With the PNG LNG gas project now al­most com­plete, Pa­pua New Guinea’s build­ing and con­struc­tion in­dus­try is be­ing freed up to work on the next wave of non-re­sources projects, in­clud­ing much-needed in­fra­struc­ture.

Business Advantage Papua New Guinea - - Contents -

Pa­pua New Guinea’s build­ing and con­struc­tion in­dus­try is be­ing freed up to work on the next wave of non-re­sources projects, in­clud­ing much-needed in­fra­struc­ture.

At the height of the con­struc­tion phase of the Exxon­mo­billed PNG LNG project in 2012, the con­struc­tion sec­tor con­trib­uted 16% of PNG’S GDP. But with the com­ple­tion of the project, the build­ing and con­struc­tion in­dus­try sec­tor ex­pected to fall by 8% in 2014, ac­cord­ing to PNG Trea­sury es­ti­mates.

Quiet in min­ing and petroleum

‘The one dis­ap­point­ing area is the in­ac­tiv­ity in the min­eral space. It’s of con­cern to ev­ery­one here,’ says Frank Kramer, CEO of Kramer Ausenco, one of the largest en­gi­neer­ing and project man­age­ment firms in the South Pa­cific re­gion, which has around 120 staff mem­bers based in Australia, Solomon Is­lands, Van­u­atu, Fiji, Samoa and Tonga, as well as PNG.

‘The PNG LNG project is now about 95-to-100% com­plete … the min­er­als sec­tor is also quiet. Newcrest’s Li­hir gold project in the New Ire­land prov­ince has down­sized and the timeline for WafiGolpu in Morobe Prov­ince has been pushed back, so there’s a very scarce level of ac­tiv­ity in the con­struc­tion or en­gi­neer­ing space.’

Hous­ing and public sec­tor works

In the ab­sence of work in the re­sources area, PNG’S build­ing and con­struc­tion com­pa­nies are look­ing else­where.

‘The only sec­tors driv­ing the econ­omy would be the hous­ing sec­tor, which is spo­radic be­cause of fund­ing and land ten­ure is­sues, and public sec­tor works, com­ing through since the new bud­get,’ Brett Mcdon­ald, Pres­i­dent of Red Sea Hous­ing’s Aus­tralasian Di­vi­sion, tells Busi­ness Ad­van­tage. The Saudi-based com­pany has been heav­ily in­volved in the con­struc­tion of the Aus­tralian-gov­ern­ment funded Manus Is­land Detention Cen­tre, re­ceiv­ing an A$35 mil­lion (K79.2 mil­lion) con­tract.

‘I still think there’s plenty of work out there,’ says Do­minic Avenell, Man­ag­ing Direc­tor of Avenell En­gi­neer­ing Sys­tems (AES), a con­struc­tion busi­ness with its ori­gins in the re­build­ing of Rabaul fol­low­ing the 1994 vol­canic erup­tions. ‘We tend to spread our­selves out. We go look­ing for con­tracts and I think hav­ing our sort of ex­pe­ri­ence gives us an ad­van­tage.’

AES has re­cently com­pleted con­struc­tion of the much­needed tu­ber­cu­lo­sis ward at Daru Gen­eral Hos­pi­tal, res­i­den­tial dor­mi­to­ries at Port Moresby Tech­ni­cal Col­lege and new build­ings for the Pa­cific Ad­ven­tist Uni­ver­sity in Port Moresby— three Aus­tralian Aid-funded projects.

Quiet, but not too quiet

Mean­while, Frank Kramer re­ports a ‘very good year in terms of over­all rev­enue. Our bot­tom line has been well and truly over bud­get’.

The firm has a num­ber of ma­jor projects just fin­ished or about to fin­ish in early 2014, in­clud­ing Stage Two of the Wind­ward Apart­ments com­plex at Ela Beach, while the new har­bour­side of­fice build­ing for Steamships is 70% com­plete.

Among its new projects are the new K250 mil­lion (US$98 mil­lion) 300-bed Enga Hos­pi­tal, ex­pected to start in the sec­ond half of the year; the K85 mil­lion (US$33 mil­lion) re­fur­bish­ment of Marea House in Waigani, a K100 mil­lion (US$39 mil­lion) com­plex for the West­ern High­lands Devel­op­ment Cor­po­ra­tion in Mt Ha­gen and sev­eral hun­dred mil­lion kina's worth of roads and bridges for the Ok Tedi Devel­op­ment Foun­da­tion.

‘I think con­struc­tion ac­tiv­ity will be quiet for the bet­ter part of this year and we can ex­pect to see some level of ac­tiv­ity start­ing to ramp up again in 2015,’ says Kramer.

De­spite his ‘quiet’ year, he es­ti­mates that the firm has al­ready se­cured about 85% of bud­geted rev­enue for 2014.

PNG’S con­struc­tion com­pa­nies also work across the re­gion. As well as work­ing on the new K90 mil­lion Trea­sury Build­ing in Port Moresby, La­mana Devel­op­ment Ltd is cur­rently build­ing the new K18.5 mil­lion PNG Chan­cellery in the Solomon Is­lands and has ho­tel projects in Samoa and Fiji. The lat­ter, the Grand Pa­cific Ho­tel in Suva, is ex­pected to open in the first half of 2014.

In­creased gov­ern­ment spend­ing

In 2014, the Na­tional Gov­ern­ment will in­ject K2.7 bil­lion (US$1.06 bil­lion) of spend­ing into in­fra­struc­ture such as roads, ports, and power and wa­ter treat­ment fa­cil­i­ties. Ma­jor trans­port projects in­clude a four-lane high­way con­nect­ing PNG’S industrial hub Lae to its air­port at Nadzab, the High­lands High­way, fund­ing of the ex­pan­sion of Lae’s port and the K30 mil­lion up­grade of Port Moresby’s Jack­sons In­ter­na­tional Air­port.

The gov­ern­ment has also al­lo­cated K180 mil­lion (A$78 mil­lion) for in­fra­struc­ture and other re­quire­ments to host the 2015 Pa­cific Games. This in­cludes the con­struc­tion of fa­cil­i­ties in­clud­ing re­fur­bish­ment and con­struc­tion of sta­dia in Port Moresby.

More com­pe­ti­tion

Many in­ter­na­tional com­pa­nies who worked on the con­struc­tion phase of the LNG project have stayed on.

‘The cost of do­ing busi­ness, the cost of ser­vices, has gone down. Now there are more peo­ple ca­pa­ble of get­ting the job done,’ ob­serves Do­minic Avenell. Frank Kramer agrees, and sees it as a big plus for PNG: ‘Quite a lot of them are look­ing around for more work. There is now much more con­struc­tion ca­pac­ity in PNG. This is good, but we must al­ways en­sure there is sig­nif­i­cant na­tional con­tent in the in­dus­try.’

One in­ter­na­tional com­pany look­ing to ex­tend its work in PNG is the China Rail­way Com­pany, which will com­mence work on the con­struc­tion of the Waigani Con­ven­tion Cen­tre by the end of this month.

In the longer term, the sec­tor is also wait­ing ea­gerly for the In­teroil/to­tal SA LNG project to ex­plore and de­velop the Elk and An­te­lope fields in Gulf Prov­ince. Kramer ex­pects it will be an­other three or four years be­fore ‘se­ri­ous con­struc­tion on the ElkAn­te­lope fields be­gins’.

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