Cost Of Exxon Gas Project In PNG Up To US$15.7 Billion Due To High A$

A large gas export joint venture in Papua New Guinea operated by Exxon Mobil Corp. (XOM) has experienced a US$700 million budget increase to US$15.7 billion due to the impact of the high Australian dollar, project partner Oil Search Ltd. (OSH.AU) said Thursday.

Oil Search said the massive project, which will ship liquefied natural gas to customers in Japan, China and Taiwan, remains on track to achieve first sales in 2014.

The cost increase will be funded in line with the project's existing financing terms, namely 70% with debt and 30% with equity.

Oil Search said the project's existing US$14 billion project finance facility fully covers the debt component of the cost increase.

"Oil Search has ample liquidity to fund its increased equity contribution to the PNG LNG project while continuing to pursue an aggressive exploration and appraisal programme in PNG and overseas," the company said.

Exxon owns 32.2% of the project, Oil Search owns 29.0% and Australia's Santos Ltd. (STO.AU) owns 13.5%.

Oil Search Chief Executive Peter Botten said last month that the project is about half finished. A rapid appreciation in the value of the Australian dollar since sanction in late 2009 has put upward pressure on costs.

Cost overruns are common with LNG projects, which are capital-intensive developments that can take four years or more to construct.

Woodside Petroleum Ltd. (WPL.AU) recently announced a A$900 million cost blowout at its Pluto LNG project in Western Australia state that was partly related to Australia's tight labor market.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com

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