Good morning everyone. It is a real pleasure to be here today on behalf of the PNG LNG Project.
I want to start by saying how proud I am to be part of this industry at this point in time. Anyone who truly understands the enormous energy challenges facing the world today will appreciate the important role natural gas is playing in overcoming these challenges.
A country’s progress can often be determined by how well it manages its natural resources. Over the past century there have been many nations that have had their fortunes changed by the men and women of our industry. We are seeing this today in North America with shale gas and here in Australia with coal seam gas and LNG, and we are certainly seeing it in Papua New Guinea.
Before I start, I’d like to quickly say happy anniversary to our local affiliate, ExxonMobil Australia, and its Gippsland joint-venture partner BHP Billiton. Next month marks the 50th anniversary of their historic JV.
50 years – now that’s a partnership! And I understand this Saturday (April 12) is the 45th anniversary of their first supply of natural gas to Melbourne. A lot of oil and gas has gone down the line since, and over the years this has transformed the Australian economy.
In PNG we have embarked on a similar journey. And we are eagerly anticipating the delivery of our first LNG cargo.
The PNG LNG Project truly is an engineering wonder, not so much because of what it is, but rather where it is and how we have built it. This is PNG’s Snowy Mountains Scheme. It demonstrates how world-class engineering and project execution can really lift a developing economy.
This is a multi-faceted project and believe me, I could talk for hours and hours about any aspect of it. But I don’t have hours so I’m going to briefly tell the story of this Project from my perspective.
The Project objective is to commercialise natural gas resources from Hides, Angore, Juha, and associated gas from the existing oil fields by drilling, producing, and transporting it over 700 kilometres to the coast near Port Moresby, then liquefying it to allow shipment to LNG customers.
Right from the start we were aware that time was critical to our success.
Back in 2007 our gas marketers saw a window of opportunity in the rapidly growing LNG market presented by 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.
Now we all know that the gas business is all about relationships – relationships with our communities, our customers, our joint-venture partners, and governments. These are long-term relationships where gas marketers are essentially matchmakers, linking suppliers with customers who are often half a world away.
There were two big advantages we had with PNG – the place and the people.
When you get to know Papua New Guinea, you realize what a truly unique and amazing place it is. Let me take a minute to tell you about the PNG that I have come to know and appreciate over the six years I have been working on this Project.
My husband and I are avid bird watchers and to bird watchers, PNG, particularly the Highlands, is Disneyland. While staying at Ambua Lodge, in the Highlands, about 2 hours from Hides, we saw 14 different species of Birds of Paradise. In one tree alone, we saw nine different species at one time, including this Ragiana’s Bird of Paradise and my favorite, the Blue Bird of Paradise, a truly amazing and beautiful bird.
Similar unique experiences have been reported by divers, hikers and nature lovers in general.
PNG offers rare opportunities and many of these have unfolded for those of us fortunate enough to have worked on this Project.
We knew from the outset that with this project we had an opportunity to show the world the beauty and potential of this country and its people.
There were many skeptics and this was not surprising because we faced formidable challenges.
We had to convince gas customers, investors and lenders that we could install hundreds of thousands of tonnes of steel pipe and modern industrial plant 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.
Normally with a major project like this, we would have our customers signed up and our EPC (Engineering Procurement and Construction) 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.
Our gas marketers broke the land speed record for finalising sales agreements.
Our finance team raised, what was at that time, the largest project finance deal in history in the midst of the global financial crisis.
The support of the PNG government and the communities was crucial in making this happen.
We took the lenders on a tour of the country, meeting politicians and visiting some of the communities. They were overcome by the reception they received.
Executing the project on the ground also required strategic planning.
Most of the project infrastructure – the gas plants, pipelines, and the ships that will take the gas to the market – consists of proven, fit-for-purpose technology.
However, the logistics of getting these facilities into place, on time, in PNG was another matter altogether.
We started with a very active early works program prior to the Final Investment Decision. The objective was to do what we could to reduce the Project’s critical path schedule. We wanted to avoid having our drilling and construction contractors competing for the same limited existing logistics infrastructure in the field.
We worked to provide flexibility and contingency by opening three logistics paths to the remote Project areas:
- the existing 800 kilometre highway from Lae;
- a route from the south through the Pai Inlet in the Gulf of Papua;
- and the establishment of an air bridge to the HGCP by building an airfield at Komo to allow the use of Antonov cargo planes.
We also brought in some equipment using L100 aircraft into the Tari airport. Despite the need to overcome a range of issues and uncertainties, this combination of access points proved successful in meeting our logistics needs. I am really proud of what we have achieved in a few short years despite terrifically challenging conditions, including record wet weather, land access and logistics issues.
Our teams are now in the process of handing over to the production team.
We got here because of outstanding collaboration, sound engineering and some interesting and creative problem-solving at times.
I’d like to take a few moments to tell you about some of our achievements.
Overall, we are more than 95% complete, and we remain on track for first delivery of gas to our customers by mid-year.
ExxonMobil is delivering this project on time and essentially on budget, in a field where many others cannot say the same.
Let me start in reverse at the LNG Plant and work my way back up to the Highlands.
