The world is short of gas and prices have more than doubled. Most of PNG’s gas is sold under long-term deals that follow the oil price, so only part of the jump reaches PNG, and a tax rule holds the State’s share down until 2029. Papua LNG, PNG’s next gas project, is set to start selling around the time experts expect too much gas and falling prices.
Key points
- Qatar’s outage has more than doubled Asian gas prices, to about US$25 a unit.
- About three-quarters of PNG LNG’s gas is sold on long-term deals tied to the oil price, so it earns far less.
- A tax rule holds down the State’s LNG tax take until 2029.
- Papua LNG could start selling into a gas glut that experts expect by 2030.
Qatar has delivered 98 cargoes of liquefied natural gas since March, 536 fewer than in the same months last year. The Economist reported the figures on 4 October under the headline “The world is facing an almighty LNG crunch.” That is 39 million tonnes of gas missing from world markets, about 9% of last year’s supply.
Liquefied natural gas, or LNG, is natural gas cooled into a liquid so it can be shipped. Papua New Guinea sells it from the PNG LNG plant at Caution Bay outside Port Moresby, run by ExxonMobil. A world shortage should mean more money for every cargo PNG sells. How much of it actually reaches the country depends on how the gas is sold, how it is taxed, and when PNG’s next project starts.
How the shortage started
Qatar stopped producing gas on 2 March and told its customers it could not deliver, according to the energy research firm Wood Mackenzie. Missile attacks then caused fires and heavy damage at Ras Laffan, Qatar’s main gas site.
Iran closed the Strait of Hormuz, the sea route Qatar’s gas ships use, after attacks by the United States and Israel, according to The Economist. Bloomberg reported on 28 September that Qatar had again extended its notice that it cannot deliver.
Wood Mackenzie estimated the outage took about a fifth of the world’s gas supply off the market. “Each additional month of disruption removes around 1.5% from annual global LNG availability,” said Daniel Toleman, the firm’s research director for global LNG.
Prices have more than doubled
Gas for immediate delivery in Asia was selling for about US$25 a unit when The Economist went to press, around 140% higher than before the war. (Gas is priced per million British thermal units, a standard measure of energy.)
Asia used to buy most of Qatar’s gas. It has since found most of what it lost from the United States, Australia, Malaysia and Nigeria, but is paying more for it.
Europe is worse off. Its gas storage is only 72% full, the lowest on record for this time of year, The Economist reported. Experts it quoted warn a cold November could push prices to US$30 to US$40.
Why PNG doesn’t get the full price
Most of PNG LNG’s gas is already sold years in advance. The project agreed to supply 6.6 million tonnes a year to four big Asian buyers: JERA and Osaka Gas in Japan, Sinopec in China and CPC in Taiwan. Kumul Petroleum than managing director Wapu Sonk confirmed the figure in 2024: “Our long term contracts were for 6.6 MTPA (million tonnes per year) of LNG.”
The plant now produces more than that. Santos, the project’s largest shareholder, reported it ran at a rate of 8.7 million tonnes a year in the second quarter of 2026. On our calculation, that means about three-quarters of the gas goes to the long-term buyers and about 2.1 million tonnes a year is left to sell elsewhere.
The long-term deals don’t follow the gas price. They follow the oil price from about three months earlier, according to Santos. Oil was cheap early this year, averaging US$67 a barrel in the first quarter, then rose above US$100 in the second, Santos reported.
So the gas sold under those deals was still priced off cheap oil. Santos received an average of US$11.21 a unit for its LNG in the second quarter, less than half today’s Asian spot price. That figure covers all of Santos’s gas, not just PNG, and the two prices cover different months. Santos expects higher oil prices to lift what it earns in the third quarter.
The gas that does sell at today’s prices
The extra gas, beyond the long-term deals, is sold at whatever the market pays. Since late 2023 each project partner has been allowed to sell its own share of that extra gas, The National reported.
Santos sold three PNG cargoes before 30 June and expected about US$300 million for them, or roughly US$100 million a cargo on our calculation. It says it is owed more PNG cargoes before the end of the year.
Kumul Petroleum, the State’s company, owns 19.37% of PNG LNG. It sold its first cargo on the open market to PetroChina in April 2024. We could not find any published figure for how many cargoes Kumul has sold this year or how much it earned. That number would show how much of the price jump reaches the State directly.
