'Green light' for PNG gas project. Chevron said "ways of fast tracking the project were being studied in an effort to commence gas supplies by the end of 2002"
'Green light' for PNG gas project
The National, July 28
By KEVIN PAMBA and BRIAN GOMEZ
PORT MORESBY: Four foundation customers have provided the effective "green light" for the historic US$3.5 billion (K8.9 billion) PNG to Queensland gas pipeline project.
The announcement of the signing of preliminary sales agreement, heralding the development of the biggest project ever for PNG and Queensland, was welcomed both in PNG and Australia.
The operator of the project, Chevron Services Australia, said in a statement that the proponents had concluded negotiations on an agreement to supply gas to Allgas Limited, a subsidiary of the Queensland State Government-owned utilities group, Energex.
"Energex has acted as an aggregator for the sale of gas to a number of major customers including Tarong Energy, Comalco, Sithe Energies and CS Energy," Chevron said in a statement.
"The 20-year contract is for up to 130 petajoules of gas per year for supply to a number of industrial, commercial and domestic customers in south eastern Queensland."
Queensland Premier Peter Beattie described as "momentous" the completion of the agreement at three o'clock yesterday morning between Energex and the PNG gas partners and back-to-back agreements between Energex and its customers.
"This is effectively the green light for the PNG gas pipeline, with the foundation customers now agreeing on price, gas volumes, fundamental terms and conditions," Mr Beattie said.
The project will be the largest in PNG history with faster spin-offs in terms of employment and revenue generation. It holds out similar promise in Queensland.
Queensland's Deputy Premier Jim Elder described the project as Australia's biggest infrastructure project since the Snowy Mountains Scheme with capital investment that was expected to reach A$8.1 billion by 2001.
Project director Dr John Powell said: "We welcome the initialling of this first gas sales agreement with Energex.
"This contract alone is very close to the foundation volumes required to underpin the development of the PNG gas project.
"Energex is to be congratulated for its support for gas fired power stations.
"Gas fuelled co-generation plants deliver a 75 per cent reduction in carbon dioxide emissions compared to a coal fired power station."
A consortium spokesman told The National about US$1 billion of total
project spending would occur in Queensland with the remaining US$2.5 billion needed to build the gas collection and pipeline
system in PNG.
The partners in the gas consortium have commissioned the Australian National University to conduct economic modelling of the venture to determine economic impacts on PNG. Results are anticipated in the next few weeks.
Two former PNG resources ministers who were actively involved in the project negotiations, Sir Rabbie Namaliu and Masket Iangalio, welcomed the announcement in separate statements late yesterday.
Prime Minister Sir Mekere Morauta and new Petroleum and Energy Minister Tommy Tomscoll could not be reached for comment last night but since coming into office a fortnight ago, Sir Mekere has highly commended the progress of the project saying it can assist the ailing PNG economy significantly.
Mr Iangalio said Chevron, Oil Search and all parties have made a breakthrough by signing up the first customer.
"I was more than pleased with the project moving another step forward to reality," said Mr Iangalio.
Sir Rabbie said "the signing underpinned the economic viability of the pipeline project and there is no doubt in my mind that it would now proceed".
Mr Iangalio said the project is set to generate A$300 to A$400 million in tax revenue alone and said it is sufficient to replace the annual Australian budgetary support which will be phased out next year.
Chevron said once the agreements have been approved by the respective boards, the project will move into front end engineering and in parallel, final approval and financing activities. This is expected to take around 12 months.
Gas for the contract will initially flow from the oil producing Kutubu and Gobe fields in Southern Highlands and later from the Hides field some 70 kilometres to the northwest of Kutubu.
The consortium of Australia Gas Light company and Petronas will build, own and operate the Australian leg of a spur line from Gladstone to the Brisbane area.
AGL's Managing Director Len Bleasel said his group was "studying various delivery options, including the possible construction of a new pipeline direct from Gladstone into Brisbane.
"At this stage we believe financial closure can be achieved by mid next year and then the pipeline could be completed by early in 2003," he said.
However, Chevron's spokesman, Cliff Leggoe, told The National ways of fast tracking the project were being studied in an effort to commence gas supplies by the end of 2002.
In other related announcements:
Gibson Island Power Pty Ltd, a subsidiary of Sithe Energies Australia Pty Ltd, said it planned to use gas from PNG for a 350-400 megawatt cogeneration plant near Brisbane. It would cut greenhouse gas emissions by 60 per cent compared with existing coal-fired power stations.
Queensland's Minister for Mines and Energy, Tony McGrady, said the three power project proponents had plans to generate an additional 1400 MW of electricity with a A$1 billion investment. While not all these projects may go ahead, the quantity of PNG gas targeted for this sector is only adequate for generation of about 750 MW.
Comalco yesterday also announced the start of a final feasibility study for the Gladstone site option of its proposed 1.4 million tonnes a year alumina plant.
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