PM orders govt to fasten pace

Oseah Philemon
The long-awaited Papua New Guinea $US10 billion liquefied natural gas (LNG) project in the Southern Highlands Province has taken a major step closer to reality.

Papua New Guinea Prime Minister Sir Michael Somare has ordered the entire government machinery to rally behind the project to ensure the agreement is signed in May to allow the project to advance at a quicker pace towards construction.

If this goes according to plan, PNG gas is expected to be delivered to the world markets by 2013.

The industry welcomed the statement by the prime minister.

A source said: “We thank him and the government for the commitment and the PM’s intention to focus on finalising the terms so we can execute the gas agreement in early May.”

The source said the project is prepared to move to FEED once “we have an executed Gas Agreement, which sets out the fiscal and legal terms, which will regulate the project throughout its lifetime”.

FEED is the front-end engineering and design stage which must be completed before the project is able to take a final investment decision and formally decide to fund and proceed with the project.

It entails working out indicative costs, timing and contractors for the FEED stage. This will be provided when the project takes a formal decision to commence FEED.

The PNG LNG Project proposes to commercialise the Hides, Angore and Juha fields and the associated gas resources in the currently operating fields of Kutubu, Agogo, Gobe and Moran in the Southern Highlands and Western Provinces of PNG.

The gas will be treated at a gas conditioning plant at Hides, then transported via pipeline to a 6.3 million-tonne per annum LNG liquefaction plant and storage facility, proposed to be located 20 kilometres north west of Port Moresby.

Somare said the government, in support of the project, has already ensured the following:

• The site of the proposed liquefaction facility has been established in the precinct of the Konebada Petroleum Park, just outside Port Moresby;
• Both the state and the project have approved preliminary financing plans;
• The project partners have executed their joint venture agreement showing their alignment amongst themselves; and
• Oil Search, which is one of the major partners in the project, issued a statement saying the participants in the PNG LNG Project have signed and executed a Joint Operating Agreement (JOA).

The JOA outlines the rights and obligations of the PNG LNG Project joint venture participants, covering all commercial aspects of the project including gas supply arrangements, utilisation principles and voting requirements.

Oil Search’s Managing Director Peter Botten said: “The JOA was one of the key deliverables undertaken during the PNG LNG Project pre-FEED work and the execution of this agreement demonstrates the alignment of the key gas field participants behind the PNG LNG Project.

“The agreement paves the way to progress into the Front End Engineering and Design phase of the project, subject to the conclusion of a Gas Agreement with the PNG Government. The signing of the JOA represents a major step forward in the commercialisation of our large PNG gas resources through the development of a world scale project in PNG.”

The PNG LNG Economic Impact Study by independent economic consultants, ACIL Tasman, stated that should the PNG LNG Gas Project proceed, it will contribute very significantly to PNG’ economyŃfrom capital investment, direct cash flow from Government and landowner equity involvement, taxes and royalties, employment and business development opportunities.

Somare told parliament: “The PNG LNG project led by ExxonMobil and its partners including, Australian Gas Light (AGL), Oil Search Limited, Santos, Nippon Oil Exploration and our PNG’s very own Mineral Resources Development Company (MRDC) is a world class gas project that will serve as the foundation for future gas commercialisation.

“The fact that ExxonMobil is leading this project has attracted world headlines and also poses the question whether PNG can do business on the global stage. This is our challenge.

“We must understand that big projects of this magnitude takes time and patience to develop and the state must also be committed to every stage of the project.”