Exxon Starts Drilling for Natural Gas in Papua New Guinea

Exxonmobil announced on Monday that it has started to drill for natural gas in Papua New Guinea (PNG) as part of its $15.7-billion PNG LNG venture. The drilling is at the Hides natural gas field at PNG's highlands.

The oil firm said it expects the field would yield nine trillion cubic feet of natural gas which would be piped to a liquefied natural gas (LNG) processing terminal and chilled for export to China, Japan and Taiwan.

Exxon aims to start its first LNG deliveries in 2014. If Hides would yield as projected by the oil giant, it could generate sufficient resources to support an expansion of PNG LNG to three production units from the two being planned, said Oil Search, the Australian partner of Exxon for the venture.

Exxon initially drilled two separate wells in the southern and northern parts of the Hides field which established the location of the gas and water contact and provided an estimate of the size of the gas field.

Because natural gas is a cleaner form of energy, large oil and gas firms are pouring billions of dollars to locate and extract the resource. Australia, which has benefitted from the resources sector through mining of iron ore and coal, is now shifting its focus on LNG.

Based on estimates and the large number of LNG projects in Australia underway, industry experts believe the country would be the world's largest LNG exporter by 2020, outpacing Qatar. However, local users of gas have complained that they are paying at rates five times higher than their counterparts in the U.S. and pushed for reserving some of Australia's natural gas output for domestic consumption at lower prices.

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