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Papua New Guinea approaches threshold of major new infrastructure projects

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LNG Industry,

Oil Search has announced that Papua New Guinea (PNG) is on the threshold of substantial new investment that could double its LNG production in the coming years.

This forecast was made by the Managing Director of Oil Search, Peter Botten, at the PNG Petroleum and Energy Summit in Port Moresby. Speaking at the event, he noted that the global LNG market is highly competitive, with other major new projects already moving to final investment decision (FID).

“Consequently, the next phase in PNG’s gas development and related project milestones must move forward in a timely and responsible way and must consider lessons learnt on optimising a sustainable, responsible process,” Botten said.

“Good progress was made in 2018 on downstream pre-FEED studies to support new LNG capacity (3 x 2.7 million tpy trains) with upstream pre-FEED on Elk-Antelope (PRL15) already well advanced.

“Development concepts for our Associated Gas Expansion (AGX) project planned for 2019 were also completed.”

Last year, Papua LNG and the PNG government signed a memorandum of understanding (MoU) that set the key terms and conditions for a gas agreement, including the equitable split of value between state and developers, domestic market obligation and national content.

Botten added: “The Papua LNG Gas Agreement is on track to be finalised by late March and signed in early April 2019 with a gas agreement between the State and P’nyang (PRL3) joint venture to be finalised soon after.

“Additionally, JV partners are progressing commercial agreements supporting integration, including site and facility access.”

According to the statement, last year saw global LNG demand grow by 6%, with further growth of 4.5% per annum forecast to 2030. This is driven by government policies and north-east Asia markets prioritising gas over both coal and nuclear power. This means that by 2030 an additional 120 million tpy of new supply will be needed. Oil Search claims that this has seen renewed global interest to fill the supply-demand gap into the next decade, and buyers are looking to diversify LNG sources from new countries and sellers.

Speaking at the event in Port Moresby, Botten noted that the company would be prioritising its exploration and appraisal activities to ensure optimal use of capital.

“In the north-west Foldbelt, we are continuing to pursue opportunities for PNG LNG backfill and optimal gas field phasing to create value; whilst in the Forelands, we are investigating optimal commercialisation routes for Kimu, Barikewa and Uramu.

“The onshore Gulf remains an attractive proposition, with many tcf-structures close to planned Papua LNG infrastructure.”

Balancing this, Botten went to stress how important it is to maintain operational stability through social initiatives and responsibility, claiming: “whilst our core business may be oil and gas exploration and production, we operate in a socially responsible manner with strong values and high standards guiding our work. Our vision and values make this clear.

“Respectful, open relationships with local landowners and all levels of government are at the heart of our current and future success. We invest in, and deliver, on going social programmes including: support of Hela Provincial Hospital and health authority; and continued earthquake recovery, especially in public health and infrastructure.

“We are also promoting new partnerships targeting education and training, women's empowerment and gender-based violence, and youth engagement.

“Power projects, like the new Port Moresby power station, are aligned to the government’s development aims as is our support on equitable benefits distribution to land owners.”

Last year, the company published its Climate Change Resilience Report, which illustrates its resilience under a variety of different scenarios, including 2°C pathway, and will release a progress report on the Voluntary Principles on Security and Human Rights (VPSHR) in late March.

Closing his speech, Botten reiterated that responsible development, with balanced value sharing, is necessary to realise PNG’s LNG potential.

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