Black Gold from Gobe

Industry

By Nevule Choi

FROM a once inaccessible location traversing the Gulf and Southern

Highlands provinces of

Papua New Guinea, 25km south-west of Mount Murray, 85km south-east of lagifu-Hedinia oil fields and 450 km north-west of Port Moresby, gold is flowing. Black gold, that is, from Papua New Guinea’s second full-scale oil project, Gobe. The Gobe complex is the second full-scale oil project developed in PNG by Chevron Niugini, currently the country’s sole oil producer. Gobe follows the suc cessful development of the Kutubu Project, which had held the reputation of being PNG’s first and only oil producing field.

For the people in the Gulf and Southern Highlands provinces, the promise of long awaited infrastructure development seems all the more tangible now. Production began in Gobe during the second week of March.

Landowner royalties and government revenues began accruing from the time first oil flowed from Gobe in the second week of March. In June, the royalties for March and April were forwarded to a trust account held by the Finance Department.

The total of landowner royalties paid out for March was K 106,795. For April it was K 202,511. The total now held in the trust account is K 309.206. Besides the roy alties, the national government has agreed to provide the landowners with a new road to Samberigi, which will, in time, provide previously isolated villages with access to Kikori in the South and to the highlands centre through Erave. The estimation for the cost of the road is over K5OO million.

The first stage is from Kaiam to Erave; the second from Kaiam to Paia Inlet; and the third from Paia Inlet to Kerema on the Papuan coast.

The section of the road from Kaiam to Erave will cost more than K 135 million.

The Kaiam-Samberigi extension will cost more than K4O million. Chevron Niugini has agreed to use Tax Credit funds to the tune of K 5 million to construct the initial 10 kilometres of the highway.

A spokesperson for Chevron said the company had already engaged surveyors to survey the initial phase of the road.

Representatives from the Department of Works and Transport travelled to the field to discuss the details of the road project with Chevron.

“As soon as surveying is completed we are planning to mobilise contractors to start work,” the spokesperson said.

Construction of the initial phase is understood to have been won by Curtain Bros-Barclay Bros JV. Funding for the rest of the road still has to be found, according to Gabriel Gabonen, Project Co-ordinator for the Gobe Petroleum Project.

Landowners will also participate in the construction of the road through sole con

tracting, sub-contracting and other joint

ventures. Other landowner benefits under the Memorandum of Agreement, which says the landowners will receive Kl 4 mil lion, include K 1 million as a grant for busi ness development and another K 200,000 allocated for training sponsorships.

Total funds being made available to the landowners will be more than K 260 mil lion. The Gobe project consists of two sep arate oil fields: South east Gobe and Gobe Main which are located 80 kilometres south-east of Lake Kutubu. The South East Gobe oil field was discovered in 1991 and Gobe Main, 1994.

South East Gobe is PNG’s first unitised oil field, in that its underground reservoir of oil extends across the boundaries of

adjoining exploration and development

licences. Known reserves from the com bined fields are estimated to be 100 mil lion barrels. Production levels as at June 3 were 36,351 barrels per day, and they are expected to peak at a production of 50,000 barrels per day by mid-year.

“Gobe is the second step in the long range plan to develop Papua New guinea’s oil reserves, and further demonstrates Chevron’s commitment to the develop ment of this country’s natural resources,” said Richard Matszke, a director of Chevron Corporation, and president of Chevron Overseas Petroleum Inc.

“As Gobe lies in relatively close prox imity to Kutubu, it is well situated to be

tied into the existing export pipeline,” said Larry Barthold, managing director of Chevron Niugini Pty Ltd, a unit of Chevron Overseas Petroleum Inc.

“The existing infrastructure can be used

to economically develop potential future

prospects,” Barthold said, pointing out that combining Gobe Main and South East Gobe into one integrated development pro ject enhances the economics of building additional infrastructure to bring these fields, and eventually more remote fields, into production. The Gobe project is based on the utilisation of the existing Kutubu export pipeline and marine terminal.

The project consists primarily of upstream facilities including a number of development wells and field production facilities. In addition, a crude oil export system is tied into the Kutubu pipeline.

Production from the two separate fields are separately measured, then collected and processed to export specification at the Gobe well sites and the Kutubu export pipeline. Oil from the GPF is exported through an export pipeline which connects to the Kutubu pipeline at a point between 70 and 90 kilometres from the Kutubu cen tral processing facility. The Gobe export pipeline is approximately Bkm in length.

The project operators, Chevron Niugini, originally budgeted an amount of US$32l million for the project, but the costs upon completion amounted to US$2BO million. Construction work on the project officially started on February 3, 1997. By March 2 of this year, all project facilities essential for the introduction of hydrocarbons were achieved.

The handover from construction to operations commenced on January 19 this year and was completed early this month.

Chevron Niugini announced during the first week of June that part of the MOA between the state and the landowners, which involves the building of health and education facilities in the surrounding dis tricts, under the tax credit scheme, had been approved by the government. The Gobe oil fields development project has been seen by many observers as being more than an oil field.

The development brings with it infras tructure, health and education assistance that had been denied the people of the Kikori and Erave areas in both the Gulf and Southern Highlands provinces since

independence. ■