said.
Santos has maintained its production guidance for 2014 at between 52 million and 57 million boe. The drivers of the increase in production will be PNG LNG and the startup of the Dua oil project in Vietnam and Peluang gas development in Indonesia, Santos said.
