Statement to Parliament on the PNG LNG Project
by
Grand Chief Rt. Hon. Sir Michael Somare GCL GCMG CH CF KStJ
Prime Minister
Mr Speaker
After my re-election last year, I stood before Parliament and announced that the commercialisation of the vast gas resources of our country would be the number one priority of this government and would underpin the future economic and social aspirations of our people.
I said this at a time when we were recovering from the demise of the PNG-to-Australia Gas Pipeline project and we faced the uncertainty of our headline mineral projects which for the most part have carried the national budgets over the decades.
Mr Speaker,
Since then, government officials had been exploring with the industry other commercial alternatives for our gas. We have focused on the Liquefied Natural Gas (LNG) which has grown in popularity in world energy markets and is enjoying the buoyant prices in the rest of the oil & gas industry.
The PNG LNG project led by ExxonMobil and its partners including, Australian Gas Light (AGL), Oil Search Limited, Santos, Nippon Oil Exploration and our very own Mineral Resources Development Company (MRDC) and is a world class gas project that will serve as the foundation for future gas commercialisation.
The fact that ExxonMobil is leading this project has attracted world headlines, and also poses the question whether PNG can do business on the global stage. This is our challenge.
Mr Speaker,
We have come to understand that big projects of this magnitude take time and patience to develop and the State must also be committed to every stage of the project.
So last year, my government established a Ministerial Gas Committee, co-chaired by the Deputy Prime Minister and the Minster for Petroleum & Energy.
It also comprises the relevant Ministers who will necessarily contribute to the realisation of this important initiative.
To support this Committee, we further established an inter-governmental Taskforce chaired by the Chief Secretary and comprising all senior line agencies.
This taskforce will be assisted by a Gas Coordination Office to coordinate the State’s resources in dealing with the project proponents.
Mr Speaker,
The PNG LNG project has seen much progress towards the Front End Engineering & Design (FEED) phase which is the pre-cursor to the Final Investment Decision (FID) on construction, commissioning, and the first sale of gas.
We have already ensured the following:
- The site of the proposed liquefaction facility has been established in the precinct of the Konebada Petroleum Park just outside Port Moresby;
- Both the State and the project have approved Preliminary Financing Plans;
- The project partners have executed their Joint Venture Agreement showing their alignment amongst themselves; and
- Since January 2008, the State and Exxon have been in tough negotiations on both the Fiscal Terms and the Technical Project Scope Terms so that the Gas Agreement between the State and the ExxonMobil led consortium can be executed and commencement of FEED announced.
Mr Speaker,
The fiscal or tax terms of any project remain the biggest issue because it determines what shares of the revenue generated will go to the State as the tax collector and what shares of the revenue will go to the project.
I am happy to announce that the Fiscal Terms of the PNG LNG Project were agreed to last week between the State and ExxonMobil.
The terms agreed represent value for the State and addresses the important issue of accessing the windfall revenues that is currently being enjoyed by the oil & gas industry while ensuring that the project proponents receive an appropriate return on what could be a US$ 10 billion investment.
This is a good value partnership that will underpin the growth of this country as we move through the new millennium.
Mr Speaker,
I am informed that on the strength of the agreement with the State on fiscal terms, ExxonMobil has commenced its preliminary logistical preparations for FEED.
Funds have been transferred, people have been engaged and the marketing personnel have begun introducing PNG LNG to the rest of the world.
We will not falter and procrastinate.
In that regard, I have directed the whole of government to focus on finalising the technical terms of the project so we can execute the Gas Agreement.
Mr Speaker,
Let me state this clearly - I expect that in early May 2008, the State and ExxonMobil and its project partners will be moving into FEED.
We will announce to the world that PNG can conduct commerce on a global arena, and set the benchmark for other projects that will most definitely materialise from the establishment of the PNG LNG Project.
Thank you.
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