Energy for the World. Opportunity for Papua New Guinea.

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Speeches, 16 May 2017

Creating lasting opportunities

APNG Business Forum , Andrew Barry, Managing Director, ExxonMobil PNG Limited

It’s a pleasure to be speaking with you today.  Firstly, I would like to congratulate the Australia PNG Business Council for their organisation of this event which encourages important dialogue across a broad range of industry sectors in PNG.  It is always encouraging to see the many business opportunities being discussed and the focus on growing the economy and ultimately improving the standard of living for all Papua New Guinians. It is us at this conference who have the responsibility and accountability to do what is right for our shareholders and importantly right for the country. At ExxonMobil doing what is right for both is a critical measure for success. We are proud of our accomplishments with PNG LNG and are very much looking forward to more major developments in the not too distant future. 

Partnering to create opportunity for PNG

I would like to start, as I always do, by acknowledging the single greatest factor in our success – that is strong partnerships based on mutual trust and respect.  It is the basis of all our business endeavors everywhere around the world.  Having strong relationships with all your stakeholders and working to pull together in the same direction is what it takes to ensure investors invest and economies, businesses and communities thrive and continue to grow.  

To landowners, State, Provincial and local level government representatives, co-venturers, staff, and the many suppliers who support our business I thank you for your support.  

Similarly ExxonMobil’s long and deep relationships with buyers and financial institutions enabled the confidence from each party to make the very significant commitments that were required to make the project happen. 

Collectively we can feel very proud of what we have achieved - and feel very excited about the future opportunities we have created to build upon solid foundations.  

When you reflect on the business environment back in 2009 when we embarked on the PNG LNG project it is not dissimilar to today. The global financial crisis in 2009 created a lot of uncertainly while today’s low commodity prices and global LNG market is creating a similar environment. 

The bold decisions government took to provide fiscal certainty and work in partnership with business meant investment dollars were spent in PNG vs other countries.

The same challenge remains today and the same level of cooperation, teamwork and partnership will be required for us to be successful in the future.

Global capabilities 

PNG’s resources are not easy to commercialise - many companies have tried and failed - what sets ExxonMobil apart is our global experience in resource development, particularly in challenging geographical locations like PNG.

Application of state-of-the-art technology is an important enabler for cost effective development of resources.  

We use technology at every step in the value chain and here in PNG we have demonstrated that across multiple areas; from drilling some of the most complex wells in the Corporation right down to our Papua New Guinean operations staff using tablets to efficiently and effectively manage the operations and maintenance at the plant.  

Safety culture

PNG LNG is outperforming the industry across all metrics. Most importantly our safety performance is quite simply best in class with almost 70 million hours worked without a lost time incident since 2013 and our focus continues to be that no one gets hurt.  The way our Papua New Guinean workforce has embraced a culture of safety is one of the most satisfying aspects of my job.  

Flawless operations

Last year we continued to produce LNG at rates well above the design capacity of our facilities.  Recently we have exceeded production rates at ~20% above design.  Just 10 days ago we celebrated our 300th cargo - almost 3 years to the date that our first cargo set sail to Asia. 

In addition we recently received the good news that the PNG LNG project fields’ resource base is 25 percent larger than previously assessed.  This follows an independent recertification which estimates PNG LNG has 11.5 Tcf of technically recoverable resource - an increase of 2.3 Tcf since it was last certified in 2009.  This further highlights the quality of the PNG LNG resource. 

Our exceptional reliability and ability to optimise the production operations is a reflection of the total commitment our Papua New Guinean workforce has to our business.  Their pride in showcasing what they can do to the world is infectious.  

World class performance

At the LNG Plant right now our Papua New Guinean maintenance technicians are working on activities which are a first for any ExxonMobil facility in the world.  

They are removing and undertaking complex maintenance on large gas turbine engines which drive the LNG compressors, and then reinstalling them in the plant.  Many LNG plants around the world have to shut down their LNG trains in order to maintain and overhaul the gas turbine engines.  

The PNG LNG plant has been designed to keep running while most major maintenance activities are completed.  It is because of this we are able to work with the engine manufacturer GE, to do the work in PNG in our workshops, while reducing impact to our business.  

Our Papua New Guinean technicians are developing unique skills during this time, which not many people anywhere in the world have had the opportunity to experience. 

