China Development Bank provides $600 million loan for PNG Liquefied Natural Gas (LNG) Project (Linked to Record ID#39326 and #61187)

China Development Bank contributes to USD 1.95 billion unsecured term loan in 2009 On December 15, 2009, Papua New Guinea Liquefied Natural Gas Global Company LDC — a project company and a special purpose vehicle that is jointly owned by Esso Highlands as operator (33.2%), Oil Search (29%), the PNG Government through Inde­pendent Public Business Corporation (19.6%), Santos (13.5%), Nippon Oil Exploration (4.7%), PNG landowners through Mineral Resources Development Company (2.8%) and Petromin PNG Holdings (0.2%) — obtained $14 billion of funding through a series of agreements with a consortium of 17 commercial banks and export credit agencies (ECAs).

Amid a difficult market environment, the financing was well oversubscribed, underpinned by a well-developed commercial structure designed to ensure an acceptable risk-sharing mechanism between the project and the financiers.

The ECA negotiation process began in January 2009 and commercial banks were invited to submit financing proposals in July/August 2009.

The debt package consisted of US$4.6 billion in commercial tranches, US$5.7 billion of direct lending from ECAs and a US$3.8 billion loan from the sponsor, ExxonMobil.

The 17 banks that participated in the syndication of the commercial tranches were ANZ, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Calyon, China Development Bank, Commonwealth Bank of Australia, Crédit Industriel et Commercial de Paris, DNB Bank ASA, Intesa Sanpaolo, Mizuho Corporate Bank, National Australia Bank, Natixis, Société Générale (SG), Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, UniCredit and Westpac Banking Corporation.

SG and Sullivan & Cromwell were appointed financial adviser and international legal adviser in early 2008.

The commercial tranches were divided into a US$1.95 billion uncovered term loan, US$800 million term loan guaranteed by Export-Import Bank of the US (US Eximbank), US$900 million guaranteed facility by the Italian ECA Servizi Assicurativi del Commercio Estero (SACE), and a US$950 million facility insured by Nippon Export and Investment Insurance (NEXI).

China Development Bank contributed US$600 million (captured via Record ID#61186) to the US$1.95 billion uncovered term loan.

The ECA facilities are split into a US$2.2 billion direct loan from the US Eximbank, US$1.8 billion term loan from Japan Bank for Inter­national Cooperation, US$1.3 billion loan from the Export-Import Bank of China (captured via Record ID#39326) and US$350 million loan from the Export Finance and Insurance Corporation.

The interest rate is unknown.

On October 4, 2013, an additional syndicated loan facility of USD 1.5 billion was committed to fund the increased project construction cost.

The debt consists of a USD$600 million term loan provided by a consortium of 10 banks, including $120 million USD from China Development Bank ((captured via Project#61187), and a USD $900 million sponsor loan from ExxonMobil. The loan has a maturity length of 13-years 6 months.

The purpose of the PNG Liquefied Natural Gas (LNG) Project was to build gas production and processing facilities, onshore and offshore pipelines and liquefaction facilities in PNG with the capacity to produce 6.6 million tons of LNG per year.

The main components of the project include (1) an LNG plant (that consists of two LNG process trains, two 160,000 cubic meter LNG storage tanks, a marine loading terminal for LNG tankers up to 215,000 cubic meters, camp facilities, including accommodation and amenities, administration office, medical center, emergency helipad and sport and recreation center); (2) the Hides Gas Conditioning Plant (HGCP); and (3) a 700 km pipeline that transports natural gas from the Hides Gas Conditioning Plant to the LNG plant.

The LNG Plant is located 20 kilometers northwest of Port Moresby, at Caution Bay on the south coast of PNG’s Central Province.

The LNG process involves removing impurities and cooling the gas down to a temperature cold enough to turn it into liquid form. Once achieved, the LNG is moved to specialized storage tanks. From there, the LNG goes through a pipeline connected to the jetty where it loads onto LNG carriers. These ships then export the LNG to the international market.

The operation has the capacity to produce more than 8.3 million tonnes of LNG annually, an increase of 20 percent from the original design specification of 6.9 million tonnes per annum (MTA).

Condensate, a low-density mixture of hydrocarbon liquids recovered through the gas liquefaction process, is also stored and loaded onto tankers for export at the LNG Plant. The Hides Gas Conditioning Plant (HGCP) is located just outside of the township of Hides in PNG’s Hela Province. The plant processes up to 1 billion standard cubic feet of gas gathered from eight wells each day.

At the plant, gas, condensate and water are separated and treated before being sent via separate pipelines to other facilities in PNG for further handling.The gas is transported along a 700-kilometre-long pipeline to the LNG Plant near Port Moresby where it is converted into liquid form, ready for shipping.

Around 30,000 barrels of condensate is also produced at the Plant daily.

After separation, the condensate is directed along its own pipeline to the Kutubu Central Processing Facility and later the Kumul terminal for export. These production demands are met by more than 450 production staff who work around the clock every day of the year.

Conditioned gas is transported from the Hides Gas Conditioning Plant (HGCP) in the Highlands to the LNG Plant just outside of Port Moresby via a state-of-the-art 700-kilometre-long pipeline. The pipeline includes an onshore and an offshore portion. The onshore section of pipe has a diameter between 32 and 34 inches and is buried one metre below ground.

It travels a distance of 290 kilometers from the HGCP all the way down to the Omati River.

The offshore section of pipe joins the onshore section at the Omati River and extends a further 407 kilometers to the LNG Plant.

The offshore segment travels approximately 24 kilometers past Goaribari Island to the open sea, then across the Gulf of Papua to the Caution Bay landfall at the LNG Plant.

ExxonMobil PNG Limited, a subsidiary of ExxonMobil, is the is the entity responsible for operating the PNG Liquefied Natural Gas (LNG) Project. In 2008, the initial PNG LNG Project partners signed a joint operating agreement.

In that same year, an independent Economic Impact Study was commissioned and showed that the Project would have a significant impact on the GDP of Papua New Guinea, in addition to other benefits such as employment and business opportunities.

Then, on Mary 22, 2008, the project venture participants and the the Government of Papua New Guinea formally signed the Gas Agreement, which established the fiscal regime and legal framework by which the PNG LNG Project is to be regulated throughout its lifetime and set the terms and mechanism for State equity participation in the Project.

Following this, it was announced that the project would enter Front End Engineering and Design (FEED). Between December 2009 and March 2010, sales and marketing agreements for the gas were signed with four major customers.

An Environmental Impact Statement, which draws upon 26 supporting studies and took two years to complete, was approved by the PNG Government in October 2009. This documented the many rigorous commitments and measures the project would take to manage environmental risks. On December 8, 2009 the project venture participants approved the project, paving the way for construction to begin.

This was supported by the completion of financing arrangements with lenders in March 2010.

Engineering, procurement and construction (EPC) contracts were approved in late 2009 and in early 2010 construction work began. On or around April 29, 2014, the PNG LNG Project started production of liquefied natural gas ahead of schedule.

Then, on May 25, 2014, the first shipment of liquefied natural gas from the PNG LNG Project was delivered by the Spirit of Hela to the Tokyo Electric Power Co. Inc. (TEPCO) in Japan.

Chinese state-owned oil company, Sinopec, also signed an agreement (on December 3, 2019), with ExxonMobil to purchase 2 million tons of LNG annually from the PNG LNG project.