Industry collaboration and government help crucial for Western Province gas, says Repsol chief

Cross-industry collaboration and help from the Papua New Guinea government are required to get the most out of the gas in Western Province, David Lester, Chief Office Representative for Repsol PNG tells Business Advantage PNG.

Repsol operations Source: Repsol

Repsol operations in Papua New Guinea. Source: Repsol

Lester says the issue is not finding gas but working out what to do with the reserves already identified. ‘We are at a point where a lot of the resources have been discovered and a lot of it is stranded.

‘Across the industry we are all starting to ask: how do we make this cost-effective for us?

‘We are in a low oil price environment and we still want to be profitable at the end of the day. The only way we are going to do that is through some level of compromise and collaboration across companies.’

‘Lester remains convinced that gas has an important role to play in the area.’

Lester says exploring in PNG is among ‘the most challenging exploration a company can do.’ Over the last six years, the company (formerly Talisman Energy before the Repsol takeover) has been an active explorer.

‘We and our partners have drilled over 18 wells in PNG,’ he says. ‘This has been done safely with zero serious harm.’

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Energy grid

Repsol's David Lester Source: Repsol

Repsol’s David Lester Source: Repsol

Lester says Repsol came close to successfully negotiating a deal to provide miners with gas as an energy source in 2015/16. The miners, which partially use hydropower, had been affected by the El Nino drought.

Had the negotiations been successful, he says, this would have been used ‘as the foundation gas for Phase 2, which would be Western Province gas aggregation.’

Lester remains convinced that gas has an important role to play in the area. ‘We believe that gas is good for PNG but we are stuck with a paradox—not just in PNG, but in other countries as well where there is also an abundance of gas.

‘Mines continue to prefer the self-supply of electricity. That results in mines and countries having to spend hard currency on importing diesel while leaving gas fields stranded.

‘Where we find minerals, unfortunately, we often don’t find a national energy grid sitting on top. So, mines have to be self-sufficient just as we have to be in the exploration stage for reliability. And no one is more reliable than yourself.

‘Gas is good and there is lots of it in PNG.’

‘But we believe that there is great potential for the mining industry to be used as an anchor customer to unlock energy resources for the sustainable development of the power sector.’

‘Gas is good’

Lester says such arrangements could raise PNG’s GDP, create job opportunities and improve the miners’ competitiveness.

‘Gas is good and there is lots of it in PNG. And yet we continue to see lots of hard currency being spent importing fuel for commercial power consumption.

‘Gas isn’t a renewable energy but it does have a lot of the benefits of renewable energy.

‘We need government intervention with incentives and directives and regulations.’

‘It is clean, it is sustainable, it can be locally-produced, it is competitively-priced and it can generate taxes. And it can create jobs. But we do need some cross-industry collaboration. We all need to take the next step and commit.

‘We know that PNG wants and needs a solution to domestic electricity generation because the people of PNG are starting to expect it and even demand it.

‘It also fits in with the electrification vision for 2030-50. We need government intervention with incentives and directives and regulations.’

Expectations

Lester tells Business Advantage PNG that it is important to manage expectations. ‘Western Province gas is not going to be a PNG LNG. It is not going to be a Papua LNG, either.

‘ExxonMobil’s PNG LNG project ‘without a shadow of a doubt’ had a transformative effect on the PNG economy.’

‘To get some early runs on the board, domestic gas power is a quick and easy solution. You can see the first gas coming on before 2020; you could have gas power and electricity to a customer easily by then. Everything else is going to take a long time.’

Lester is optimistic about the oil price, which he says determines the viability of gas projects in PNG. He says ExxonMobil’s PNG LNG project ‘without a shadow of a doubt’ had a transformative effect on the PNG economy.

‘The infrastructure that came in as part of that project, the standards that Exxon brought into the country and the expectations that they had of contracting companies totally changed the game for PNG.

‘It has been the same with the likes of Total and Repsol coming in with high expectations of how work is conducted.

‘Contracting companies in PNG are now benchmarked at a global level, not just at a country level. That has absolutely changed how work in PNG is done for the better.’

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