Oil’s still

attractive

RECENT troubles do not seem to have deterred resource com panies from taking the invest ment plunge in Papua New Guinea.

Seemingly undeterred by the closure of the Bougainville copper mine oil com panies are about to pour about As 2 bil lion with another $1 billion to be spent developing the Porgera gold mine.

The latest development is the demand

by the Southern Highlands provincial

government for an oil refinery to be built near the large lagifu oil field.

Politicians are stepping up their cam paign the provincial premier, Yaung tine Koromba, visited Australia to talk to refinery companies and he also de spatched ministers to Asia on the same quest.

The lagifu project manager, Chevron Niugini Pty Ltd, and the central govern ment in Port Moresby have united to resist demands for a refinery. In this latest row in an increasingly tense cli mate of resource development in Papua New Guinea, Koromba issued a state ment which said: “Chevron must go along with the wishes of the government, and the people of the province. It must not argue over this matter.” The High lands people, in a demand which is be coming very familiar to the oil and min ing companies, want a greater share of the proceeds from the oil at lagifu to remain within the province.

Both the company and the Namaliu government regard the suggestion of a full-scale refinery as wildly unrealistic.

They do conceded that a small-scale plant, capable of refining some products such as jet fuel, is possible. The Minister for Minerals and Energy, Patterson Lowa, said the government was advised five years ago by experts from the East- West Centre in Honolulu that a large scale oil refinery in Papua New Guinea would not be in the best interest of the country. Another study during the Wingti government had come to the same conclusion, he said. He said the mini-refinery which the government in Port Moresby supported would process between 2000 and 3000 barrels a day, which was just a small proportion of the expected 100,000 barrels a day which will be pumped at lagifu.

Chevron Niugini is now negotiating with the national government about a 280-kilometre pipeline to take the crude oil to the coast in the Gulf of Papua.

Koromba’s demands for a refinery are seen by some observers as establishing a negotiating case, with the Southern

Highlands province eventually trading

that demand for better compensation and royalties. The Chevron Niugini

approach seems to be aimed at keeping the issue as subdued as possible, negoitating with the Southern Highlands leaders and answering all their questions, and hoping the problem will fade with time.

The potential rewards of lagifu are such that the oil companies are prepared to see the problems through. lagifu’s oil will be worth about AsBoo million a year at current prices and full-scale produc tion is scheduled for late 1992. The pro ject includes, besides Chevron, BP Oil, Oil Search Ltd, BHP Petroleum (PNG) Ltd, Ampol Exploration Ltd and the Merlin Petroleum Company.

While Papua New Guinea Defence Forces troops battle the Bougainville re bels, the resource companies are eager to stake out areas in other parts of the na tion. Recent arrivals include Mobil Cor poration, the chemical and oil company Dupont and the Louisiana Land and Ex

ploration Co Oil majors farming into

Papua New Guinea are looking for fields of at least 100 million barrels in size.

One aspect which will need to be re solved are the several PNG exploration permits held by small Australian com panies which do not themselves have the resources to fund all the cost of finding oil in the country’s difficult terrain.

There is expected to be an increasing incidence of these companies farming out shares to large corporations but that will give them entry into high potential earnings if there was a major find. Companies which fall into this category includes Austin Oil, Mt Angelo Exploration, First Australian Resources, Victoria International Petroleum, Lakes Oil, Adelaide Petroleum and Pacarc

Niugini.

There is still considerable disagree ment among geologists as to where the most promising oil fields lie, but there is concensus on the prediction that there are some major finds to come. □