OREANDA-NEWS. June 04, 2014. Papua New Guinea, a small Southeast Asian nation better known for its jungles and corruption, became the world's newest significant energy exporter after an Exxon Mobil-led facility began shipping natural gas.

The cargo delivery from the USD19 billion (USD 20.5bn) PNG LNG project is the first from several new liquefied natural gas, or LNG, terminals in Papua New Guinea and Australia. These plants are due to start up over the next three years and will mark a shift in the global LNG trade's epicenter, away from the Middle East.

Work began on the PNG LNG project in 2010, when Asian gas users were looking to ramp up imports of fuels that burn cleaner than coal, and international energy companies were struggling to access resources not owned by foreign governments. The industry's landscape has changed dramatically since then, with companies in North America now looking to export shale gas while China this week signed a deal with Russia worth USD 400bn to buy gas delivered by a cross-border pipeline.

The changes in the industry in recent years threaten to make the market even more competitive and drive prices down for producers but for Papua New Guinea, the start of gas shipments around three months ahead of Exxon's schedule heralds a much-needed cash injection to its economy. By some estimates, the PNG LNG project could more than double the country's gross domestic product.

Exxon said the PNG LNG project will produce more than 9 trillion cubic feet of gas over 30 years, starting with the maiden shipment to Japan's Tokyo Electric Power Co, better known as Tepco. The Houston-based company is already in talks with partners including Australia's Oil Search about expanding the plant.

"It's great for Papua New Guinea," said Jenny Haward-Jones, an expert on the country at the Lowy Institute, a Sydney-based think tank. "It sends an important signal to the international resources community that things can get done here."

Still, it is unclear whether the country will be able to avoid the so-called resource curse that befalls many developing nations that suddenly receive an influx of cash.

"The big problem is whether the country uses the revenue from PNG LNG to improve living standards here and equally distribute the benefits," said Ms Hayward-Jones. "It seems to be going well, but you wouldn't want to predict everything will be completely rosy."

Early completion of the project is a boon for Exxon, which is under pressure from investors to find new sources of revenue to boost sagging profits. Oil and gas production at the biggest US oil company has fallen every year since the 2010 acquisition of natural-gas producer XTO Energy.

"Our demonstrated expertise will enable us to progress other LNG opportunities in our portfolio, including expansion opportunities in Papua New Guinea and to meet growing global demand," Neil Duffin, president of Exxon Mobil Development Company, said in a statement.

Still, PNG LNG faces continuing risks, including potential disputes between landowners over the distribution of royalties, environmental damage, and harsh operating conditions in a country that is prone to heavy rains and earthquakes.

The gas resource for PNG LNG is located in remote parts of the country's mountainous highlands and has to be transported to the coast by a 190-mile, 32-inch pipeline that traverses rugged terrain up to 650 feet above sea level. From the shore, it is transported by a 250-mile subsea pipeline to a gas-processing terminal before being shipped to customers in Asia including Tepco, China Petroleum and Chemical Corp, also known as Sinopec, Osaka Gas and Taiwan's CPC.

The project's infrastructure crosses lands occupied by many local tribes that speak dozens of different languages and that are often at war.

The Panguna copper mine on the Papua New Guinean island of Bougainville was shut down in 1989 after locals attacked the mine and its staff amid claims of environmental pollution and unfair distribution of government proceeds.

Peter O'Neill, Papua New Guinea's Prime Minister, is optimistic. He said that PNG LNG will benefit the country for generations.

Exxon and Oil Search are looking to aggregate gas to support new processing facilities for an expansion of its annual production capacity beyond 6.9 million metric tonnes of LNG. Among their options are a large gas resource at P'nyang, also located in the country's highlands, and further exploration prospects near fields that already supply the PNG LNG plant.

Oil Search is also involved in a joint venture that includes InterOil and Total which is planning to build the country's second LNG plant by tapping two large gas discoveries in the country's south.