Exxon Seeks to Overcome Challenges in PNG After 21% Cost Overrun

Exxon Mobil Corp. (XOM), operator of a $19 billion liquefied natural gas project in Papua New Guinea, said it’s confident the development will begin shipments in 2014, even after costs surged 21 percent.

“There’s still a long road ahead and quite a few challenges,” Decie Autin, Exxon’s project executive in Papua New Guinea, said today in a speech in Sydney.

Exxon is working with the government of Papua New Guinea to resolve infrastructure challenges, especially along the Highlands Highway used to transport materials, and “law and order issues,” Autin said. The company also has brought in special equipment to manage heavy rains, which have hit records in 14 of the last 21 months, Autin said.

Irving, Texas-based Exxon and its partners, including Oil Search Ltd. (OSH) and Santos Ltd. (STO), face higher costs because of a stronger Australian dollar and construction delays, the companies said last month. The project also will increase production capacity by 5 percent to 6.9 million metric tons annually, according to Exxon.

Initial results “look positive” from exploration drilling at the P’nyang natural gas resource, and Exxon is evaluating options for the gas, including a potential third processing unit for the LNG venture, Autin said.

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

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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