Papua New Guinea: New approach for gas chiefs
PostCourier, June 13
THE proponents of the PNG Gas project are undertaking a new marketing approach with customers, in line with a focus on commercialising the project as soon as possible.
This follows the recent change in operatorship of the project.
The new strategy would see them negotiating directly with the customers and not going through third parties as was the case previously.
Previously, the project partners had agreed that Queensland Government subsidies Ergon Energy and Energex would market the project on behalf of the project partners.
The Post-Courier understands that as a lead up to the new initiative, the developers would be withdrawing the term sheets that were given to Ergon and Energex and customers in November, and would start a consultative process with each potential customer to determine their individual fundamentals for the use of the gas.
“Project sponsors are proposing a revised approach that has greater flexibility and reflects input from stakeholders over this time,’’ according to sources.
“The primary approach would be to canvass all commercial opportunities for gas sales and to fully ascertain individual customer needs and requirements to build a commercial basis that works for the supplier and customer.’’
The developers would be meeting with all stakeholders over the next two weeks to discuss the revised approach, including meetings with various PNG ministers and bureaucrats, Queensland Premier Peter Beattie and his deputy and State Treasurer Terry Mackenroth, State Development Minister Tom Barton and senior treasury bureaucrats from Queensland.
They will also meet with the chairman and chief executive officers of the following companies: Ergon Energy, Incitec, QAL, Comalco, Energex, QNI, CS Energy, Tarong, Enertrade, and the chief executive officers of the following: AGL/Petronas/APC and Stanwell.
They will also meet with Federal ministers and Opposition members and appropriate senior bureaucrats from Canberra.
The Post-Courier understands that marketing initiatives that started in November last year have been unsuccessful in confirming the required markets for the project to proceed.
“Remaining issues that require resolution prior to entering full front-end engineering design (FEED) include definition of gas markets that are attractive for both suppliers and customers for the project to proceed,” sources said.
“A financing plan that allows an appropriate level of PNG participation in the infrastructure is also required, following the rejection of provision of “soft loans’’ to PNG from the Federal Government.
“All project sponsors see the clear need to reinvigorate the project, with different commercial approaches to key stakeholders, including governments, customers and APC, and address these remaining issues in a constructive way.
“Project sponsors are keen to make a major effort to test the commercial reality of this project and provide acceptable outcomes to all stakeholders. The project now needs to concentrate on key commercial issues, market development, transportation structure and financing for PNG participation.
“In order to provide new impetus to the project, the owners have unanimously decided to reorganise the personnel and approach to help reinvigorate discussions and negotiations with other stakeholders and to concentrate on the key commercial issues required for project commerciality.’’
Primary control of the project will be through an owners’ group, where all stakeholders are represented. Certain owners will take the lead in some areas, with full support of other owners. This process has clear leadership guidelines and responsibilities.
These are:
* Day-to-day project leadership — ExxonMobil.
* Queensland stakeholder Interface — Oil Search, with support from ExxonMobil and Chevron.
* Market definition and negotiation — ExxonMobil with backing from Oil Search and Chevron.
* Federal Government —ExxonMobil, with Oil Search and Chevron support
* PNG Financing — ExxonMobil with backing from MRDC and Oil Search.
* Technical and engineering — ExxonMobil, with Chevron support.
* PNG stakeholder interface — Oil Search, with support from Chevron and Orogen Minerals.
postcourier.com.pg
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Papua New Guinea: Project ‘must happen’
PostCourier, June 13
THE billion kina PNG Gas project is so vital to Papua New Guinea it has to happen, says the chairman of the Government’s gas committee and Bougainville Affairs Minister Moi Avei.
Mr Avei also reiterated his earlier comments that PNG could lose the vital project unless the government acts decisively now.
He has returned from fresh talks with senior Queensland Government ministers about the status of the project and their position.
Petroleum and Energy Minister Roy Yaki and senior government officials accompanied him to the meetings.
Mr Avei said yesterday that they would be presenting a submission to Cabinet this week in Mr Hagen, outlining the government’s financing package and the structure of PNG participation in the project.
He said once the Government resolves these issues, the other project partners “will not have a choice but work towards securing customers in the next few weeks. The ball will be back in their courts’’.
Oil Search Ltd chairman Trevor Kennedy on Friday outlined the benefits of the project to PNG, saying the project could underpin the PNG economy for the next 30 years.
He said the benefits include:
MAKING a substantial contribution to the GDP of PNG and increase revenues for landowners and the provincial and national governments;
OFFSETTING the projected decline in economic growth and government revenues from declining oil production.
He said if the project did not go ahead and no new oil reserves are exploited, current production levels from the Southern Highlands Oil field would decline rapidly in the two years to 2001 and the resource would be completely depleted by about 2012.
“Conversely, gas production from existing oil fields will improve recovery of remaining in place oil reserves,’’ Mr Kennedy said.
“If declining oil production is not offset by the export sales of gas, there would be a marked slump in economic activity in PNG.
“In the absence of the project, overall economic activity will decline by nearly 3 per cent per annum as oil exports decline rapidly, falling to an annual reduction of around 0.7 per cent as the decline in oil exports gradually tapers off.’’
He said, among other pluses, the project would sustain the benefits to employment, government revenues, landowner payments and other social benefits currently generated by the Kutubu oil project. If the project does not proceed, these benefits will be erodes as oil production declines.
postcourier.com.pg
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Papu New Guinea: Yaki, Avei confident of pipeline project
The National, June 13
Despite slow progress with the PNG/Queensland gas project, Petroleum and Energy Minister Roy Yaki said yesterday he and the chairman of the PNG Gas Committee, Moi Avei, remain confident the A$6.5 billion (K11.07 billion) project will proceed.
Mr Yaki's comments were made during the signing of a K279.6 million (US$85 million) financing agreement between Napa Napa oil refinery project developer InterOil Corp and Overseas Private Investment Corp (Opic), the US government's investment promotion agency.
Mr Yaki and Mr Avei held extensive talks with the in Brisbane with the Queensland Government last week and received confirmation that there was support for the multi-billion kina project at a stakeholder level.
"Both minister Avei and myself met Queensland state ministers and some customers last week," Mr Yaki said.
"We outlined to the Queensland ministers the steps the PNG Government was taking to advance the project in the coming weeks," a joint statement issued jointly by the two ministers said.
They said the Queensland Government placed a strong emphasis on the project "because of its clear economic, employment and energy benefits for the state".
Mr Yaki said everyone had to be frank about past problems and disappointments, but we should be determined to work together to ensure that progress is not impeded.
Mr Yaki and Mr Avei met with the managers of the PNG/Queensland gas project and key customers such as Energex and Ergon, the state-owned electricity companies, and with Comalco, which is considering plans to build a A$1 billion (K1.7 billion) alumina refinery at Gladstone.
"We believe we can offer Queensland, and the wider Australian market, gas on more competitive terms than the Timor gas project can."
An immediate priority for the project, which will be considered by the National Executive Council at its meeting in Mount Hagen this week, is the need for greater landowner involvement and support for the overall project.
The benefits of the project to the whole community "are greater than any other project has offered, or is likely to offer, in the foreseeable future, they said.
"The supply of gas and the overall electricity industry in Queensland is highly competitive. We must offer a reliable gas supply, and we must offer it at a competitive price," they said.
They said the Timor Sea gas project, which has signed a letter of intent with a major prospective buyer in Townsville, should be viewed as a challenge and as a threat to the PNG gas project.
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