Gov­ern­ment en­cour­ages pri­vate sec­tor par­tic­i­pa­tion in PNG’S en­ergy sec­tor

Pa­pua New Guinea’s na­tional gov­ern­ment is en­cour­ag­ing the pri­vate op­er­a­tors to gen­er­ate and sup­ply elec­tric­ity to state util­ity PNG Power, which in turn may be set for a par­tial pri­vati­sa­tion.

Business Advantage Papua New Guinea - - Energy -

The lack of a re­li­able en­ergy sup­ply is con­sis­tently iden­ti­fied as an im­ped­i­ment to do­ing busi­ness in PNG— in­deed, un­re­li­able util­i­ties were named as the sec­ond most crit­i­cal is­sue fac­ing busi­ness in this year’s PNG 100 CEO Sur­vey (see page 10). Most com­pa­nies of any size are thus forced to have the gen­er­a­tors nec­es­sary to meet their own en­ergy needs—a ma­jor added cost.

It is no sim­ple mat­ter to sup­ply elec­tric­ity across a coun­try with a geog­ra­phy and cli­mate such as PNG. State elec­tric­ity com­pany PNG Power cur­rently runs three main sep­a­rate power grids and 16 smaller sys­tems, while West­ern Power owns and op­er­ates small iso­lated grids in West­ern Prov­ince. To com­plete the com­plex power mix, there is some pri­vate gen­er­a­tion for min­ing op­er­a­tions, as well as mini-grids in pro­vin­cial cen­tres and stand-alone gen­er­a­tors for in­di­vid­ual busi­nesses and com­mu­ni­ties.

PNG’S to­tal in­stalled ca­pac­ity is about 500MW, ac­cord­ing to the Se­nior In­vest­ment Of­fi­cer at the Asian Devel­op­ment Bank’s Sus­tain­able In­fra­struc­ture, Srini­vas Sam­path, which means only 13% of the coun­try has ac­cess to elec­tric­ity. The aim, he told the 2014 PNG Ad­van­tage In­vest­ment and In­fra­struc­ture Sum­mit, is that by 2030, 70% of the coun­try will have ac­cess to elec­tric­ity.

The chal­lenges fac­ing en­ergy providers in PNG in­clude a re­liance on im­ported diesel, ex­po­nen­tially-in­creas­ing de­mand, and a re­mote and harsh ter­rain over which to es­tab­lish and main­tain trans­mis­sion lines.

Re­form un­der way

While a de­clared state of emer­gency in the power sec­tor in early 2015 sug­gests that in­her­ent prob­lems in PNG’S en­ergy sec­tor persist, there are clear signs of both progress and re­form.

Public En­ter­prise and State In­vest­ment Min­is­ter Ben Micah told the 2014 PNG Ad­van­tage In­vest­ment and In­fra­struc­ture Sum­mit that all new ma­jor power gen­er­a­tion projects will come from In­de­pen­dent Power Pro­duc­ers in the pri­vate sec­tor. Al­ready, com­pa­nies such as New Bri­tain Palm Oil and PNG

For­est Prod­ucts are sell­ing ex­cess power to their re­gional grids and sev­eral other com­pa­nies are in ne­go­ti­a­tions.

Ref­er­ence pric­ing will also be in­tro­duced to help cal­cu­late prices.

Al­ter­na­tive power sources

PNG Power is look­ing at pri­vate en­ter­prise to pro­vide gas, biomass and geo­ther­mal as al­ter­na­tive en­ergy sources to im­ported oil.

‘One of the most fun­da­men­tal ways of re­duc­ing the cost elec­tric­ity is through re­duc­ing diesel con­sump­tion,’ says Paul Nerau, Chair­man of the In­de­pen­dent Public Busi­ness Cor­po­ra­tion, the state com­pany which man­ages PNG Power and other state-owned en­ter­prises.

The na­tional gov­ern­ment has ac­quired two gas tur­bine gen­er­a­tors, which will sup­ple­ment power de­mand by 30 megawatts in Port Moresby and Lae, he says.

