But need US$2.5m to deliver it to Australia.


Initial investment of Kina 8.2 billion (about US$2.5 million) will be needed for the delivery of Papua New Guinea gas to Australia. An equal amount will be needed for future investment over the nominal projected 30-year life of production.

Economic benefits from the gas project for Papua New Guinea at net present value are estimated to be US$3 billion to US$4 billion over a period of about 30 years from the first delivery of gas in 2009.

Construction employment will peak at 1600 jobs and 400 permanent jobs will be created.

Potential net cash flow to the government and project area landowners is estimated to be between US$2 billion and US$5.6 billion over 30 years from 2009 compared to US$1.7 billion from oil from 2009 to the projected end of oil production in 2025.

PNG growth would rise to an estimated peak of 9%, about 12 years after gas exports commenced.

Approvals and licences for the project are expected to be issued by the PNG government this year. This will enable finance to be completed followed by detailed engineering design and construction.

First gas deliveries to Australia are set for 2009 through a pipeline to run from the Kutubu, Gobe, and Moran oil fields and Hides gas fields in PNG's Southern Highlands region across the Torres Strait and down into Queensland, according to an environmental impact statement for the project published in January and inspected by ISLANDS BUSINESS.

The pipeline will run from the highlands through the foothills and lowlands of the Gulf province and along the Kikori River to the Omati River delta.

From landfall it will run across the Gulf of Papua to the international border with Australia near Peace Cay in the Torres Strait. At this point, the line will become the property of AGL Petronas Consortium, an Australian enterprise that will build a continuation of the pipeline to Australian buyers.

The study says that polls from 1997 to 2005 show that landowner support-a critical element to take into account in PNG if serious disputes are to be avoided during the construction of a project and after the commissioning of it-ranges from 68% in Hides to more than 95% everywhere else.

The main exception to the generally high support for the project and for public roads to be built are reservations amongst the people of the Gulf Province about a road linking their areas to the highlands, the study disclosed.

“More than 90% of Highlanders want the roads, 60% at Gobe and less than 40% at Kikori.

“The later viewpoint in part reflects concerns about squatting and a deterioration in law and order if criminals and other undesirables use the road to migrate to Kikori.”

Oil was first discovered in Papua New Guinea in 1911. But it was not until the 1980s that substantial reserves of oil and gas were found in the Southern Highlands province. Gas production began at Hides in 1991, followed by oil production at Kutubu.

The gas project was conceived in 1995. By 2004, Australia's tightening gas supply and growing gas demand had improved the PNG project's competitiveness.

In 2004, the present participants began work on front-end engineering, design and an environmental assessment.

The aim is to commercialise the gas reserves at Kutubu, Gobe and Moran oil fields and the Hides gas field, and by doing so maximise oil recovery from existing oil and gas fields.

PNG partners for the gas delivery deal are Esso Mobil Corporation (39.4%) and the operator; Oil Search Limited and its affiliates (54.2%); Nippon Oil Exploration through a subsidiary, Merlin Petroleum (3.4%); and subsidiaries of Mineral Resources Development (3%).

The gas field is predicted to produce an average of 225 petajoules of gas a year for about 30 years to 2040. The first delivery is scheduled for June 2009. Detailed engineering is set for completion by January 2008.

The study asserts that if the gas project is not built now, the synergies of combined oil and gas production will progressively diminish and finally vanish when oil production stops in about 20 years time.

It says it is difficult to predict at which point an otherwise viable commercial project would become unviable, but the likelihood increases with time.

Potential value-adding gas-based industries such as methanol production, liquefied petroleum gas and compressed natural gas would have no supply source.

Undeveloped gas and condensate fields to the northwest of existing production plant will not have the synergies of following the gas project into production.

Instead, they will have to face the more difficult commercial hurdles of stand-alone development with a corresponding lower chance of meeting investment criteria.