Interview: Peter Graham
How is the completion of the Papua New Guinea liquefied natural gas (LNG) project likely to affect the country economically and geopolitically?
PETER GRAHAM: I am happy to say that the PNG LNG project shipped its first cargo on May 25, 2014, after starting production months earlier than planned. There are not many projects in the Asia-Pacific region that can say they’re ahead of schedule, and I think this achievement demonstrates to the world that a project of this magnitude can be implemented in PNG – which will be vital for future investments. We are already seeing increased foreign investment, and economic growth over the past few years has been quite outstanding.
The project’s completion will not only see PNG join the exclusive group of LNG producers, it will also strengthen relationships in the Asia-Pacific region, especially among the growing Asian economies. On the domestic front, it will have a big effect on the economy, with the potential to uplift critical sectors like health care, education and infrastructure. Throughout PNG’s history, there are only a couple of projects that have been truly transformational for the nation’s economy, and I have little doubt that this is one of them.
What is the real potential of the gas sector in PNG?
GRAHAM: Compared with other established resource-rich nations, PNG today has a relatively small volume of proven reserves. All the same, PNG is set to become a strategic supplier, given its location near fast-growing Asian markets and how recently it has become a new producer. Since we began this project, other majors have entered the country, making this initiative a testament to PNG’s potential. More exploration is likely to mean more discovery of reserves in the long run, and this is what the country needs to support future developments. There is space for more trains at our existing facilities, but we will need additional proven reserves of natural gas to underpin further investment in the PNG LNG project. We have an active exploration programme that we hope will add to existing reserves.
When poorly managed, hydrocarbons often lead to corruption and even conflicts. How can PNG best manage its resources to avoid this?
GRAHAM: The recent signing of an application to the Extractive Industries Transparency Initiative is a sign that PNG is willing to account for its revenues in a transparent way. As for the creation of the PNG sovereign wealth fund, it remains to be seen how this will be structured and operated. That the government has put so much effort into understanding what has worked elsewhere in the world is very encouraging. It will be important that the government applies project revenues to stated priorities, in which case the outcome will be transformational and the benefits enormous.
Looking back on this project, what would you say have been the major stumbling blocks?
GRAHAM: Construction in PNG faces many challenges, not only from the rough terrain, limited infrastructure and difficult weather, but also due to the complexity of land ownership and access. There are an estimated 60,000 landowners in the project’s areas, and perhaps our greatest challenge has been to sustain consultation with local communities and manage expectations.
Government agencies, though challenged by the project’s size and pace, have done a remarkable job in meeting its milestones, from negotiating the fiscal terms and benefit-sharing agreements prior to project’s launch, to financing the government’s equity share. Various government agencies have also stepped up to meet the needs of the project – for example, processing work permits and visa applications for thousands of foreign workers with an average turnaround of just ten days, and clearing massive quantities of material through Customs without delays. In the end, with sound engineering, good planning, creative solutions and an amazing team of dedicated people, we have brought a complex project to completion. We could not have done this without the support of Papua New Guineans and their government, and for that we thank them.
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