What the Budget expected
Treasury built the 2026 Budget on a gas price of US$11.70 a unit and an oil price of US$66 a barrel, according to the Budget papers published in December 2025. Today’s Asian spot price is more than double that gas figure, and oil has risen more than 50% above it.
That should mean more money for the State, but a tax rule slows it down. The Bank of PNG said in March that LNG tax payments are expected to be lower because the project can deduct its investment costs twice from 2025 to 2029.
The central bank expects PNG’s mineral exports, which it counts as LNG, gold and copper, to bring in about 80% of the country’s foreign earnings this year. Its March forecasts were made just as the war began and did not include its effects.
There is also little room to produce more gas soon. New wells lifted output in 2025, the Bank of PNG said, but the next big addition, the Agogo facility, is not due to start producing until 2028, according to Santos.
Papua LNG gets a new boss
Papua LNG is PNG’s second gas export project, based on the Elk and Antelope gas fields in Gulf Province. TotalEnergies, which developed it, announced on 7 September that ExxonMobil will take over running it, with a 34.1% share. TotalEnergies keeps 20%, Santos 21%, ENEOS Xplora 2.4%, and Kumul Petroleum and the Mineral Resources Development Company 22.5% between them.
The project is estimated to cost about US$14 billion. TotalEnergies said changes to the design and new contract bids have cut close to US$4 billion from the cost since 2024.
The war has helped Papua LNG find support. “Some of the financiers and buyers who previously turned down Papua LNG, now we are seeing them coming back,” Arnaud Berthet, managing director of TotalEnergies EP PNG, told The National in April. The National reported more than 30 banks and seven government export lenders had signalled support.
The State’s deal
Marape set out the Government’s terms on 14 September. The State’s share of the project will rise to 25% and gas for the domestic market will be cheaper, his office said. A support package of about US$1.95 billion will apply only under set conditions.
“When prices are down, the agreed concessions apply,” Marape said. “When prices are higher, the State has mechanisms to recover value.” He set 15 December 2026 as the target for a final decision to build. His office did not publish how much money the project is expected to earn the State.
Landowners and provinces
Before any decision, landowners and provinces must agree how to share the State’s benefits. Under the law, 20% of the State’s share goes to affected landowners and local, district and provincial governments.
On 8 October, Gulf and Central provinces signed the first agreement, splitting their benefits 80% to Gulf and 20% to Central, The National reported. Talks on the rest are due to finish by early November.
“The signing is an important achievement, but it is not the end of the development forum process,” Petroleum Minister Jimmy Maladina said.
Experts warn of too much gas by 2030
The Economist also carried a warning for Papua LNG. New projects around the world could lift supply to 630 million tonnes a year by 2030, about 60% more than last year. Demand is growing more slowly.
If Qatar fully recovers and every planned project goes ahead, the world could have 55 to 75 million tonnes more gas than it needs, The Economist reported. Experts it quoted said prices could then fall below US$6 a unit, less than it costs many projects to export.
Berthet told The National that Papua LNG’s first shipment is expected by 2031, after five years of construction. That was based on a decision earlier in 2026. Either way, the project would start selling gas just as experts expect prices to soften. Wood Mackenzie’s three forecasts all show Asian gas prices easing once Qatar’s supply returns.
“There is no longer consensus on how the market evolves,” said Kateryna Filippenko, Wood Mackenzie’s research director for global gas markets.
PNG pays the other side
The same war has made PNG’s imported fuel dearer. Westpac economists Justin Smirk and Shamal Chand wrote in April that fuel prices jumped after the war began and would push up inflation. PNG sells gas overseas but relies on imported petrol and diesel, the Westpac note said.
Marape announced a fuel package on 16 April. “As of tonight, our fuel prices are being pegged to March levels,” he said, according to his office. His office said higher oil and gas prices were expected to bring in more revenue to help cover the cost.
The dates that matter
How long Qatar stays offline will decide how long PNG’s extra gas sells at crisis prices. The Economist estimates Europe alone will need an extra 20 million tonnes before next winter if Qatar does not return soon, which could keep prices high through 2027.
Gas sold under the long-term deals follows the oil price three months behind, according to Santos. That means the oil rise earlier this year will show up in PNG LNG’s earnings in the months ahead.
For Papua LNG, the landowner and provincial talks are due by early November. The date after that is 15 December, Marape’s target for a final decision to build.
