Papua LNG project ‘definitively’ going ahead in Papua New Guinea, says Total

France’s Total SA has confirmed its plans to commence construction for Papua LNG, the country’s next big liquefied natural gas project. Business Advantage PNG spoke with Philippe Blanchard, Managing Director of its PNG subsidiary, Total E&P PNG, to learn more about its race to start construction in 2018.

Total E&P PNG's Philippe Blanchard

Total E&P PNG’s Philippe Blanchard

Business Advantage PNG: Earlier this month, your CEO Patrick Pouyanné paid a lightning visit to Papua New Guinea. He outlined Papua LNG as a US$10 billion project that would employ 10,000 workers. What is required to get the project to a green light from here?

Philippe Blanchard: As mentioned by our CEO, first we have to be able to tell the size of the reserves, which is why we are finalising the appraisal program. The plan is to complete the appraisal work by end of 2016 and be able to size the facilities immediately afterwards.

So, in 2017, we can move the project into FEED (Front End Engineering Design).

We have already started the social and environmental impact assessment studies. We have to perform surveys all over the project’s footprint.

That will take place between now and 2017. There are plenty of activities running in parallel.

It is a good project and the most important thing is to ensure that the project is cost-competitive and comes at the right time on the market.

The idea is to progress and be ready to launch the project in 2018 in order to take advantage of the current market by securing the best gas prices and by lowering the expenditures of the project. It will benefit both the developers and also all the stakeholders in Papua New Guinea and the people of Papua New Guinea. 

Story continues after advertisment...

In addition we think that a better window for gas marketing and monetisation will be present in the early 2020s. So, the timeline of this project should also be aligned with that.

Business Advantage PNG: Can you see any obvious obstacles that could prevent that from happening? For example, if the gas price keeps going lower, does that affect the project?’

Location of the two LNG sites. Credit: Oil Search

Potential locations of the Papua LNG project’s two plants. The location of the plant at Caution Bay is already announced; a decision is expected before the end of 2016 on where the processing of gas will take place. Credit: Oil Search

Philippe Blanchard: It is a good project and the most important thing is to ensure that the project is cost-competitive and comes at the right time on the market. We believe in the price improvement in a long term because there will be a need for gas, and LNG in particular.

Business Advantage PNG: Given that the source of the gas is closer to the shore, is Papua LNG going to be a less complicated, less capital-intensive project than the ExxonMobil PNG LNG project?

Philippe Blanchard: These are two different projects with different challenges. Papua LNG is a good project and potentially it is a low cost project.

It is an important project for Papua New Guinea.

We will leverage all the advantages of the logistics and cost environment to make it a competitive project.

For Papua LNG, distance between the field and the proposed LNG plant is shorter; there is only one field involved but some impurities in the gas have to be treated.

Business Advantage PNG: Does that mean there will be more onshore processing of the gas before it is exported?

Philippe Blanchard: It is still under study and we have not yet firmed up our decision on where to treat and sweeten the gas before liquefaction and export. A decision would be made before the end of the year.

Business Advantage PNG: The PNG Government has the right to join the project. What signs have you received from the PNG government so far about its interest in doing this?

Philippe Blanchard: It is an important project for Papua New Guinea. From our discussions, they are interested. I believe that Kumul Petroleum Holdings, which is anticipated to hold this interest, is really keen on this project.

Business Advantage PNG: Gulf Province is in one of the less developed areas of Papua New Guinea. At this stage, what key infrastructure do you think needs to be in place?

Philippe Blanchard: I think it is important that medical and educational facilities are developed with the project going forward for the benefit of those people from the surrounding areas and the local communities who will be employed by the project contractors.

Purari River: Credit: Origin Energy

Purari River: Credit: Origin Energy

In addition, in terms of other infrastructure, our preferred option today is to use the Purari River to send all the equipment and material we need.

There will be phases in the project when we will need a large amount of skilled labor, at other periods we will need more unskilled labour.

We will also perform a full assessment on roads as well, as we would probably develop an airstrip for transportation of personnel.

Business Advantage PNG: A figure of 10,000 jobs was mentioned by M. Pouyanné. Of those jobs, how many are likely to be skilled jobs and how many unskilled?

Philippe Blanchard: It is too early to give a figure today. The ratio will evolve over time. There will be phases in the project when we will need a large amount of skilled labor, at other periods we will need more unskilled labour.

Business Advantage PNG: Once the facilities have started, it will be operated by a smaller team …?

Philippe Blanchard: Yes, after construction, an LNG plant employs usually about three or four hundred people. You need mainly operators to steer your installation—as well as skilled workers (electricians, mechanicians, etc) to perform the maintenance of the facilities.

But in our case, we will operate two plants with two operations and two maintenance teams: one for the upstream processing and one for the LNG processing.

Business Advantage PNG: Do you expect it to sell to similar markets to the PNG LNG gas?

Philippe Blanchard: We will start discussing gas marketing very soon with our JV partners and potential gas off-takers. We will take into account an evolving market and new players.

We are committed to making it happen. It is a key project for Total, in line with its LNG strategy.

We will look to provide gas mainly to the Asian market. It is clear that Japan, China, Korea, for instance, could be potential buyers. But other countries may be interested to buy gas from Papua LNG project.

Business Advantage PNG: How important is it to have the gas supply contracts in place before you start production?

Philippe Blanchard: It is really important because it gives you the confidence to incur all the expenses that are required. For such a project, you will look at financing by external lenders.

These will lend you money only if you show them that you will reimburse your loans. It is why you need to secure gas off-taking contracts early in your development process.

