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

Business Advantage Papua New Guinea - - Contents -

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.’

Oil change

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.

Ma­jor hy­dro

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.

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