Policy buoys Australia-PNG gas pipeline supporters - Reuters
By Diana Taylor
BRISBANE, May 24 (Reuters) - Backers of the Papua New Guinea to Queensland gas pipeline said on Wednesday a new gas friendly state government policy should be enough to get the A$3.5 billion project over the finish line.
``It sets the framework, the environment for us to have the certainty in the project and for our customers to go ahead and close the contracts,'' said Papua New Guinea-based oil and gas producer Oil Search Ltd (Australia:OSH.AX - news).
``With this policy we believe we can nut off these contracts in relative short order. It is a very positive milestone for the project,'' managing director Peter Botten told Reuters.
The Australian Gas Light Co (Australia:AGL.AX - news), which will build, operate and jointly own the 2,655 km pipeline in a consortium with Malaysia's Petronas, said the Queensland policy was a major step forward.
The Queensland government earlier released its long-awaited energy policy, stating that at least 13 percent of all electricity must be generated through gas-fired power stations by 2005.
The government also said it was in talks with AGL/Petronas about taking an equity stake in about 25 percent of the Australian leg of the pipeline, with the aim of completing the industrial Townsville to Gladstone leg by mid-2002.
This would boost the construction of a gas-fired power generator in Townsville, which would be operational before a raft of other proposed coal-fired power stations are completed, AGL said.
BINDING SALES SOUGHT
Orogen Minerals Ltd (Australia:OML.AX - news), majority-owned by the Papua New Guinea government, agreed the policy paved the way for work to accelerate binding gas sale agreements.
Project leaders currently have conditional gas sale agreements with two Queensland government corporations, Energex and Ergon Energy.
Botten said the sole remaining hurdle was to tie down the amount of equity being sought by the Papua New Guinea government in the project and how that equity would be financed.
``The talk is the Papua New Guinea government will want 30 percent of the infrastructure and we're quite comfortable with that as long as there is certainty in how that package will be financed,'' he said.
Gas pipeline participants said the 13 percent level was less than the 20 to 25 percent gas package anticipated by the market, but this was offset by the proposed government equity in the pipeline.
The government support for the project follows the announcement by Comalco Ltd (Australia:CMC.AX - news) that it would conduct a final feasibility study on a A$1.4 billion alumina refinery for the Queensland industrial city of Gladstone.
It also follows the recent announcement by pipeline leader Chevron Corp (NYSE:CHV - news) that gas unitisation had been achieved by the dozen owners of gas in the Hides and Kutubu fields, in PNG's Southern Highlands.
Coal producers which currently supply coal for 97 percent of the state's burgeoning generation needs and which face losses in long term supply agreements, said the state policy was flawed.
``It's an incomprehensible policy; it mandates that 15 percent will be gas and renewable energy, but which is more expensive and higher than the existing cost of coal-fired energy,'' Queensland Mining Council chief executive Michael Pinnock said.
However, the government said it had already agreed to a further 2,800 megawatts of coal-fired power generation and the policy was a fair breakdown for coal/gas energy needs, with the majority of power still being sourced from coal.
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