developers losing patience

By Alex Tilbury
BRISBANE, Feb 27 AAP - Time is running out for potential
customers to secure gas from the $6-7 billion Papua New Guinea gas
project as its developers are losing patience with the market.
The project partners, including operator ExxonMobil, remain
confident there were enough customers in Queensland and the
Northern Territory but they cannot wait forever.
The pipeline was dealt a blow late last year when foundation
customer Australian Gas Light Co announced an alternative long-term
supply deal.
Oil Search Ltd managing director Peter Botten said today the
pipeline was viable and there was enough customers in the market to
underwrite the deal.
But he said potential customers need to step forward as the
patience of the PNG Gas project partners was wearing thin.
"How do you get these guys to commit? I suppose the issue for me
and all of the project partners is how do you make people realise
that the window is not open forever?"
He said the project partners were losing patience especially
with Queensland customers who risked losing a competitve energy
source.
The project - which has been on the drawing board since 1996 -
had a capacity of 300 petajoules per annum (PJPA), and had so far
secured total commitments to take 60-75 PJPA from TXU, CS Energy
and MIM Holdings Ltd.
But commitments for 100-150 PJPA were needed to proceed to the
$US50 million to $US70 million Front End Engineering Design (FEED)
stage.
The FEED stage would last about a year and lay the foundation to
construct the 3,000 kilometre pipeline from the PNG highlands to
Weipa in north Queensland.
Potential customers are Alcan's bauxite and alumina operation on
the Gove Peninsula plus Energex and Comalco's alumina refinery at
Gladstone and Incitec Ltd, in Brisbane.
The project was close to announcing a move to FEED before
Christmas, when AGL pulled the pin.
"I have no doubt that we would be in FEED now had AGL not made
its decision. The timing was missed by only 20 days," Mr Botten
told AAP.
He also told delegates at a power and gas conference in Brisbane
today that three viable pipeline routes had been identified in
pre-FEED studies.
Work had also identified that building an onshore gas processing
plant to expand the existing Hides and Kutubu fields was cost
effective and quicker to build.
Mr Botten said the pipeline deal was a company-maker for Oil
Search - which completed a $1.5 billion merger with Orogen Minerals
NL last year - but it did have other projects.
"I can get a gas processing plant and a gas project up on one of
our fields in PNG in three years guaranteed, so why do I sit here
taking hits in the market when I have other development options
that are credible and guaranteed to deliver value in a period of
time?" he asked.
Mr Botten also flagged the company would announce "a substantial
profit from doing business in PNG" next Wednesday.
"We had record revenue, production was up, the oil price is
fantastic and we have the expanded asset base since the merger," he
told AAP.
The PNG Gas partners are ExxonMobil with a 38.9 per cent equity
interest; Oil Search (45 per cent); ChevronTexaco (9.7 per cent),
Japan PNG Petroleum (3.4 per cent) and MRDC, a PNG state entity
representing landowners (three per cent).
AAP alt/sh