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Talks underway with ExxonMobil

PORT MORESBY, Papua New Guinea (PNG Post-Courier, June 23, 2009) – Japan’s largest utility and one of Asia’s renowned companies, Tokyo Electric Power Co, is in talks to buy liquefied natural gas from Exxon Mobil Corp’s $12.5 billion [US$4.8] Papua New Guinea LNG venture as it competes with China for supplies.

Exxon Mobil Corp in a statement yesterday said it had reached "commercial terms" with three Asian buyers, and would begin discussions for binding sales and purchase agreements.

ExxonMobil executives hesitantly responded to correspondence on how much the company was looking at but said they were still under commercial negotiations.

The world LNG market is likely to face supply shortages around 2013 as new projects fail to keep pace with supply, according to Wood Mackenzie, a UK energy research and consulting company.

China Petroleum & Chemical Corp, the nation’s second-biggest oil company, said last month it was in talks to buy two million tons a year of the fuel from the Exxon-led project.

Exxon and its five partners may approve PNG’s largest investment before the end of this year, Oil Search Ltd, one of the holders, said in a statement on June 15.

They will start construction early next year, according to the Port Moresby-based Oil Search.

"This is a key milestone in the project’s schedule, with delivery of LNG to the market expected to commence in late 2013 or early

2014," Ron Billings, vice president of LNG, Exxon Mobil Gas & Power Marketing Company, said in the statement.

Shares of Tokyo Electric have lost 16 per cent this year, compared with a 17 per cent rise in the 17-member Topix Electric Power & Gas Index.

They traded at 2525 yen, up 1.6 per cent, at the 11am morning break in Tokyo yesterday.

Port Moresby Plant Exxon, which owns 41.5 per cent of the venture, has dropped 11 per cent this year.

Oil Search, with a 34 per cent stake, has gained 21 per cent over the same period.

Oil Search shares rose 2.2 per cent to $A5.64 at 12.12pm in Sydney.

The venture plans to build a unit near Port Moresby to process gas from the Southern Highlands.

The project has enough resources to support a third production unit of 3.15 million tons a year that could come on stream by 2017, UBS said.

Exxon awarded a contract to a Clough Ltd-led venture for early project work such as roads, bridges and camps for the project, Clough said on June 4.

LNG is natural gas chilled to liquid form for transportation by ships to destinations not connected by pipeline.

Papua New Guinea Post-Courier: www.postcourier.com.pg/


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