PNG LNG project prepares for first shipments
As PNG’S largest resources project reaches the point of completion, Business Advantage speaks exclusively with the man who has lead the project since day one: Peter Graham, Managing Director of Exxonmobil PNG.
Business Advantage: (BA) At what stage does the PNG LNG project find itself, at the start of 2014? Peter Graham (PG): Different aspects of the project are more advanced than others, but the project overall is more than 95% complete.
Starting from the Highlands area and working down: the drilling is going exceptionally well. Two wells are being drilled on each of four well pads. So far, we have successfully completed five of eight planned production wells at Hides.
Coming down the pipeline from the Highlands: construction of the pipeline is also doing very, well. Construction has been particularly challenging as the pipeline runs right along the top of ridges, up some very steep terrain and then back down into the valleys. The contractor has done an outstanding job in getting through very difficult conditions.
Finally, the LNG plant located close to Port Moresby is also doing very, very well Power is being generated on site, and we’re progressively commissioning the various components on Train One of the LNG plant, then we’ll progress across to Train Two.
Gas is also now also moving from Kutubu north to start the commissioning of the Hides Gas Conditioning Plant. When that’s complete, we’ll start flowing gas from the Hides wells to the Hides Gas Conditioning Plant and down to the LNG Plant to start the production of LNG.
The first cargo of LNG will be in the third quarter of this year, and we’re confident of meeting that schedule. At steady-state production, we need the equivalent of six ships in total to ship the cargoes. BA: You must be very excited at this stage PG: Everyone is. The finish line is very clear at this point in time. Now, it’s a matter of being sure that all of the components of the Project come together for a safe start-up.
The operations and maintenance team are now onsite at both plants, ‘walking down’ the procedures and getting ready progressively to take control of the facilities. At the LNG Plant, they have already taken care, custody and control of the utilities area, so they now manage the power supply and the water and other utilities, and will progressively take over the entire facility.
The transition from construction to operations involves a major effort on training, including competency assessments to validate that the operations team is ready for start-up. BA: I’m presuming the project’s head count is now starting to come down now. What will happen to those workers leaving the project?
PG: It’s starting to come down, yes. Our best estimate of the direct employment on the project once it’s operational is 1000 to 1200 people—plus contractors, supply services and so on. We have about 14,700 people currently working on the project, of which about 5,600 are Papua New Guineans. In the first quarter of this year, we’ll see the next tranche of workers leave..
To that end, we’re actively working with Hela Province and Central Province to get Infrastructure Development Grant (IDGS) projects under way so that, as we phase down, those same skilled people are picked up for community infrastructure work.
The government has committed 120 million kina (US$51.68 million) a year for ten years for IDGS. You often hear the criticism that a certain business has been in operation for years, and that there is little evidence of improvements in infrastructure for the local communities. With so much money committed by the government to infrastructure projects under the Benefit Sharing Agreements for the PNG LNG Project, I don’t want that to be said about our project. BA: Another way the country’s benefiting from the PNG LNG project is with the National Transmission Network, which is using your pipeline … PG: Yes, the fibre optic cable has now been laid from the LNG plant site to Hides. As the pipeline is buried, so too is the fibre optic cable.
This is a modest investment on the part of the State to essentially open a backbone of fibre optic cable right across the country, from Port Moresby across to Gulf Province up to Hides. The government may choose to connect up the cable from Hides across to Madang and Lae, which would provide a national communications backbone.
It’s a great example of private enterprise working with government to find synergies where it’s a win/win for everyone. BA: Now that Exxonmobil is firmly embedded in the country, what other opportunities are there for you? PG: We have an active exploration programme at this point in time, predominantly in the same general areas as existing oil and gas licenses. We’ve been active in working on seismic programmes with our license partners in recent past to define opportunities, and we’ll just see how that plays out. BA: What are your thoughts on the potential development of industries around gas production in PNG? PG: Proving up new reserves is the key for that next phase of development. For any new development, proved reserves are needed for long term sales contracts to underpin major investment. Downstream development will come in time but will require the addition of uncommitted reserves – that’s time and money.
‘ You often hear the criticism that a certain business has been in operation for years, and that there is little evidence of improvements in infrastructure for the local communities. I don’t want that to be said about our project.'