THE PNG-LNG project has made another step towards development of a third LNG train, and given the country’s dire electricity infrastructure a boost, by inking a deal with the PNG government to boost gas development in the region.

Operator ExxonMobil has agreed to supply gas for domestic generation of up to 25 megawatts of power – a quarter of Port Moresby’s current needs – for the next 20 years.

The US supermajor signed a memorandum of understanding with the PNG government in January, where the expansion project was awarded a petroleum development licence for the P’nyang gas field in PRL 3.

“P’nyang will provide additional long-term gas reserves for power generation and project expansion, including expected debottlenecking of the existing trains and a third LNG train,” joint venture partner Oil Search managing director Peter Botten said.

The deal sets the end of 2017 as the latest time a final investment decision on the project can be made, along with a timeline for various objectives.

The licencees are finalising the petroleum development licence for P’nyang and it is expected to be offered by the first quarter of 2015.

“Preparations are underway for appraisal drilling and development engineering studies, which will commence this year,” Mr Botten said.

Then-ExxonMobil PNG managing director Peter Graham said the power supply deal – which will provide the nation with 20 million cubic feet a day of natural gas – ensured a long-term solution to the country’s crippling power shortages.

The supply is designed to be provided for an interim period while the government addresses long-term generation options

“The remainder of the gas supply will be used to fuel a new state-owned gas-fired power generation unit expected to be located near the LNG Plant outside of Port Moresby,” ExxonMobil said in a statement.

Esso PNG P’nyang Limited, the operator of the P’nyang field and an ExxonMobil subsidiary, and its co-venture partners will commence preparations to drill a P’nyang appraisal well within two years of the awarding of the petroleum development license.

Preparations for appraisal drilling are anticipated to commence in 2015, subject to progress of technical work, permitting and budgeting.

Oil Search announced the resource base is bigger than previously thought, with new data indicating strong support for a third train.

“The commitment under the MoU to near-term appraisal drilling will be undertaken to better quantify 1C contingent resource volumes,” Mr Botten said.

Mr Botten said he was “delighted” the operator had signed the MoU, saying the agreement met the needs of all interested parties.