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Speeches, 16 June 2015

PNG LNG: A platform for future growth in Papua New Guinea

UK-PNG Trade and Investment Forum, Andrew Barry, Managing Director, ExxonMobil PNG Limited

Honorable Prime Minister, Ministers, High Commissioners, (other dignitaries) and distinguished guests, it is a great privilege to be here with you today.

Let me start by saying I am passionate about PNG and believe the future for the country is a bright one.

For someone with over 20 years of experience working primarily in international roles related to LNG production and sales, PNG is an exciting place to be!

The PNG LNG Project’s reputation is one of safety, sound environmental management, continuous and consistent community engagement, and on time performance – a true reputation for ethics and excellence. This reputation was built through the hard work not only of us, but of the PNG government, our co-venture partners and the landowners and communities in and around the areas in which we work.  There are a number people here today who contributed directly to the Project’s success.  We are all fiercely proud of our reputation - and work hard to protect and strengthen it.  

As we look towards the future, let me first take a few minutes to give you an overview of the project before I reflect upon what has made PNG LNG the success that it is, and how we can build upon this success to create a future that every Papua New Guinean so richly deserves.

In 2010, ExxonMobil PNG Limited started construction of the $19 billion PNG LNG Project, an integrated development that includes gas production and processing facilities, onshore and offshore pipelines, and a LNG plant. Our facilities and pipelines traverse five provinces from the Highlands to the coastal waters outside Port Moresby – some 700 kilometres in distance. In addition, four custom-made LNG Tankers were built to deliver PNG LNG gas to four major customers in the Asia-Pacific. Three of those tankers have been delivered and are in service, the most recent being the Papua that began its delivering cargoes into China earlier this year.

The construction phase of the project was completed in 2014, months ahead of schedule. First LNG flowed in April, quickly followed by the loading of the first cargo in May. Incredibly, just over one year later, we have loaded our 100th cargo which we celebrated just last week. The significance of delivering ahead of schedule cannot be understated and required the cooperation of the government, landowners and communities. 

By any measure, the scope of the PNG LNG Project is large. In fact, there had never been a project of a similar scale or scope undertaken anywhere in Papua New Guinea.

We are tapping natural gas reserves from multiple fields spread across over almost 200 kilometers. We built a one billion cubic foot per day gas-conditioning plant in the mountainous highlands, and a 6.9 MTA LNG plant northwest of Port Moresby. To connect these two points, we built a 700 km long pipeline with 300 of those onshore rising from sea level to 2,700 meters through very challenging terrain. This is more than twice the height of the highest mountain in the UK and with mother-nature lashing us with torrential rain regularly along the way it was certainly an engineering feat of massive proportions.

Logistics were also challenging. We had to transport thousands of loads of equipment over the Highlands Highway which at 800kms would take on average 5 days without the case of landslips or adverse weather along the way. 

To bring some of the more sensitive equipment into the highlands we built the longest air strip in PNG at Komo and received 88 Antonov loads to complete the construction of the gas conditioning plant at Hides.

The good news continues, for after 12 months of production I can report our facilities are operating at high levels of efficiency, above our expectations.   Our workforce of more than 2100, with 70 percent Papua New Guinean, has proved that we can deliver a reliable source of energy to the world. Their dedication and focus on safety and operational excellence has been outstanding. And I must say, that one of the most satisfying parts of our journey is to see the enthusiasm and dedication of our Papua New Guinean workforce. We have put them through rigorous training and development and we could not be happier with their progress.

Standing up here, the other achievement that I could not be prouder of is our safety performance. Since startup we have work more than 48 million hours without a lost time incident free or an incredible 25,000 years for a single person not needing to take time off work as a result of an injury. Just think about that, and reflect on whether you think you could work at home for 25,000 years without sustaining a significant injury. Truly an outstanding achievement for the team and in particular our Papua New Guinean work force who typically put a hard hat and safety boots on for the first time when they started with us.

In essence the PNG LNG Project has demonstrated to the world that this rapidly developing and resource-rich nation is an attractive investment destination.

Papua New Guinea is a truly special place – not just because of its growing role as a source of energy for the world, but also for its history, its diverse and rich biodiversity, and the determination of the Papua New Guinean people to progress national development.

As I have said, 2014 was an incredible year for Papua New Guinea and as we reflect on the PNG LNG Project successes it is more than just the physical assets that were built, or the revenues that flow. The Project has and will continue to build intellectual and skill capacity within the country.

During construction we employed more than 9,000 Papua New Guineans and delivered more than two million hours of training through some 13,000 training courses.

We have worked with local suppliers, which has resulted in an in-country spend of almost 11 billion Kina (over 4 billion US dollars).  We have also invested more than 650 million Kina (approximately 240 million US dollars) in community programs and infrastructure, with a particular focus on education and community health. Programs that are very much aligned with the governments key initiatives.

There is no doubt that the current low commodity prices will challenge resource sector dependent economies such PNG. 

What is important to reflect on is the long term nature of investments such as the PNG LNG Project. Commodity prices are cyclical and as long as the fundamentals are strong, like they are for this Project, the benefits will remain for partners, lenders and government.

The PNG LNG Project has created a reputation that is not only enjoyed by Project participants but also by the wider industry. While this reputation is backed by the Project execution it is also important to reflect on the buyers and project lenders who were also key to its success. 

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. 

The PNG LNG project originally bought together 24 lenders including 6 Export Credit Agencies and 17 financial institutions, and ExxonMobil as a co-lender. On buyer side we had the support of key long term Japanese, Chinese and Taiwan buyers who put confidence in ExxonMobil, our co-venture partners and PNG to deliver on the LNG needs in their country.

But a word of caution is needed. When things go as well as they have for the Project some may take the view that it was easy – it was not. Project success took a massive effort in terms of human resource, financial capital, project management, and technical know-how to achieve. 

Having financially and technically strong partners with the global experience in the industry such as ExxonMobil along with the capabilities of our co-venture partners will continue to be the key to success. 

The PNG government deserves much praise for its efforts to deliver a stable political environment and legislative frameworks that encourages new investment.  In addition to its work to increase revenue transparency and accountability as well as putting in place mechanisms that support the country’s development aims are helping to build a solid reputation for PNG as an attractive country for future investment. 

ExxonMobil PNG believes there is significant ongoing investment and growth potential for our business in PNG.  We are investing in new exploration and drilling to confirm resources for the potential expansion of the PNG LNG project and we could not be more excited about the opportunities.

We are also working closely with the government to provide gas for domestic use and power generation. We have two power projects under development with the first expected to be online within the coming weeks followed up by a second phase next year.  Both projects are important to supporting the government’s plans to improve the capacity and reliability of power supply for Papua New Guineans which will in turn facilitate the growth of businesses within the country. 

In conclusion, ExxonMobil is committed to PNG for the long term. We understand our corporate responsibilities and are committed to improving the lives of Papua New Guineans. We appreciate and do not take for granted the strong support and relationship we have with the government, landowners and communities. 

We are working hard to ensure that production operations maintain the highest level of performance We also are committed to providing a work environment where Nobody Gets Hurt and we operate in an environmentally responsible manner Protecting Tomorrow Today.

The future of PNG is bright and we continue to be encouraged by the leadership and vision of the Government. We are partners in the project, in driving economic growth, in the community and in a shared future.

Thank you.