In Jan­uary, Exxonmo­bil—which op­er­ates the coun­try’s first LNG plant—signed an mem­o­ran­dum of un­der­stand­ing with the PNG Gov­ern­ment to sup­ply up to 20 mil­lion cu­bic feet a day of nat­u­ral gas for 20 years for do­mes­tic con­sump­tion.

‘A por­tion of the nat­u­ral gas sup­ply al­lo­cated for do­mes­tic use will en­able PNG LNG to pro­vide up to 25 megawatts of elec­tri­cal power for an in­terim pe­riod while the gov­ern­ment ad­dresses long-term power gen­er­a­tion op­tions,’ says Exxonmo­bil’s now for­mer Man­ag­ing Direc­tor, Peter Gra­ham.

‘The re­main­der of the gas sup­ply will be used to fuel state-owned gas fired power gen­er­a­tion units ex­pected to be lo­cated near the LNG Plant out­side of Port Moresby.

‘We think that this is a great step to­wards im­proved sup­ply for Port Moresby, and will be work­ing with PNG Power and do­ing our best to sup­port them so they can quickly ac­cess the power.’

Oil Search’s CEO Peter Bot­ten says ex­ec­u­tives are talk­ing with the gov­ern­ment about other projects, too

‘In Lae, we’ve been work­ing very hard on a biomass power gen­er­a­tion sta­tion—some­thing in the 30-to-35mw range— which would pro­vide very com­pet­i­tively priced power for the Lae and north coast area. We’re work­ing with PNG Power on that. We’re very con­fi­dent it is fea­si­ble, and would in­volve some 2500 to 3000 lo­cal landown­ers grow­ing trees to pro­vide fuel for the power sta­tion.

‘We’re also work­ing with the gov­ern­ment on power in the High­lands, both at Hides and at Ku­tubu, and look­ing at a num­ber of op­por­tu­ni­ties and joint ven­ture part­ners for in­creas­ing power gen­er­a­tion in the Port Moresby area.

‘There’s a very con­struc­tive dia­logue go­ing on with the Gov­ern­ment about how that might be achieved, but it does re­quire some long-term think­ing and long-term in­vest­ment in in­fra­struc­ture.

‘Over the next three to five years you will see a num­ber of sig­nif­i­cant de­vel­op­ments un­der way in the High­lands and the north coast, and cer­tainly ex­tra power in Port Moresby. It may be ear­lier than that,’ says Bot­ten.

Hy­dropower

A fea­si­bil­ity re­port on the Ramu Two hy­dro power project was de­liv­ered to the Na­tional Ex­ec­u­tive Coun­cil (PNG’S Cabi­net) in Jan­uary 2015 for en­dorse­ment.

This project will add an­other 180MW to the ex­ist­ing Ramu hy­dro­elec­tric scheme to meet in­creas­ing de­mands, par­tic­u­larly from min­ing and industrial de­vel­op­ments in the High­lands re­gion.

A fur­ther hy­dropower project is be­ing con­sid­ered for the Naoro River near Port Moresby, while talks on the gi­ant 10,000 MW Pu­rari River hy­dro power project may also restart in 2015. It is be­lieved the out­put could feed into the Port Moresby and High­lands grids, as well as the ex­port of elec­tric­ity to Australia. Power from the scheme will also be used for ru­ral elec­tri­fi­ca­tion.

Nerau also says a pro­posed geo­ther­mal project in West New Bri­tain Prov­ince could pro­vide 4,000 MW of power.

Pri­vati­sa­tion

As for pri­vati­sa­tion of PNG Power it­self—there is more work to be done. Be­fore PNG Power can be par­tially or wholly sold off, the first job will be to un­bun­dle its var­i­ous func­tions.

‘Th­ese are the re­tail, trans­mis­sion and gen­er­a­tion el­e­ments,’ ex­plains Paul Nerau.

There­after, it could be that PNG’S elec­tric­ity sec­tor will fol­low the re­forms be­ing made in telecom­mu­ni­ca­tions, where whole­sale and re­tail func­tions are in the process of be­ing sep­a­rated (see page 39).

PNG For­est Prod­ucts’ power plant in Morobe Prov­ince is sell­ing some of its elec­tric­ity to state util­ity PNG Power.

The Yonki Toe of the Dam hy­dro­elec­tric project in Eastern High­lands Prov­ince.

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