MELBOURNE, Aug 19 (Reuters) - Partners in the Papua New Guinea LNG project, which started exporting liquefied natural gas (LNG) in May, are in talks with customers to shift from spot-priced cargoes to contract sales before the end of 2014, PNG LNG partner Oil Search said.
Spot prices for LNG in Asia LNG-AS have slumped about 20 percent since shipments of PNG LNG started, partly due to the new supply from PNG, and any shift to contract sales should ease the glut on the spot market.
“There’s no doubt that PNG LNG cargoes have played a role in setting the spot pricing,” said Peter Botten, managing director of Oil Search Ltd, which owns 29 percent of the PNG LNG project.
He said the joint venture partners, led by ExxonMobil Corp , wanted to make sure output was stable from the two trains at the plant before moving to contract sales to its long-term customers: China’s Sinopec, Japan’s TEPCO and Osaka Gas, and Taiwan’s CPC.
Between May and the end of June, seven cargoes of PNG LNG were sold, all on the spot market, with five going to Asian buyers, according to Oil Search’s June quarterly report.
“Clearly with stability in the project and stability in the production, we anticipate that we’ll move across to contract sales certainly before the end of the year,” Botten said.
“I can’t give you any further timing on that until the joint venture has finalised its review with the customers itself, but the intention is to move across to contract sales as soon as reasonably possible,” he told reporters on a conference call.
Botten was speaking after Oil Search reported a 34 percent jump in half-year profit, thanks to the earlier than expected start and ramp-up of PNG LNG exports. (Reporting by Sonali Paul; Editing by Richard Pullin)