PNG must develop gas resources before Qatar takes markets, expert says

AAP

PAPUA New Guinea must accelerate development of its natural gas projects and lock in customers or risk losing out to other nations pushing coal seam and shale gas projects, an oil and gas expert says. Independent researcher and the chairman of FACTS Global Energy, Dr Fereidun Fesharaki, gave the warning at the 11th PNG Mining and Petroleum Investment Conference in Sydney today.

The three-day conference has so far focused on the US$15 billion PNG LNG (liquid natural gas) project under development by ExxonMobil in PNG's Southern Highlands.

The joint venture project with Santos, Oil Search Ltd and the PNG government is on track to deliver its first shipment of LNG in 2014.

Dr Fesharaki says PNG must act quickly to secure Asian markets for that and other LNG developments, or face competition from the cheaper Qatar LNG currently being sold into the US market. "You have to be aware that this threat is there, so you have to act to shore up your customers,'' Dr Fesharaki said.

"It is not possible to compete with Qatari LNG on economics. The only way to compete is to tie up the market.'' Dr Fesharaki said LNG production in Qatar cost about a quarter of that in PNG. The Australian Government has provided concessional loans of US$500 million to support development of the PNG LNG project, which is viewed as critical to the social and economic development of PNG.

PNG Prime Minister Sir Michael Somare said in his opening address to the conference that Australian companies had already won contracts worth twice as much as the finance provided by the Australian government. "My government is anticipating that LNG revenues will propel the economy to new heights and significantly improve our social indicators, which for too long have remained stagnant,'' Mr Somare said.

PNG is expecting growth of 7.1 per cent in 2010 and eight per cent in 2011, the Prime Minister said.

But exporting gas from the remote Southern Highlands and Western Province of PNG is not without its challenges, according to ExxonMobil upstream project mananger for the PNG LNG project Decie Autin. Ms Autin said a 700km pipeline, including 450km of sub-sea pipeline, would be required to transport the gas to an LNG facility near Port Moresby for shipment.

Ms Autin said the pipeline must also traverse low lying topography, deep gorges and steep terrain that was subject to landslides and significant environmental areas, making it a complex undertaking.

An export terminal would operate 24 hours a day at the LNG processing site near Port Moresby, loading an LNG tanker for export every two to three days, she said.

Prime Minister Somare said he hopes to witness the reopening of the Bougainville Copper Mine, closed 20 years ago amidst secessionist violence. "PNG is also in the throes of becoming a major world supplier of copper,'' he said. The Panguna mine at Bougainville is one of the world's largest copper and gold mines.

"Our darkest hour came with the Bougainville conflict,'' Mr Somare said.

"It was a setback from which Bougainville and the nation has not fully recovered. Work is well underway to restore the damage of those years.''

Mr Somare said the government would continue to focus on providing a stable political environment and transparent mining regime to encourage futher development.