Good afternoon everyone. It is a real pleasure to be here today on behalf of the PNG LNG Project.
My name is Yow-Yeen Lee and I was responsible for building the 6.9 million tonne per annum LNG Plant just outside of Port Moresby in Papua New Guinea. Decie Autin, the Project Executive, would have liked to be here today, but a new job back in Houston has meant some last minute changes in her availability.
I only have 10 minutes to talk about a project that has been almost a decade in the making and that involved 55,000 people and some of the most challenging terrain – and wettest weather – I’ve ever seen. I hope that I have a chance to talk more about this significant LNG project during the Q&A session.
Given the title of this panel session – “Which projects are destined for success in the Asia market?” – I’d like to use the PNG LNG Project as a case study of a successful project, and use some of the highlights and lessons learned to illustrate how we achieved this success.
Despite the challenges we faced, we delivered the PNG LNG Project ahead of schedule – and there aren’t many other projects in the region right now that can say that.
As some of you may know, an earlier vision of the PNG LNG Project was very different from what we have today. Originally, the idea was to build a 3,000-kilometre pipeline from the Southern Highlands that would connect with existing gas infrastructure to serve customers in Australia. But as we considered the technical challenges and the burgeoning opportunities in global markets, it became clear that for the people of Papua New Guinea and for our partner companies, there would be tremendous value to pursuing a more substantial investment and a more long-term presence.
So we changed our plans – and that flexibility was crucial.
What we have today is more than 800 kilometres of pipeline – both onshore and offshore – connecting the wellpads and a gas conditioning plant in the Highlands of Papua New Guinea with a world-class liquefaction plant located just outside of Port Moresby. The Project has capacity of 6.9 million tonnes per annum and has four long-term customers in Asia: Sinopec, TEPCO, Osaka Gas and CPC Corporation. Because we started up ahead of schedule, our first shipments of LNG have been on the spot market. I am delighted to say that we shipped our first LNG cargo under a long-term contract to CPC earlier this month.
So what opportunities were we seeing back in 2007 when negotiations began with the PNG Government for an LNG project?
Our gas marketers saw a window of opportunity in the rapidly growing LNG market presented by both demand growth and the winding down of existing LNG sources around 2013-2015. Our goal was to bring PNG LNG supplies to the market in this period ahead of other proposed projects in the region.
Right from the start we were aware that timing was critical to our success.
Our gas marketers worked with our partners, the government, the financing entities and other key stakeholders, and broke the land speed record for finalising sales agreements. They locked in long-term contracts with four customers.
These efforts have played out well. Each year ExxonMobil conducts a comprehensive analysis of energy trends, which includes tracking the growing demand for natural gas in Asia and assessing the opportunities to supply that demand with LNG. As reflected in these ExxonMobil energy outlook projections from 2014, demand for natural gas is anticipated to increase 170 percent in Asia over the next 30 years, with the PNG LNG Project ideally placed geographically and technologically to serve this market.
Our finance team raised, what was at that time, the largest project finance deal in history – despite being in the midst of the global financial crisis.
Normally with a major project like this, we would have our customers signed up and our Engineering Procurement and Construction, or EPC, contracts in place, before we approached lenders. But to meet our timing objectives, we had to run our engineering, our marketing and our financing in parallel.
In doing so, we had to convince customers, investors and lenders that we could install hundreds of thousands of tonnes of steel pipe and modern industrial plant equipment into one of the most remote, rugged, culturally and politically complex, and beautiful places on earth – on time – and make it operate efficiently for decades, and do so in an environmentally responsible and culturally sensitive manner.
We had to convince them that we could do it – and then we had to do it.
Execution was the next challenge. Parts of the Project are located in remote areas and infrastructure such as roads and bridges could not cope with the very large components that we needed to bring in.
For example, few of the 98 bridges along the Highlands Highway were rated for heavy loads exceeding 50 tonnes, even though some of our equipment weighed over 60 tonnes. We had to think creatively, build additional infrastructure, and even fly some pieces in on the enormous Antonov aircraft via a purpose-built airfield. In the end, we safely transported over 16,000 loads along the highway, which was closed for more than 200 days due to weather and incidents.
The size and scope of the PNG LNG Project would overwhelm any country’s government, but the PNG Government stepped up and delivered. Without their support we would not be where we are today, and I was pleased to hear Minister Duban speak earlier today about the oil and gas industry in Papua New Guinea and to see how committed the government is to making this a successful and sustainable industry for the long-term.
We also worked closely with the communities in which we constructed the Project facilities. Papua New Guineans are connected to the land spiritually and traditionally, and this guided our approach to community relations. Our team of hundreds of land and community affairs staff met with communities daily in informal and formal settings. The relationships they developed enabled the Project to be completed. This took some time, but through listening and understanding the concerns of our neighbours, we were able to work with them to achieve common goals.
There are many more examples I could talk about, but in the limited time I have, I will say that the success of the Project really came down to disciplined project management, collaboration, sound engineering and, at times, creative solutions.
Flexibility was also key to the Project’s success. Each time we came across an obstacle, we stopped, examined it and thought about how we could approach it differently. Adapting to the environment of Papua New Guinea and being flexible in the way we approached issues were critical success factors. Our success was also made possible by the world class resources and experts we were able to tap into from ExxonMobil’s global operations.
We used local resources where we could. More than 9,000 Papua New Guineans were employed in Project activities, and we delivered more than two million hours of training. Not only was this key in garnering support for the project from the country, but it has also helped to establish a skilled workforce for the future. Papua New Guinea can now develop and capture the opportunities that its strong economy presents.
In conclusion, I am incredibly proud to have been part of this project. A combination of foresight, careful planning, and disciplined execution has made it a success.
Papua New Guinea is a resource-rich nation, and it is 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 Papua New Guinea’s development can continue.