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Speeches, 21 May 2014

PNG LNG update: Where are we and where to from here?

Australia PNG Business Forum, Dan Lillig, Technical Manager, PNG LNG Project

Good afternoon everyone. It’s a pleasure to be here this year to update you on the PNG LNG Project – and what a year this last one has been.

Many of you will know Peter Graham, who has spoken at this conference several times. He really wanted to be here to talk with you but you may know that there’s a big ship moored at our marine terminal just out of Port Moresby and he needs to be around to see it off.

I’m the Technical Manager for the Project and have been working on this project for two years.  My initial work in support of PNG LNG was in 2008 as the Project was preparing to move towards full funding, and at that time, the completion of the Project was something a long way off in the distance.

So it is with great pride that I stand here today, with the Project almost complete.

I know there were people who thought that this moment might never come, considering the immeasurable challenges that the team worked to overcome. At times – very few times, I should add – I thought that the obstacles were too great. But, with sound engineering, planning, creative solutions and an amazing team of dedicated people, we are almost there.

It’s also something that could not have been done without the support of the government and of the Papua New Guinean community. I would like to take the time to thank everyone in PNG – because we wouldn’t be where we are today without you all.

For the last few months, we have been gradually handing our facilities over from the construction teams to the production team – the production team being the group of people who will manage these facilities and deliver gas to our customers for the next 30 years.

They have taken over the facilities with gusto – although I’m sure quite a few of them are only getting a few hours of sleep each night as they put in their all to make sure the facilities are ready to deliver our first cargo of gas.

So where are we at?

Let me start at the LNG Plant.

This is a photo of the ship that is at our marine terminal, loading the first LNG cargo which will head to Japan in the coming days to our first customer, TEPCO. The ship, the Spirit of Hela is almost 300 metres long and around 12 storeys high. It has capacity to hold 80,000 tonnes. We expect to have a tanker come into our terminal every four to six days, on average, to load LNG.

Around the rest of the LNG Plant, our two tanks, each large enough to hold a Boeing 747, were completed months ago.

Train 1 was finished and handed over to us by the contractor in January this year, and Train 2 was handed over in March.

The LNG Plant occupies 685 hectares and at our peak we had 11,000 people working there. Can you imagine feeding that number of people? We can – and we know that it takes around eight tonnes of meat and a tonne of rice to feed that number of people each and every day.

Connecting the LNG Plant to our facilities in Hides is a 407-kilometre offshore pipeline, which was finished in December 2012.

This connects to a 292-kilometre main pipeline which runs onshore from the Omati delta all the way up to the Hides Gas Conditioning Plant. The pipeline was completed in February this year, but not without its challenges. This main gas pipeline descends from the mountains along ridges and across major rivers, in remote areas with few pre-existing roads. The soils vary widely with volcanic soils providing a soft surface that made laying a heavy pipeline difficult.

In some areas, we had to bring in pipe via helicopter because the ground just wasn’t able to support heavy trucks. You can see in this photo here the telepheric cable system that we used in one particularly steep area.

But with a workforce of around 5000 Papua New Guineans working on the onshore pipeline alone, in addition to the expatriate staff, we did it.

And we don’t have just one pipeline – we have a couple more including a 109 kilometre line that transports condensate from the Hides Gas Conditioning Plant to the Kutubu Central Processing Facility, and an 18 kilometre spineline which connects the Conditioning Plant to our wellpads.

All together, these onshore pipelines have enough steel to build around 20 Eiffel Towers.

We are now focusing on restoration work along the pipeline right of way to allow grasses, trees and other flora in the area to return naturally, and I have been incredibly impressed with how quickly vegetation has returned – but not surprised given the rain that flows through these areas.

To the Hides Gas Conditioning Plant now, to which we first introduced our own gas from Hides on 20 March this year. What an exciting day that was! But of course it signaled a lot of work to come as we prepared the site for commissioning and startup. Our teams have worked tirelessly to ensure that it was done safely.

Our Operations and Maintenance trainees have been right in the thick of it, learning from experienced mentors. Here’s a photo of two of them, Roger Pobaya and Vincent Ipoya, opening the valve of the first well. You cannot begin to understand how proud they both were to participate in this milestone, which they described – in their own words – as “history-making”.

This facility is now sending natural gas down the pipeline to the LNG Plant, and condensate to the Kutubu facility. The condensate is exported via Oil Search’s Kumul Terminal.

