LNG market participants are assessing the impact of Papua New Guinea LNG's earlier-than-expected restart, after a 46-day shutdown caused by a 7.5-magnitude earthquake in the PNG Highlands February 26.
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PNG LNG-operator ExxonMobil had said as recently as Thursday that the projection of eight weeks for a return to production remained in place, only to announce 24 hours later that the facility's train one had already begun producing LNG.
PNG LNG's early start-ups are not new to the LNG markets. The facility began production in April 2014, ahead of its second-half 2014 projection, leading to unexpected availability of spot supply in Asia.
While the impact of this recent restart on the LNG market is yet to be seen, trading sources have already noted the possibility of spot offerings from PNG LNG adding bearishness to the thinly traded spring market of Northeast Asia.
"PNG LNG's restart should add supply to the Pacific region, right during a time when demand is starting to tail off. This will likely have bearish implications on prices, as countries look to absorb the excess supply," said Jeff Moore, manager with S&P Global Platts Analytics.
Assuming an operating rate of 8.5 million mt/year, bringing the restart date forward from approximately April 30 would add nearly 400,000 mt of LNG to the market.
During the period in which PNG LNG was offline, some of the maintenance work that had previously been scheduled for April and October was completed, which will also help offset some of the estimated volume -- more than 1 million mt of LNG - lost in the past six weeks.
A spokeswoman reiterated Thursday that ExxonMobil was adhering to its initial eight-week shutdown plan, despite activity ramping up at the site, including the delivery of a cooling cargo from Indonesia's Bontang and the arrival of an unloaded project vessel, the Papua, at the facility.
"The purchase of this [Bontang] cargo does not reflect a change in our earlier projection of eight weeks for return to production," the spokeswoman said last week.
The company announced March 5, it would take approximately eight weeks to complete repairs and restore production, which indicated operations would resume in late April or early May.
However, in separate statements, ExxonMobil and stake holders in the project Santos and Oil Search said Friday production had already resumed.
"At present, one LNG train is operating at the LNG plant site, with the second train expected to start up as production from the Hides field and the Oil Search-operated Associated Gas fields ramps up," Oil Search's Managing Director Peter Botten said.
ExxonMobil has a 33.2% stake in PNG LNG, along with Oil Search (29%), Santos (13.5%), National Petroleum Company of PNG (16.8%), JX Nippon Oil and Gas Exploration Company (4.7%), and Mineral Resources Development (2.8%).
PNG LNG has a nameplate capacity of 6.9 million mt/year but has consistently operated above it, and said it expects rates to remain above 8.5 million mt/year going forward.
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