Exxon’s PNG Project Cost Estimate Climbs 5% to $15.7 Billion

Exxon Mobil Corp. (XOM) increased the cost estimate for its liquefied natural gas project in Papua New Guinea by about 5 percent to $15.7 billion because of a stronger Australian dollar, according to partner Santos Ltd. (STO)

The LNG venture remains on schedule to begin exports in 2014, the Adelaide-based company said today in a statement. Santos, Australia’s third-largest oil and gas producer, said its share of the additional cost is about $100 million.

The Exxon project is among more than A$200 billion ($205 billion) of LNG ventures planned in Australia and Papua New Guinea to meet Asian demand for cleaner-burning alternatives to coal. Australian LNG projects face rising costs and delays as the nation moves to challenge Qatar for the top spot in global rankings of LNG exporters, Standard & Poor’s said Nov. 29.

“If the costs were to increase again, you’d be concerned, but if this is the extent of it then it’s still looking like a reasonably attractive project,” Ivor Ries, a Melbourne-based analyst at E.L. & C. Baillieu Stockbroking Ltd., said by phone.

The $14 billion of financing arranged by the partners covers the part of the increased cost that will be funded by debt, partner Oil Search Ltd. (OSH) said in a statement.

“Costs of project components often fluctuate throughout the life of a project,” Port Moresby-based Oil Search said.

Shares of Santos rose 1.3 percent to A$13.25 at the 4:10 p.m. close in Sydney, compared with a 2.6 percent gain in the S&P/ASX 200 Index. Oil Search climbed 1.6 percent to A$6.38.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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