PNG LNG racks up the milestones

THE $US15 billion PNG LNG project is racing ahead of rival gas projects to tap into growing energy demand in the Asia Pacific. Yet ExxonMobil subsidiary Esso Highlands is not underestimating the challenge of building the project.
PNG LNG racks up the milestones PNG LNG racks up the milestones PNG LNG racks up the milestones PNG LNG racks up the milestones PNG LNG racks up the milestones

Esso Highlands managing director Peter Graham outlined the project's progress at the PNG Gas Developments Conference in Cairns last week.

"We are making good progress towards our planned start-up window of 2014," Graham said.

Three key milestones have been reached in recent weeks. The first was the pouring of the first concrete foundation for the liquefied natural gas plant.

Number two was a ground breaking ceremony for the process area where a subcontractor will build the first two LNG trains.

The third milestone was the first weld of the gas pipeline, which will ultimately stretch for around 700 kilometres.

The onshore part of the pipeline will be 250km long and Graham said a lot of work had gone into finalising the route it will take.

"We have avoided a number of inhabited areas, sacred areas, archaeological sites and critical wildlife habitat, while also choosing a route that provides long-term integrity in this challenging terrain," he said.

For the 450km subsea section of the pipeline, Graham said a detailed engineering and execution plan was continuing while pipe lay vessels and support vessels were organised.

At the Hides gas conditioning plant - the site of recent landowner unrest - he said site preparation and construction of camps was well underway.

Well pads are being prepared for the drilling rigs, which are under construction in the US, while the wells are under final design by specialists in Melbourne and Houston.

Bulk earthworks at the Komo Airfield are making progress on the main roadway, despite some heavy rain.

ExxonMobil has an enviable reputation for delivering big projects on time and on budget.

But Graham noted the importance of investor certainty in delivering such a project in PNG.

"This means a certain and reasonable fiscal regime, an effective judicial system, good governance and a safe, secure environment in which to live and do business," he told conference attendees.

"And we need to continue demonstrating success at delivering projects in a complex environment such as Papua New Guinea."

He also shed light on the outlook for gas demand in the coming years.

"Over the next 25 years, energy demand in the Asia Pacific region is expected to rise by about 65 percent. That's roughly the energy equivalent of adding another Australia to the region every 18 months."

Outside of the hugely capital-intensive nature of major gas projects, the Exxon executive noted the importance of competition.

"The world has an abundance of gas and recent advances in technology have significantly added to this," he said.

"This is already at the stage where, apart from new coal seam methane export projects here in Australia, some are even floating the possibility of using tight gas from the US to provide export LNG.

"So it would be very wrong to assume that the world can't do without PNG gas.

Nevertheless, cost overruns and delays in rival gas projects in Australia means stock market analysts from Macquarie are favouring Oil Search because it is a big stakeholder in the PNG LNG project.

While there are a variety of risks to PNG operations, the project joint venture is making progress on many fronts to share the benefits of the development and its expenditure.

Graham said more than 5000 PNG citizens had been trained for construction roles and PNG nationals numbered almost 5500 of the total project workforce of more than 7000 by the end of March.

"Our objective is to develop the PNG LNG project on time and in compliance with the highest standards for health, safety, environmental and social safeguards and business ethics," he said.

"International gas customers, partners, shareholders and lending institutions have shown confidence in our abilities and potential. Now, we recognise that it's up to us to deliver.

"It's a project that can underpin the future economic and social aspirations of PNG people and will encourage new exploration and development in the country. We are working with partners, government, landowners and communities to develop a safe, secure, efficient business environment.

"In short, as we develop the PNG LNG project we are also facilitating the growth of the energy sector in PNG, bringing new opportunities to local businesses and national citizens, and directly and indirectly helping PNG to grow as a nation."

PNG LNG is scheduled to start producing from 2014 and is expected to deliver more than 9 trillion cubic feet of gas over its 30-year life.

Partners in the project are operator ExxonMobil (33.2%), Oil Search (29%), IPBC (16.6%), Santos (13.5%), Nippon Oil (4.7%), MRDC (2.8%) and Petromin (0.2%).

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