Drilling is ongoing. The PNG wells have to produce at very high rates reliably for a very long time. A major challenge of drilling in the Highlands is the presence of porous limestone near the surface, elevated pressures encountered during deeper drilling operations, pressure regressions and challenging wellbore stability. This in turn has required more capable drilling rigs and more robust drilling assemblies than used previously in PNG. 

We continue to utilise our two custom-built drilling rigs. To date, six gas wells needed to support production are complete, with the final two wells at Hides currently being drilled.   

The Komo Airfield was finished early last year, but I know it still generates interest. Building Komo involved bringing in 400,000 cubic metres of gravel and aggregate. To move all the earth at the airfield involved our haul trucks travelling the equivalent of 32 trips around the earth.

In order to prevent the Antonov aircraft from slipping in heavy rain, grooves had to be saw-cut into the runway. We needed 3,900km of grooving along the complete runway surface. This is the same as cutting a groove from Perth to Sydney.

In total, we completed 88 Antonov aircraft deliveries of heavy and sensitive equipment flown into Komo Airfield.

This facility is now being used to transport in our workforce and we are in discussions with the government about future use of this airfield.

While I am incredibly proud of all this work that has been done, I think the biggest achievement we have made has been our investment in people.

There is no doubt that for many of our Papua New Guinean workers, the PNG LNG Project is positively changing and enhancing their lives. Our project is the largest investment ever undertaken in Papua New Guinea. While mining and oil have been around for decades in the country, this is the first LNG project. With little industry experience and the size and scope of the project, finding a suitable workforce was a challenge.

While we’ve brought in workers with pre-existing skills to help with the technical aspects of the Project, we’ve spent a lot of time – over two million hours – training 10,000 Papua New Guineans to work on this project.

As I mentioned earlier, our Operations and Maintenance trainees are now at the Hides Gas Conditioning and LNG Plants learning on the job. In one room alone, we calculated that they are being mentored by people with over 200 years of experience collectively. So they’re in good hands, and I can’t wait to see the day when they’re training other Papua New Guineans in the oil and gas industry.

Of course, our workforce has reduced significantly, but we’re confident that the skills that we have provided will put them in a good position for other jobs in PNG and globally if they choose.

Local businesses have also benefited from their involvement in the Project. We continue to invest in PNG businesses and have so far spent more than 10.71 billion Kina in Papua New Guinea.

Businesses have lined up at the door of the Project-established Enterprise Centre to receive training and mentoring services, and the Centre has trained more than 17,000 Papua New Guinean entrepreneurs to date. The Centre has provided the equivalent of more than 9,700 training days to Papua New Guinean businesses. 

Finally, our commitment to investing in local communities has seen us support programs focused on education, health, the environment, agriculture and women’s empowerment opportunities.

These are having important impacts in communities around our Project area.

So where to from here?

We still have work to do. With our first cargo just a few days away from leaving PNG, our first priority is safely finishing the remaining activities to reach full production rates.

From then on, it’s about ensuring that we can reliably and consistently produce LNG for our customers. This is critical as we only have a few days of storage in our tanks. It’s also critical as we demonstrate to the world that Papua New Guinea can deliver.

We also continue to focus our efforts on ongoing exploration activities to add additional resources.

Wherever ExxonMobil works globally, we work with government and civil society stakeholders to promote transparency and good revenue management practices. 

Transparency strengthens accountability and good governance, supports maintenance of a country’s investment climate and promotes stability while fostering dialogue and mutual education on matters that are not always understood. Transparency is good for business.

In PNG the government should be commended for achieving candidacy status in the Extractive Industries Transparency Initiative, or EITI, in March this year. While becoming a candidate marks a significant milestone, the real work and effort remains ahead to achieve full status as an EITI compliant country.

Together with a well-structured and governed sovereign wealth fund, PNG EITI can play a positive role in ensuring benefits from resource projects support PNG’s development priorities.

In addition to our support for EITI, we are supporting the government with its Clan Vetting Program, an important step in ensuring that revenues from the Project reach the rightful communities. The Department of Petroleum and Energy has put a lot of effort into this area and we are confident that this will be done fairly and equitably.

Papua New Guinea is a resource-rich nation and uniquely positioned to deliver natural gas to meet the growing demand of Asian markets over the long term. As Asia grows, revenues derived from the PNG LNG Project will provide a long term financial basis from which PNG’s development can continue.

The PNG LNG Project demonstrates to the world – particularly the investment world – exactly what Papua New Guinea is capable of. This is an important step for Papua New Guinea as it means increased investor confidence, further foreign investment, and economic growth for the country.

On behalf of the PNG LNG Project, thank you for your time.