Business Advantage PNG: One issue is the political need to employ as many local people as possible in the project. That required ExxonMobil to build its Enterprise Centre to help locals skill up. Do you see a similar initiative being required?

Philippe Blanchard: There are universities, colleges, training centres (for example the Kumul Academy) that are already operating in Papua New Guinea.

We think that it is more efficient for everybody and less costly to build partnerships with the existing institutions, rather than building new centres.

Business Advantage PNG: So, is the project definitely going ahead?

Philippe Blanchard: Yes definitively. As a reminder, mid-2015, the location for the main infrastructures have been selected. Since then, the development studies as well as environmental and social base line surveys have progressed.

We are committed to making it happen. It is a key project for Total, in line with its LNG strategy. It allows us to pursue our growth in the Asia Pacific region.

Comments

  1. Josephine T Dukaduka says:

    The Gulf LNG has to be processed within the Province to benefit the resource owners. Bringing transformation. In addition to that; We need to see that an Energy Policy is in Place, Clan vetting is done prior to phrase one construction,National Content Plan…..etc.

  2. Jori Kesi says:

    I just want to know how total and it’s subsidiaries will settle the landowners land compensation and ke seed capital for Papau LNG landowners to participate meaningfully in the project. The landowners do not want to go through the similar hardship being faced by the landowners from PNG gas areas that is taking years for the state to pay them the promised seed capital. Land compensation payment must be the priority step that Total must take before anything else. Settle what is due to them first before you can go ahead with the project.

  3. Patsy Mero says:

    NO PIPELINE POLICY STANDS. Every Gulf citizens wants pipeline to be in the province, otherwise?

  4. George Simon says:

    Total and the PNG Government must give priority to the LO as being the resource owners regardless of who they are. They have to work in partnership, the stand alone is what the people of Gulf Province is fighting for.
    Everything has to be constructed on site where the resource is, means downstream processing be done.
    Total must spend , what you get out from that is more than what you construct on the ground that is a fact.
    Don’t deny the people of Gulf Province by using Caution Bay as the bypass saying it is cheap to run pipeline. Total must construct a STAND ALONE on the resource site, this is what the people and resource owners of Gulf Province wants, remember Caution Bay is in Hiri Central totally another province and don’t deserve what is coming from another Province. All benefits must remain with the resource owners.

  5. James vagi says:

    Agree, priority should be given to locals as they have shown and proved that they can build/construct any projects big or small…

  6. Cyril Szakolczaï says:

    Great development project in PNG by TOTAL.
    Photo © Cyril SZAKOLCZAI on the poster 🙂

  7. Aluja Jakari says:

    Great Opportunities for us Papua New Guinean in terms of Local business participation and Job Opportunities as well.

  8. Kanau Iobuna says:

    With you bro Martin Mako

    • Aluja Jakari says:

      Yes, This will bring more opportunities in our country , PNG. In terms of local business Opportunities and Job opportunities improve the country’s economic level. It must always work closely with the governments and immediate landowners as well.
      I support the concept of Total E&P PNG’s Mr. Philippe Blanchard

  9. Martin Mako says:

    The developer Total SA and the National Government must always respect the decision of the Landowners and the people of Gulf Province and understand that the ‘NO PIPELINE POLICY’ still stand.
    The landowners and the provincial government of the host of the second LNG want all the development to be done in the province. Gulf province can never be denied of its decision and the right to decide for its resource. That is PNG way. We own the resources, you bring your expertise and develop our resources in our province not else where like the proposed caution bay. Your proposal contradicts our stand so fix this issue before you plan ahead. Otherwise you might be planning for nothing.
    LANDOWNER – Gulf Province.

  10. Paul B K says:

    Whilst all seems to be on track, I wonder how the state will pay for its 22.5% stake???

  11. Stephen says:

    Local level governments should support LOs with funding of equity in the project. Bottom up approach! It’s too sad to see the people getting the crumbs after all the prior fees eat away what is rightfully theirs.

  12. Kanau Iobuna says:

    Agree all employees in the oil/ gas Sector (working Age considered) made redundant or stood down due to the end of the construction phase of the LNG can be reintegrated into the Papua LNG as they have the experience then slowly recruit out to the locals and out towards the international arena

  13. Jeffrey Relgang says:

    Firstly,It is a great initiative by Total.Total must be commended for such a quick approach to developing the second highest LNG project in papua new guinea.Totals big effort with vision.Big Thanks and credit to the Giant developer.
    Secondly,Can total consider those Pioneer employees who worked during inter oil days.I believe a few have been retained but most were made redundant.As a developer for the second highest LNG project,I believe equal opportunity employment is part of their company strategy to drive its operations forward.

    thanks
    Jeff

  14. Kanau Iobuna says:

    People have to have more participation in the development. Top down has been a big problem due to greedy individual souls who siphon and milk from the top before it gets down to the real owners and beneficiaries. That is the situation on the ground now. A shift is needed now

  15. Kanau Iobuna says:

    I just hope the terms of reference for this project will be geared towards the benefit of the locals within the province and radiates outward and not vice versa. The LO would have to borrow funds and have more shares in the project than to give most shares to the Govt. We need to shift the current paradigm to bottom up involvement to let the benefits trickle down to the roots. Thus, the roots will pay homage to the Govt.

  16. Great development for us Papua New Guineans.
    I had been working during the Seismic Explorations in Wabo,Elk1,Elk4,Antelop 3 stagging camp/headbase and I was the one involved surveyed at Poroi village the 500smtrsx500Smtrst.
    I had worked with the local Poroi village boys wirh Simon Pariakua as a Project and HSE Coordinator that times in 2008 to 2010.
    If total can consider us for an employment opportunities before recruiting others it woulder be b

Speak Your Mind

*