Why ExxonMobil's $19 Billion LNG Project Is a Big Deal

ExxonMobil officially shipped first cargo from its huge LNG project in Papua New Guinea. Here's why this project matters to you.

Jun 10, 2014 at 8:04AM

The role of liquefied natural gas, or LNG, is increasing among the integrated oil and gas super-majors. Giants like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are spending huge amounts of money to build massive LNG plants around the world.

For these two behemoths, the tantalizing potential of emerging market energy demand has prompted each one to build LNG facilities in the Asia-Pacific region. Chevron management stated in its last presentation that LNG demand will nearly double by 2025.

For ExxonMobil, its Papua New Guinea LNG plant is an exciting catalyst because of its enormous production potential. And, this potential is getting very close to materializing since the company just took the first LNG shipment.

This marks the beginning of a long and highly profitable journey for ExxonMobil, one that will leave it and its shareholders measurably better off.

LNG from PNG
ExxonMobil has a large number of high-profile projects lined up this year, so it might be easy to overlook an individual project in such a far place as Papua New Guinea. But you'd be wise to pay close attention to this particular LNG project because its production potential is truly amazing.

Xom Lng

Source: pnglng.com

Over the $19 billion project's expected 30-year lifespan, ExxonMobil expects to produce 9 trillion cubic feet of gas. Each year, project capacity is pegged at 6.9 million tonnes. The first shipment just occurred, headed to Tokyo Electric Power in Japan, ahead of schedule. Other major customers for the project's output include China Petroleum and Chemical and Osaka Gas. Production toward a second shipment is ongoing now that additional wells are coming online.

The project is an integrated one, with gas production and processing facilities stretched across several provinces of Papua New Guinea. These facilities, which include a gas conditioning plant and liquefaction facility, are connected by roughly 435 miles of pipelines.

In a statement, Neil W. Duffin, president of ExxonMobil Development Company, stated:

The PNG LNG project exemplifies ExxonMobil's leadership in project execution, advanced technologies[,] and marketing capabilities. Our demonstrated expertise will enable us to progress other LNG opportunities in our portfolio, including expansion opportunities in Papua New Guinea and to meet growing global demand.

This project mimics Chevron's own huge LNG projects, which are situated in Australia. The end result for both companies is to serve the large (and growing) demand for energy in the emerging markets, Asia more specifically.

Chevron is nearing completion of two separate projects in Australia called Wheatstone and Gorgon. Wheatstone is a $29 billion project which includes two LNG trains with a combined capacity of 8.9 million tonnes per annum and a domestic gas plant. First shipments are expected in 2016. Meanwhile, the Gorgon development is one of the world's largest LNG projects. Gorgon is about 80% complete, and management expects first shipments next year.

Why LNG matters
Liquefied natural gas holds great promise. As a liquid, it's much easier and more cost effective to store and ship. In fact, LNG occupies up to 600 times less space, according to an industry report from Royal Dutch Shell.

And, since energy demand across the globe is set to rise in the near future, LNG represents a huge opportunity.

It should come as no surprise, then, that integrated super-majors ExxonMobil and Chevron are getting ready to begin production on their own LNG projects. Both companies have situated massive LNG production facilities near Asia to easily accommodate the rising demand from Japan, China, and other nations.

ExxonMobil's $19 billion LNG facility in Papua New Guinea just shipped its first cargo, an exciting start to a long and highly productive venture. LNG will surely assist in getting production going in the right direction again for both companies, which couldn't come at a better time.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.


Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information