Bruce Hextall
The future of the proposed $6.8 billion Papua New Guinea to Queensland gas pipeline remains uncertain, despite optimism from Papua New Guinea Prime Minister Michael Somare, as project operator Exxon Mobil said there were still constraints on the program's development.
Sir Michael told the 7th annual PNG Investment Conference in Sydney that his government hoped to be able to announce on December 19 that sufficient customers would have been signed up to allow the project to proceed to its front end engineering and design(FEED) stage. However, ExxonMobil - a 38.9 per cent partner in the project - declined to back Sir Michael's optimism, saying a decision still depended on winning sufficient customers to allow the project to move forward on a commercial basis.
"The reality is, as we sit here today, we do not have sufficient customers for that to happen," ExxonMobil Gas Marketing's worldwide vice-president of new business development, Rob Franklin, told The Australian Financial Review.
The project partners say a decision to proceed with FEED must be made this month to allow gas to starting flowing from PNG by the end of 2006.
Apart from ExxonMobil, project partners include Australian-listed Oil Search with 43 per cent, ChevronTexaco, 9.7 per cent, Japan (PNG) Petroleum, 3.4 per cent and MRDC, representing PNG landowners, 3 per cent.
Last week, the PNG Government announced it would exercise its right to take up to a 22.5 per cent interest in one of the project's key gas reservoirs, the Hides Gas field in PNG's Highlands region.
Sir Michael told yesterday's conference his government also planned a direct equity stake in the downstream project of between 15 and 30 per cent.
The pipeline project's cornerstone customer, The Australian Gas Light Company, has agreed to take between 40 and 50 petajoules of gas annually starting at the end of 2006. Queensland Government-owned CS Energy more recently has contracted to take another 15 petajoules.
This is about half the gas volume required to make the project viable.
ExxonMobil's Mr Franklin said the push was on to sign up more customers but declined to confirm the PNG Government's December 19 commitment deadline.
"We're in serious and meaningful talks with potential customers. We are attempting, as hard as we can, to make the PNG project fly but we haven't done that yet," Mr Franklin said.
Key potential customers include Comalco's new alumina refinery in Gladstone and Queensland Alumina, partly owned by Comalco's parent, Rio Tinto also located in the gas-hungry industrial Queensland city.
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