Papua New Guinea Premier Wants “All-Out” Effort on Gas Project

Text of report by Papua New Guinea Post-Courier website on 18 April

The prime minister yesterday announced he had ordered an all-out government action to bring the long awaited PNG liquefied natural gas project agreement into fruition. Sir Michael Somare said he wanted this done next month.

“We will not falter and procrastinate. I have directed the whole of government to focus on finalizing the technical terms of the project so we can execute the gas agreement,” Sir Michael told parliament.

Late yesterday, the industry responded positively to the prime minister’s statement. An official statement is expected to be released later today in reaction to his statement.

However, a source close to the developing partners said the PNG LNG project was pleased to acknowledge Sir Michael’s statement of support for the project.

“We thank him for his commitment and his intention to focus on finalizing terms so we can execute the gas agreement in early May. We thank him and the government for the commitment and the PM’s intention to focus on finalizing the terms so we can execute the gas agreement in early May’.’

The source said the project was prepared to move to FEED once “we have an executed gas agreement, which sets out the fiscal and legal terms which will regulate the project throughout its lifetime”.

FEED is the front end engineering and design stage which must be completed before the project is able to take a final investment decision and formally decide to fund and proceed with the project. It entails working out indicative costs, timing and contractors for the FEED stage will be provided when the project takes a formal decision to begin FEED.

The PNG LNG project proposes to commercialize the Hides, Angore and Juha fields and the associated gas resources in the operating fields of Kutubu, Agogo, Gobe and Moran in the Southern Highlands and Western provinces of PNG.

The gas will be treated at a gas conditioning plant at Hides, then transported via pipeline to a 6.3m tonne a year LNG liquefaction plant and storage facility, proposed to be located 20 km northwest of Port Moresby.

Sir Michael said the government, in support of the projects, had already ensured:

– the site of the proposed liquefaction facility has been established in the precinct of the Konebada Petroleum Park just outside Port Moresby;

– both the state and the project have approved preliminary financing plans;

– the project partners have executed their joint venture agreement showing their alignment among themselves; and

– since January 2008, the state and Exxon have been in tough negotiations on both the fiscal terms and the technical project scope terms.

“We have focused on the liquefied natural gas (LNG) which has grown in popularity in world energy markets and is enjoying the buoyant prices in the rest of the oil and gas industry.

“The PNG LNG project, led by ExxonMobil and its partners including Australian Gas Light (AGL), Oil Search Ltd, Santos, Nippon Oil Exploration and our very own Mineral Resources Development Company (MRDC), is a world class gas project that will serve as the foundation for future gas commercialization.

“We have come to understand that big projects of this magnitude take time and patience to develop and the State must also be committed to every stage of the project,” Sir Michael said.

Originally published by Papua New Guinea Post-Courier website, Port Moresby, in English 18 Apr 08.

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