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 Papua New Guinea - - Petroleum & Gas -

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.'

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