For the LNG plant we have opted for two trains using the Air Product’s Propane / Mixed Refrigerant Liquefaction Technology. We have completed the north and south LNG tanks, as well as the 2.4 km long jetty. Train 1 was handed over to us by the EPC contractor, Chiyoda-JGC JV, earlier this year, and they are in the process of handing over Train 2.
The 407-kilometre offshore pipeline was completed by Saipem at the end of 2012, and was laid using two barges, one for the shallow waters and another (Semac) which operated in the deeper waters (around 100 m) between the Omati River delta and the LNG Plant.
Where we had a lot of fun (read: challenges) was with the onshore pipeline systems, built by our EPC contractor Spiecapag. We don’t have just one pipeline, we’ve got:
- a 292 km, 32 to 34-inch gas pipeline from the Hides Gas Conditioning Plant to the Omati Landfall where it meets the offshore pipeline;
- a 109 km, 8 inch Condensate Line from the Hides Gas Conditioning Plant to Kutubu;
- and an 18 km, 22 inch Spineline connecting the well pads to the HGCP.
The main gas pipeline from Hides to the coast descends over 2700 metres from the mountains, along ridges and across major rivers, in remote areas with few pre-existing roads. Remember we were traversing terrain where there was no path from the coast to the highlands. We sent multi-disciplinary specialised teams into the area to map and survey the terrain and identify potential anomalies.
We also used the latest LiDAR technology and geotechnical coring to capture the ground profile and build a digital model of the terrain. This helped us to identify fault zones and design the micro-alignment route of the pipeline.
The high-pressure pipeline is internally coated for flow enhancement and is buried along the entire route to enhance safety and integrity. The design and execution of this pipeline was critical to our success.
The main gas pipeline construction is now complete, and we are finalising restoration work along the pipeline right of way to allow grasses, trees and other flora in the area to return.
The Hides Gas Conditioning Plant, where we will be producing about one billion cubic feet of gas a day, is in the final stages of completion with the gas flowing into the plant for final commissioning of the first of three compression trains. The large components for this plant were flown into the Highlands via the Komo Airfield.
Drilling is ongoing. The PNG wells have to produce reliably, at very high rates for over 30 years. These development wells are the first ‘big-bore’ wells to be drilled in PNG with seven inch tubing strings to support the high flow rates needed to fill the LNG plant. The initial drilling program involves 11 wells.
Major challenges in drilling these wells includes the presence of porous limestone near the surface, elevated pressures encountered in deeper reservoirs, pressure regressions and challenging wellbore stability.
These conditions require more capable drilling rigs and more robust drilling assemblies than used previously in PNG. We are utilising two custom-built drilling rigs. The rigs were built abroad and shipped to PNG, then subsequently road transported in over 220 loads per rig via the Highland Highway. Six gas wells at Hides are complete.
As I mentioned earlier, all of this work is being done in remote locations where access to infrastructure is limited. We have transported over 14,000 truckloads up the Highlands Highway – which stretches from Lae on the coast 800 kilometres into the highlands.
We recognised early on that the highway was not a feasible option for transporting the large and sensitive equipment required to build the Hides Gas Conditioning Plant. To give you an example, while transporting those 14,000 loads, the highway was closed for more than 200 days due to weather and incidents. There are also 98 bridges along the highway, many not rated for our heavy loads exceeding 50 tons.
So we decided to build an airfield.
We’re well aware there are those who doubted that we could build an airfield in a remote, mountainous part of Papua New Guinea. It certainly was an ambitious project.
But we did it.
It involved moving a lot of dirt and volcanic soils, while bringing in over 400,000 cubic meters of gravel and aggregate. 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.
We completed 88 Antonov aircraft deliveries of heavy and sensitive equipment flown into Komo Airfield over 100 days. We are now bringing charter flights into Komo to move our workforce in and out of the highlands.
The support of the PNG government through all of this has been invaluable. As a partner in the project, they have really stepped up and provided help with visas, infrastructure development, health monitoring, permits and all the other necessary elements of completing a project of this scale. This is a big ask of any government.
Before I finish, I wanted to talk briefly about the human side of the Project.
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 some skilled workers to help with the technical aspects of the Project, we’ve spent a lot of time – over two million hours – training over 10,000 Papua New Guineans to work on this project.
Local businesses have also benefited from their involvement in the Project. We continue to invest in PNG businesses and have so far spent almost $4 billion US dollars with local companies.
Businesses lined up at the door of the Project-established Enterprise Centre to receive training and mentoring services. The Centre has trained more than 16,000 Papua New Guinean entrepreneurs to date as well as providing more than 9,000 training days and 1,200 mentoring days to Papua New Guinean businesses.
Finally, I’ve been very lucky to personally witness and experience some of the results of the community programs that we have supported. Our community investments are focused on education, health, the environment and agriculture as well as women’s empowerment opportunities, a subject that is particularly close to my heart. Just a few weeks ago, EMPNG initiated the first-ever Global Women in Management program to be held in PNG, and I’m really excited to see the outcomes.
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. Our joint success can usher in a new era of development for this diverse and strategically located nation.
I am confident that someday in the near future, I will return to that tree in the Highlands to introduce my grandchildren to the Bird of Paradise and to witness the transformation that the PNG LNG Project brought to the country and people that I have grown to admire and respect.