Papua LNG faces new delay

A TotalEnergies worker travelling from Herd Base to the Purari airstrip.

The Santos-owned $US15bn Papua LNG project faces the threat of further delays amid speculation French oil giant TotalEnergies may pull the plug on the venture.

Total, the operator, along with Santos and ExxonMobil last year moved to accelerate work on the project after a series of false dawns since gas was first discovered in the country’s gulf province in 2006.

However, the major gas development has struggled to gain momentum. A final investment decision was earlier this year bumped back to 2025 amid concern over the cost of engineering, procurement and construction contracts.

While early works for the project have been continuing over the past few months, DataRoom understands Total may look to pause transport and civil works contracts as it reconsiders the cost and scope of the 5.6 million tonne-a-year facility.

The French company’s two partners are understood to be concerned over the cost of delivering the project even if Asian buyers would eagerly scoop up volumes in the market.

For Santos, Papua LNG is also a critical project with supplies helping to ease its mainstay export facility, PNG LNG, from going into decline from 2028.

Total did not immediately respond to a request for comment.

A failure to proceed with Papua LNG would be a hammer blow to Prime Minister James Marape, who came to power promising to maximise returns from resource projects.

Mr Marape won power in 2019, and he immediately put some of the world’s biggest resources companies on notice over a perceived lack of wealth flowing from their projects back into communities.

The PNG government will take a 22.5 per cent stake in Papua LNG, higher than the 19.6 per cent held in the country’s sole other development, PNG LNG.

There are also growing concerns about financing and finding contractors, which could delay the first gas production, set for 2028.