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TOTAL Gets Nod to Go Ahead With Papua New Guinea LNG Project

Zacks Equity Research

The uncertainty involving the completion of TOTAL S.A.’s TOT Papua New Guinea liquefied natural gas (“LNG”) project is now over, per a media report. The new government of Papua New Guinea will honor TOTAL’s $13-billion gas deal signed with the previous government. (Read more: TOTAL Teams Up with Partners to Develop Papua LNG Project)

Notably, TOTAL and its partners ExxonMobil XOM and Oil Search Ltd. will develop the Papua LNG Project. The new government approved the project after getting assurance that TOTAL will consider some future benefits for the country.

Rising Demand for LNG on a Global Basis

Natural gas’ clean burning nature is making it an important choice for global energy transition toward emission less power generation. As it is not possible to export large volumes of natural gas across continents, the export of LNG is rising globally.

Per Yang Hua, the chairman of the board of China National Offshore Oil Corporation, global LNG trade is expected to exceed 500 billion cubic meters by 2030, indicating a rise of nearly 30% from 2017. A major portion of the demand is expected to come from emerging economies like China and India. This new LNG project, which is going to have an annual capacity of 5.4 million tons per annum, will allow TOTAL to reap the benefit of rising demand in the region.

TOTAL, with widespread assets across the globe, is steadily expanding global LNG operation.  At the end of the first half of 2019, the company’s total LNG sales touched 12.7 million tons, substantially exceeding the year-ago level of 5.4 million tons. The start-up of Yamal LNG trains 2 and 3 in Russia, Ichthys LNG in Australia and the Cameron first LNG in the United States have driven TOTAL’s LNG volumes.

Thanks to financial strength, TOTAL is not only developing new LNG projects like the one approved in Papua New Guinea, but also acquiring interests in new LNG prospects. During the first half of 2019, the company acquired a 10% stake in the Artic LNG 2 project in Russia.

Markedly, the LNG market is becoming highly competitive. Companies like Royal Dutch Shell RDS.A and PetroChina PTR, among others, have strong presence in the LNG space.

Zacks Rank and Price Movement

TOTAL currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past month, the company’s shares have gained 1.5% against its industry’s decline of 1.9%.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
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