Excitement builds oven K8 billion gas pipeline project

Industry

By Sam Vulum

Excitement is building in

Papua New Guinea after

positive developments in

the quest for the coun try’s biggest ever resource venture -

the K 8 billion PNG/Queensland gas

pipeline project.

Petroleum and Energy minister Sir Rabbie Namaliu announced on July 4 that agreements with potential cus tomers of the project were “very close” to being finalised.

“Not only am I confident the neces sary customer agreements will be con cluded, I believe the actual market the project will service will be even greater than we had originally expect ed.”

He made the comments on return from discussions with project partners and the Queensland government in Brisbane, Australia.

Sir Rabbie said long-term agree ments with customers in Queensland the electricity authorities and industri al users - would give the green light

for the K 8 billion project.

“The market survey has confirmed the potential demand is significantly greater than original expectations, and that will lead to even greater revenue flows to the PNG government, and greater benefits for landowners and provincial governments, over the expected lifetime of the project and beyond,” he said.

Sir Rabbie said the discussions he and the secretary of Petroleum and Gas Joe Gabut held in Brisbane were the most productive and positive to date.

“We also met with the Deputy Pre mier of Queensland Jim Elder, who confirmed his government’s strong commitment to the project.

The same commitment has been given by the Australian government.

“The co-operation between the three governments - PNG, Australia and Queensland - has been a most pos

itive contributor to the project, and the stage that has now been reached.”

Sir Rabbie said Oil Search, as the leading partner in the marketing survey with AGL, which has been engaged to secure long-term customers, deserved every credit for the stage that had now been reached. Oil Search and Oregon

“Not only am I

confident the necessary

customer agreements

will be concluded,

I believe the actual

market the project will

service will be even

greater than we had origi

nally expected”

- Sir Rabbie Namalui,

PNG’s Energy and Petro

leum minister

are meeting most of the costs at present and should be commended for their efforts, he said.

The minister said he wanted to again stress the tremendous benefits the pro ject would bring the whole nation in the medium to long term.

“This project will do more than any other to secure our economic future. It will become the largest single revenue source for the national government. It will give export income a much needed boost, and it will provide real jobs and training as well as business opportuni ties for our people.

“It will provide landowners, the South Highlands and Gulf provincial government, and all provinces through the National Gas Corporation, with sub

stantial, long-term royalty, revenue

sharing and dividend benefits.

“It will provide a real boost to the communities of the gas producing area at a time when oil production in these areas is declining very rapidly,” Sir Rabbie said.

The minister said the project will

enable major development of the PNG gas industry.

“It will facilitate the development of our own LNG industry, the use of our gas to expand electricity supply, and to do so more cheaply than at pre sent, and, it will give the stimulus to downstream industries such as fertilis ers, petro-chemicals, bottling and steel

coating manufacturing to be developed

onshore in PNG.

“There can be no question that the project will spearhead the develop ment of a wide range of industries, through the availability of a reliable, cheaper energy source,” Sir Rabbie said.

He said that long-term agreements with customers were close to being concluded was a significant vote of confidence in PNG, as well as the nation’s resource sector.

Discussions on the financing requirements of local equity in the project were well advanced, he added, with very positive discussions with the Asian Development bank and with Japanese lenders, including the OECF, for commercial and concessional finance.

Sir Rabbie said that once customer agreements were in place, work on the project would proceed very rapidly.

“When that happens, it will unques tionably be the best news Papua New guinea has had since independence,” he said.

The government has already approved a draft environmental plan for the project, with conditions and recommendations for further study before a final plan is submitted for approval by the minister.

The project’s external affairs man ager Cliff Leggoe said detailed engi neering for the project was set to start this month.

He told journalists on a tour of the Southern Highlands oil fields last month that the US$6O million engi-

Continued on page 48

From page 44

neering work would be carried out by a joint venture between Kvaemer, Egis and Bechtel. Market concerns over long-term supply issues were removed after an agreement between Oil Search and Exxon in May to allow Hides gas to be used for the project.

This let the way open for propo nents of the project to finalise deals with gas buyers and consumers, which was due for completion mid last month.

Hides 4, which was drilled last year, substantially increased the reserves at the Hides field and extended the height of the proven vertical gas column to 1238 metres from the previous 890 metres from Hides 1 and 2.

There are now adequate reserves in the Hides field to underpin the project, as well as consider a Lique fied Natural Gas project.

Last month also, interim authori sation was given to leading marketer, Allgas Energy, to negotiate gas sales agreements for the project in Queensland, allowing Chevron, the developer, to concentrate on other pressing issues.

Allgas will continue negotiations with Comalco, which is yet to com mit to the project as a buyer, even though it signed a memorandum of understanding with Chevron to nego tiate for gas purchases.

Comalco is undecided on whether to build its planned alumina refinery at Gladstone, Queensland or in Malaysia. Building it in Queensland will allow it to buy gas from the pro ject. Leggoe said Chevron and part ners in the project were confident that the signing up buyers would be complete by the end of July.

But even if Comalco does not sign up, the developers believe there is enough demand to meet the required levels for project development. Good news for the struggling economy of Papua New Guinea. ■