Exxon Mobil Corp. (XOM) and its partners Tuesday agreed to proceed with a US$15 billion liquefied natural gas project in Papua New Guinea, despite missing a deadline to wrap up financing.

The PNG LNG project partners also said approval of the project is conditional on clinching binding sales agreements with two more Asian customers. The offtake deals, along with the outstanding financing, are expected to be completed "early 2010", Exxon Mobil said.

Exxon Mobil officials previously said they targeted financial close for PNG LNG in the fourth quarter of 2009.

"Pending completion of these sales and financing arrangements, significant project activity will commence in 2010," the head of Exxon Mobil subsidiary Esso Highlands, Peter Graham, said in a statement.

The partners, which also include Oil Search Ltd. (OSH.AU) and Santos Ltd. (STO.AU), had said previously that they expected to make a final investment decision for the project on Tuesday.

The project, which will have the capacity to produce 6.6 million tons of LNG a year, is the biggest resources development undertaken in Papua New Guinea and has the potential to transform the developing nation's economy by doubling its gross domestic product.

It is one of over a dozen LNG terminals planned for construction in Papua New Guinea and Australia designed to tap an expected surge in demand for cleaner-burning fuels from fast-growing Asian economies nearby.

PNG LNG has signed binding agreements for the sale of a combined 3.8 million tons per annum of LNG to China Petroleum & Chemical Corp., known as Sinopec, and Tokyo Electric Power Co. (9501.TO), or Tepco.

Preliminary agreements with Osaka Gas Co. (9532.TO) and Taiwan's state-owned refiner CPC Corp. have yet to be finalized into binding contracts.

Exxon Mobil said Tuesday that the Papua New Guinean government has backed into the project as planned through the acquisition of a 16.6% stake. That means Exxon Mobil now has 33.2%, Oil Search Ltd. (OSH.AU) 29.0%, Santos Ltd. (STO.AU) 13.5%, Nippon Oil 4.7%, PNG landowners 2.8% and Petromin PNG Holdings Ltd. 0.2%.

-By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; ross.kelly@dowjones.com
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