Papua New Guinea to develop downstream oil and gas processing

Jan 22, 2003 01:00 AM

The Papua New Guinea government announced a bold new initiative to develop downstream processing of oil and gas resources. Petroleum and Energy Minister Sir Moi Avei told the government was prompted to activate "Plan B" following the withdrawal of the Australian Gas Light Company (AGL) from the PNG gas project and the prolonged delay in the start of the front-end engineering design (FEED) stage of the project.
Sir Moi said the PNG to Australia gas pipeline remained the government's top priority "but we cannot afford to put all our eggs in one basket". The pipeline project was expected to start production a year behind schedule in 2007, he said.

Sir Moi said significant revenue would be derived from downstream processing, which would account for expected shortfalls in the government's medium-term money plan created by the delay in the gas pipeline project. Other major benefits included increased employment and business opportunities, he said.
"In order to maximize benefits, we must add value to our gas. We must develop downstream processing industries that will create jobs and enhance the gas export project," Sir Moi said. "Our experience shows that we cannot sit back and allow multinational interests to control our destiny. We must be proactive."

The minister said the new initiative was being spearheaded by the state, Oil Search and InterOil and involved the assessment and development of downstream resources such as methanol, fertilizer, compressed natural gas (CNG), small-scale LNG and the conversion of electricity generation to gas fuel.
Sir Moi said work had already begun and an interim report, detailing a number of viable opportunities, would be completed by the end of March. The report would recommend further work to bring these opportunities to commercial reality, he said.

"The initial study will analyse present energy use in PNG, concentrating on Port Moresby and other population centres, updating past studies for industry and population growth as well as the impact of thenew InterOil refinery at Napa Napa. The study will determine possible locations of gas supply sources and cost of supplying gas to domestic markets. This will include an assessment of the viability of possible sources of gas supply for Port Moresby, such as a gas pipeline or compressed natural gas supplied by barges."
The minister said the potential export markets for LNG, such as California in the United States and India, would be assessed. The study would also consider the exporting of LNG from a northern location like Wewak and possible locations for an industry hub for downstream development such as Port Moresby, Kopi, Cape Possession, Yule Island/Hall Sound, Uramu, Napa Napa and other suitable locations.

Sir Moi said the initiative would also build on recent fiscal incentives announced in the 2003 budget to boost the ailing exploration industry. "The government and the PNG companies will work closely together to promote oil and gas development in the country and attract further investment."
Hedescribed the partnership between the state, Oil Search and InterOil as "unprecedented". Sir Moi commended the two companies for their commitment to the development of the oil and gas industry in PNG. "Over the years, Oil Search has demonstrated its commitment to PNG and the oil and gas industry time and time again; through its tireless support for the PNG gas project, the Hides gas project and extensive exploration," Sir Moi said. "InterOil is showing serious commitment by building the first refinery."

Source: BBC Monitoring Asia Pacific
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