Pipeline project

reaches critical point in PNG

By Jane Wardell

THE proposed Papua New

Guinea gas pipeline pro ject is nearing make or break time with sponsors warning potential customers that now is the time to sign more definitively on the dotted line.

Project organiser John Powell, of Chevron Niugini, said while aluminium concern Comalco no longer held a stran glehold over the project, commercial sales agreements with foundation customers needed to be signed before the end of the month to keep it on track.

A yearly demand of 100 to 120 peta joules of gas has been determined as nec essary for the $3.5 billion gas pipeline to go ahead and Comalco’s possible Queensland-based refinery, which would take up about 27 petajoules of gas, had been considered a vital part of the plan.

Sponsors have told the fourth PNG mining and petroleum investment confer ence that was no longer the case with com mitments from five customers taking the total to between 130 to 140 petajoules of gas per year.

The problem is those customers have signed memorandums of understanding only to use the resources carried by the pipeline from PNG’s southern highlands to Gladstone in Queensland and hard con tracts still needed to be tabled.

All those involved in the project have sent the same clear message to potential

customers over the two-day conference: Now is the time to act.

PNG’s minister for petroleum and ener gy, Rabbie Namaliu, referred to a “window of opportunity” that should not be squan dered as it might not reappear for some time.

The Australian Gas Light Company, which is in a 50/50 joint venture with Petronas to construct and operate the $ 1.5 billion, 2,100 km Australian stretch of the pipeline, said: “Prospective players, the game is now in your hands”.

Dr Powell expressed confidence that those companies that had already signed memorandums of agreement regarding the pipeline, including Comalco, would com mit further.

“I am quietly confident that those charged with the big decisions will say yes to the PNG gas project,” he said.

Dr Powell added that Comalco’s role in the project was no longer as crucial as it once was.

An increase in the number of potential buyers over the past year had drastically changed the mentality of “No Comalco, no project”, he said.

"The marketplace that has emerged over the past year is no longer the diverse group of unrelated buyers that put their hands up, various players are now becom ing part of a coherent network of electrici ty suppliers and metal processes,” he said.

Comalco is currently in the process of determining whether to go ahead with its $1.4 billion alumina refinery at Gladstone

in north Queensland or to situate it in Malaysia.

“I understand that the (federal) govern ment is on the brink of releasing a package of incentives for Comalco which should crystallise the decision making for this major potential customer,” Dr Powell said.

MOUs have also been signed with Stanley/Dynegy for a base load power sta tion in Townsville and with power produc er NRG Asia Pacific for a new power sta tion in Gladstone.

Dr Powell said those combined should take around 65 petajoules a year.

AGL-TransAlta had announced a 20 petajoule gas requirement plant next to Queensland nickel and Dr Powell said Chevron was also talking to Queensland Aluminium and Ergon about similar vol umes.

“We would like to see all of those con verted into bankable heads of agreement then sales contracts as soon as possible,” he said.

While the timetable to resolve fiscal aspects by mid-December and have bank able contracts in place by the end of December was “very challenging”, it need ed to be met to enable final approvals in the next six to eight months, he said.

Oil Search Ltd managing director Peter Botten has told the conference the project might be extended as far as Brisbane and discussions with potential customers in that area were underway.

“We are at an advanced state in this process and the delivery of materiel vol umes of gas into other markets, including Brisbane, is now a reality,” Mr Botten said.

For PNG, the project comes amid a decline in oil drilling and exploration, pro viding much needed diversification.

“The gas project itself will come at the right time when oil production is on the decline and exploration does not result in any discoveries,” Mr Namaliu said.

The.pipeline would guarantee a regular income for PNG in light of declining Australian aid that had been provided to the country since it achieved independence in 1975.

Some $3OO million a year in taxation revenue is expected to be provided along with 2,500 jobs during the construction phase and some hundreds when the project was up and running.

“Above all else, it will give a real boost to investment confidence in Papua New Guinea,” Mr Namaliu said. (AAP) ■