It is against this backdrop of partnership, reliability and workforce capability that ExxonMobil was confident to invest another ~$2.5bln or PGK8bln in February this year through the acquisition of InterOil Corporation - more on that transaction later.

Expanding PNG LNG infrastructure - Wellpad F

We are continuing to build upon existing infrastructure with the second phase of PNG LNG development progressing well.  

Last year we connected a new wellpad to the spineline that feeds gas into the Hides Gas Conditioning Plant.  

Wellpad F is our highest wellpad at an elevation of 2800 metres and we just began production from this well this week.    

Angore Tie-in  

This year our focus is on tying the Angore field into the production system at Hides.  The Angore field lies to the east of our Hides facilities and in order to produce the gas from that field we are building a new 11-kilometre pipeline and installing production equipment at the Angore Wellpad A.  

Our construction camp at Angore has been established and work to clear the pipeline right of way for the greenfields section is almost complete.  

Activity will ramp up further in the next few months as large equipment is flown into Komo, pipe strings and materials are transported along the Highlands Highway, and trenching and pipelaying begins.  

The Angore tie in project while on a smaller scale, has the same challenges as the foundation project pipeline construction.  

The field is a similar high pressure reservoir to the Hides field and at an elevation of 1700 metres the pipeline will follow the same terrain across steep ridges, down valleys and up steep inclines.  

Angore Tie-in - pipeline construction

Cable cranes will be used to lay the pipeline on the more challenging 20 degree slopes which are too steep for traditional pipe laying equipment. The images in this slide were taken during PNG LNG construction to give you a sense of how steep that is.  

We are working with our construction contractors and the community to ensure that opportunities for local employment and businesses are maximized.  

Business and employment opportunities are being realized across multiple different areas including security, catering and heavy equipment operation.  

We expect first production from the Angore field to be in 2019.

The Wellpad F and the Angore projects represent a further investment of several hundred million kina in the country.

Supporting PNG’s development priorities - Power

We continue to provide many benefits to the community aligned with the government’s development priorities. 

In Port Moresby approximately 20 percent of the power demand is supplied by PNG LNG gas and good progress is being made on an additional 50MW power project that would also be supplied by PNG LNG gas. 

We also continue to support other power project opportunities and have gas reserved for those including a project in the Hides area.

Upgrading Highlands Highway 

We also recognise that the upgrade of the Highlands Highway is important to the continued economic development of local communities. The highway remains one of several transportation routes used by PNG LNG and other local businesses.

As an important development partner, PNG LNG has agreed with the government to upgrade two sections of the Highlands Highway from Halimbu Junction to Nogoli and Nogoli to Komo in Hela province.  

These sections will be upgraded to the national highway standards including two lane sealed highway, upgrading bridges and crossings where needed, and improving drainage to help mitigate against water damage to the road formations. The value of these upgrades is PGK150M to be spent over 3 years and will provide hundreds of job opportunities in the local communities. 

Developing Papua New Guinean talent

We are also strongly committed to the government’s development priority to grow human capacity in PNG.

Our approach to National Content and capacity building focuses on creating jobs, educating and training Papua New Guinean employees and suppliers, transferring knowledge and skills, buying local goods and services and investing in communities to create sustainable benefits.

Investing in our workforce

Around 2500 people are responsible for operating PNG LNG and over 80 percent are Papua New Guinean.  As I said earlier, we are very proud of our workforce and are continuing to invest significantly in their development. Our business is incredibly technical and complex, and the skills required in some areas can take decades to build. Training is the key enabler for a highly qualified and professional workforce.

Since the start of production our staff has received over 200,000 hours of training. This is in addition to the more than 2 million hours of training delivered during construction.  

Creating opportunities for PNG businesses

A key component of ExxonMobil’s strategy to build capacity in Papua New Guinea involves creating opportunities for local businesses - from small micro-SMEs all the way through to large landowner companies.  

PNG LNG uses the services of nine landowner companies and some 150 non-Lanco Papua New Guinean businesses for production related activities.

We continue to see all the Papua New Guinean businesses we deal with grow in capability and capacity and are looking forward to continuing to provide more opportunities as we look to the next stage of development. 

