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    Papua New Guinea Gas Consumption Forecast

    November 22, 2021 - Fitch Solutions Sector Intelligence


      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Papua New Guinea Gas Consumption Forecast

      • 19 Nov 2021
      • Papua New Guinea
      • Oil & Gas

      Key View: Papua New Guinea's domestic natural gas consumption will continue to be small in volume terms, though favourable policies in the power generation and infrastructure space pose upside risks to growth over the next decade.

      Latest Updates
      • Papua New Guinea (PNG)’s domestic consumption of natural gas will continue to be small in absolute volume terms, capped by the small size of the domestic market, remaining below the 1bcm mark out to 2030.
      • Consumption is forecast to bounce back to record 2% growth in 2021, after a 3% contraction in 2020, as Covid-19 headwinds are gradually removed, allowing power consumption among households and industries to return to pre-pandemic levels.
      • The bulk of consumption occurs in the power sector, driven currently by Niupower's freshly-commissioned 58MW gas-fired power plant at Port Moresby, the first dedicated grid-connected gas project in PNG.
      • It is soon set to be joined by Dirio Gas & Power's plant of 45MW. PNG's medium-term strategic power development plan favours gas, as it envisions a more than five-fold expansion of total gas-fired power generation capacity out to 2030, and for its share of total generation increases from 14% to 20%.
      Structural Trends

      In comparison to its robust natural gas production and LNG exports, PNG’s own consumption of natural gas is small and mostly confined to limited usage for power generation. Nonetheless, domestic gas demand is expected to benefit from the government’s broader energy sector development goals, which seeks to 1) provide 70% of the population with consistent access to electricity by 2030, from about 22% currently and 2) shore up lagging domestic power generation and distribution infrastructure.

      A Marginal Consumer Of Gas
      Papua New Guinea - Gas Production & Consumption Forecast (2019-2030)

      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions

      The PNG Department of National Planning and Monitoring (DNPM)’s medium-term energy development strategic plan for 2010-2030 envisions a near four-fold expansion of total domestic power generation capacity, and a more than five-fold expansion of total gas generation capacity, albeit both from low bases, to accommodate rising demand. The government’s generation targets aim to achieve significant growth in gas, hydro and other renewables capacities with a view to gradually diversifying away from diesel.

      • NiuPower, a JV between Kumul Energy Limited and Oil Search, operates PNG’s only utility-scale gas-fired power generation plant of 58MW. Commissioned in 2019 after requiring investment of some USD100mn, the plant is designed to meet about 40% of Port Moresby’s peak power demand, and is capable of supporting further expansions of up to 175MW.
      • The plant will soon be joined by a second gas-fired power project by H2 2020. The USD74mn project is being spearheaded by local firm Dirio Gas & Power, subsidiary of state-owned Mineral Resources Development Company. Dirio will operate a 45MW plant at Port Moresby and has a 25-year PPA in place with PNG Power.
      Hydro, Gas, Renewables' Shares To Grow
      PNG - % Share Of Power Generation

      g = guidance. Source: DNPM, Fitch Solutions

      Gas supply to existing and new projects would continue to rely heavily on ExxonMobil’s PNG LNG project. PNG LNG currently supplies about 20% of Port Moresby’s power needs. Further expansion of the project based off new gas from P’nyang and Elk-Antelope in the latter half of the decade would make even more gas available for domestic consumption – indeed, development licenses for both fields are likely to include 5% domestic gas reservation clauses at the minimum:

      • The Asian Development Bank (ADB) has pledged to invest up to USD733mn through to 2021 to support the PNG government in building out new renewables generation capacity (to replace diesel generation), improve grid penetration nationwide and promote sustainable development. The investment program is in line with the ADB’s Country Partnership Strategy (2016-2020).
      • In November 2018, the leaders of the US, Australia, Japan and New Zealand signed an agreement to invest up to USD1.7bn to build an electricity grid in PNG. In April 2019, official from the four countries also reportedly met to discuss potential investment in a gas-fired power plant to support the Wafi-Golpu gold mine in Morobe, although exact size of the investment or the project remains unknown.
      Gas Consumption (Papua New Guinea 2019-2024)
      Indicator 2019 2020 2021f 2022f 2023f 2024f
      Dry natural gas consumption, bcm 0.7 0.7 0.7 0.7 0.7 0.8
      Dry natural gas consumption, % y-o-y 0.0 0.0 2.0 2.0 2.0 2.0
      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions
      Gas Consumption (Papua New Guinea 2025-2030)
      Indicator 2025f 2026f 2027f 2028f 2029f 2030f
      Dry natural gas consumption, bcm 0.8 0.8 0.8 0.8 0.8 0.8
      Dry natural gas consumption, % y-o-y 2.0 3.0 3.0 2.0 1.0 0.0
      f = Fitch Solutions forecast. Source: JODI, Fitch Solutions
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.


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