INFRASTRUCTURE AND TRANSPORT
Power outages may become a thing of the past, with Papua New Guinea’s power generation capacity set to double in coming years, largely due to increased investment from the private sector. Business Advantage surveys the wave of new and potential developmen
In May 2013, state utility PNG Power announced it was negotiating with Hong Kong-based power company, Energy World Corporation, to build a new power plant in Port Moresby, with a second private provider being sought for Lae (see box on page 38)).
These two larger projects indicate clearly that PNG’S Government is determined to use Independent Power Producers (IPPS) to supply part of its future energy needs.
‘IPPS are the model we’d like to see going forward, where the investor has agreed a price to sell power to the grid,’ Thomas Webster, Chairman of the Independent Public Business Corporation tells Business Advantage PNG.
Benefits all around
Public-private power deals are not without precedent in PNG. A plant run by Korea’s Hanjung Power Ltd has been selling electricity to PNG Power in Port Moresby since 1999 (in a deal currently being re-negotiated).
There are clearly benefits to both seller and buyer under such arrangements, if the New Britain Palm Oil Limited (NBPOL) power project in West New Britain is any measure.
Under a contract with PNG Power, NBPOL has been using methane derived from the processing of waste water in two of its palm oil mills to generate power both for its own use and for the town of Kimbe.
NBPOL’S General Manager in West New Britain, Harry Brock, tells Business Advantage that the two plants are supplying 1.5 MW of power—ranging from 40% to 60% of Kimbe’s current power needs—and that the company has plans to build two more 1 MW plants—attached to its remaining mills—over the next three-to-six years.
‘We’re selling biogas electricity to PNG Power for about half the cost of diesel-generated power,’ he says. ‘It’s part and parcel of our company-wide commitment to sustainability. It’s been a huge game changer for everyone here.’
Buying oil to fuel PNG’S Power’s power stations soaked up K140 million—a massive 40% of PNG Power’s entire budget in 2012, according to John Tangit, Chief Executive Officer of PNG Power. Clearly, reliance on imported oil fuel for power generation is going to be problematic in the future.
‘Our long-term aim is to convert some of the gas that we’ve got into generating power for the country,’ Prime Minister Peter O’neill told the April 2013 Australia–png Business Forum.
Estimates suggest replacing diesel with gas could halve PNG Power’s annual fuel bill.
There’s no shortage of gas in PNG, of course, subject to a deal being cut with either the Exxonmobil-run PNG LNG project or the second LNG project being run by Interoil and France’s Total SA. As Peter Graham, Managing Director of Exxonmobil PNG, suggests in his interview on page 28, additional gas reserves will need to be found if gas is to be used for power generation.
While the two new plants in Port Moresby and Lae are being future-proofed with this in mind, both will initially use diesel, but the plan is for them to diversify their fuel sources, with Port Moresby’s plant using gas and Lae’s using some form of biomass.
Geothermal power, already used at Newcrest Mining’s Lihir gold mine, is also a future power option, with PNG sitting in the Pacific’s ‘ring of fire’.
Hydropower, which already meets about 45% of PNG’S power needs, will also be a major contributor to PNG’S future energy needs. The Yonki ‘ toe of the dam’ project will is adding 18 MW to the Ramu distribution network (which services Lae and Madang), while a feasibility study is currently under way for a 80 MW plant at the convergence of the Naoro and Brown rivers near Port Moresby.
Technical assistance will be provided to PNG Power and the Department of Petroleum and Energy for the Naoro Brown project by the World Bank, as part of its PNG Energy Sector Development Project, which was signed-off today.
PNG has three potentially transformational hydro projects on the drawing board.
The 240 MW Ramu 2 project is currently at feasibility stage, with a funding model yet to be announced, but would clearly make a major difference to communities and business along PNG’S northern coast.
The biggest of all by far, however, is the 1800 MW Purari River project currently being considered by PNG Energy Developments Ltd (a 50/50 joint venture between PNG Sustainable Development Program and Australia’s Origin Energy). Indeed, the project is so large, it could turn PNG into a power exporter, with opportunities to supply northern Australia.
The project is at a crucial phase, according to Parkop Kurua, Senior Portfolio Manager, IPBC, who oversees the energy sector.
The government’s powerful Ministerial Economic Committee is currently reviewing the feasibility study, which was completed in December 2012 by PNG Energy Development Ltd (PNGEDL),
and is now considering how to proceed with the next phase—the scoping and design of the dam project.
This 1800 MW proposal could increase to a massive 10,000 MW, Kurua told Business Advantage. The commercial structure will be critical.