Papua LNG cuts cost to $14 billion, saving $4 billion since 2024
Key Facts
TotalEnergies has cut its capital cost estimate for the Papua LNG project to about $14 billion, after achieving savings of nearly $4 billion since 2024, according to a company filing with the U.S. Securities and Exchange Commission. The reduction reflects a redesign of the project and the retendering of engineering, procurement and construction packages, while operating responsibility has shifted to ExxonMobil, operator of the neighboring LNG project. The company said savings achieved since 2024 were “about $4 billion,” bringing capital expenditure to about $14 billion. TotalEnergies retains the right to buy 1.5 million tonnes of gas a year for its global portfolio, despite reducing its stake in the project. The partners are moving toward a final investment decision expected in the fourth quarter of 2026, a condition for completing the transaction linked to the change in ownership.
TotalEnergies said the cost reduction included developing an alternative upstream condensate plan integrated with the PNG LNG project, as well as retendering engineering, procurement and construction packages to a broader group of Asian contractors. The company said contract award recommendations were ready for partner approval after the tender was completed. The transfer of operations to ExxonMobil is intended to strengthen synergies with PNG LNG, which the U.S. company operates. TotalEnergies said the gas agreement signed in 2019 had been amended to reflect the budget and new improvements, and to support the project's economics even during market downturns. It added that the amendments preserve Papua New Guinea's long-term financial interests.
After the stake sale is completed and Papua New Guinea exercises its back-in right, ExxonMobil will hold 34.1%, Santos 21%, TotalEnergies 20% and INEOS Exploration 2.4%. Kumul Petroleum and the Mineral Resources Development Company will together hold 22.5%, according to a TotalEnergies statement. Separately, Santos bought an additional 3.3% stake for $189 million, raising its ownership to 21%, according to Reuters. Completion of the transaction is tied to the project reaching a final investment decision, expected in the fourth quarter of 2026.
The project plans to produce 5.6 million tonnes of LNG a year from the Elk and Antelope fields in Gulf Province, through processing facilities and a pipeline connecting to facilities near Port Moresby, with supplies destined mainly for Asian markets. TotalEnergies and Papua New Guinea government entities, represented by Kumul Petroleum, established a joint venture to market 2.4 million tonnes a year of expected production. The agreement gives TotalEnergies access to 1.5 million tonnes a year for its global portfolio. The prime minister said on October 16 that the Papua and P'nyang projects together represent about 11 trillion cubic feet of gas resources. He added that the government is seeking to arrange development of the two projects in a way that supports longer-term investment in the energy sector.
The cost and schedule reset follows setbacks in the initial bids. In April 2024, TotalEnergies and the Papua New Guinea government said engineering, procurement and construction bids did not meet commercial viability requirements and that the project needed more work before an investment decision, then expected in 2025. On September 3, 2026, the prime minister said the development cost estimate had fallen from about $18 billion to around $14.5 billion, and that the government was working to target an investment decision before December 15, 2026. Santos expects the decision in the fourth quarter of the year, Reuters reported. An analyst at MST Marquee said reaching the decision before year-end could help extend the life of the neighboring PNG LNG project, which was expected to begin declining in production near 2028.
Papua New Guinea's government announced on October 16 that ExxonMobil had formally taken over operation of the project, following the partners' agreement reached in September. This confirms the shift from the operating arrangement TotalEnergies announced in September to a formal takeover, while the partners' stakes and gas supplies remain governed by the announced arrangements. In trading on October 30, TotalEnergies shares closed at $95.33, while ExxonMobil shares closed at $187.25, according to EL7 data. The next step is the final investment decision; Santos said it is expected in the fourth quarter of 2026. Reuters also linked completion of the stake transaction to the project reaching that decision.