To date, we have spent over 13.2 billion kina on services provided by Papua New Guinean companies.  Of this, 3.5 billion has been spent with landowner companies. 

Helping communities to lead better lives

In our local communities we have invested more than 800 million Kina to build infrastructure, develop social programs, and enhance skills and knowledge to improve the quality of life for many people in and around our project areas.  

Our key programs focus on education, health and environment, women’s economic empowerment and agriculture.

Strengthening education 

We are investing significantly to improve access to education in project areas.

We are continuing to build on our scholarships program, working in partnership with respected education providers.  

We are building capacity in schools through infrastructure improvements, training and housing support for teachers.  

We have developed innovative training to strengthen academic and administration leadership in schools around our Project, which we hope will one day be used throughout the country.  

Improved health care

Our community health program is a holistic effort to support the health of Papua New Guineans. Our partnership with the PNG Institute of Medical Research continues to improve PNG’s data collection and health diagnostics.  

At a local level we are providing training for health care workers and making infrastructure improvements to community clinics.  

Late last year we handed over a new 1 million kina Sub-Health Centre and ambulance at Para near our Hides facilities. We are also helping hospitals with medical supplies.

Investing in future growth opportunities

While PNG’s natural gas resources are vast, the cost to develop is high driven by the terrain and remoteness of the opportunities. 

To drill just one exploration well can cost more than PGK300M and it is the success of our foundation business and the strength of the relationships have with the people of PNG that give us confidence to reinvest in this great country.

We are excited by recent positive results from Muruk drilling exploration program, operated by Oil Search. Yesterday we announced the Muruk sidetrack well encountered similar high-quality sandstone reservoirs southwest of the Muruk-1 discovery well which was announced in December 2016.   

This important discovery confirms the extent of the Muruk area and further establishes Muruk as a potentially significant new discovery, with the same high-quality sandstone reservoirs as the Hides field that underpins the PNG LNG project.

Oil Search and partners are now planning a production test to provide valuable information for the evaluation of the resource size. 

Exploration offshore

We are also very excited about our entrance into offshore exploration where we have picked up interest and operatorship across three petroleum prospecting licenses. The licenses are located more than 150 kilometres offshore in the Gulf of Papua at water depths averaging more than 1500 metres.  

These blocks are ideally suited to ExxonMobil’s deepwater capabilities and strengths. We are continuing to analyse seismic data purchased in 2016 and our work program includes shooting additional 3D seismic in the 2018 timeframe.

Expansion Opportunities - P’nyang

We are continuing to move forward and make progress on the P’nyang development. The P’nyang field is located in the Western Province and the development would involve a 220 km pipeline to connect the gas production to the existing PNG LNG pipeline that goes from Hides to the LNG Plant at Caution Bay. 

We are in the middle of constructing a well pad to accommodate the drilling of a well, which is planned for the second half of 2017. 

Upon completion of this well and certification of the reserves we hope to be able to move forward with the development concept and licenses. 

Expansion opportunities - InterOil acquisition

We are very excited about the recent acquisition of InterOil which will enhance ExxonMobil’s successful business in Papua New Guinea, bolstering our strong position in LNG, and onshore PNG exploration acreage. 

We believe our involvement in the Papua LNG project will complement the operator Total and take advantage of synergies with PNG LNG to realise time and cost reductions that will benefit the government, co-venturers, landowners and communities. 

While we have not been in the Papua LNG project very long we have been impressed with Total’s commitment to the same values that we hold in ExxonMobil. 

We are very confident that as the operator of the project their focus on safety, integrity, environment and the community will ensure they will enjoy the same successes that we have with the PNG LNG project. 

We are fully supportive of Total’s plans and could not be more pleased with being a joint venture partner with them and Oil Search. 

In addition to Papua LNG, we are continuing to plan for future activity on significant new acreage acquired in the acquisition.  

Creating lasting opportunities for PNG

I believe ExxonMobil and PNG LNG are playing a very important role in PNG's long-term development. We have shown what is possible when you bring global experience and local talent together to create something really special for everyone involved. 

We are deeply committed to delivering lasting opportunities to the people of Papua New Guinea.  
We do not take lightly our responsibility to ensure the benefits of PNG LNG and any future endeavors, are shared with the nation to help drive its growth further.

Thank you.