Thank you Andrew, it’s a great pleasure to be in Papua New Guinea to discuss ExxonMobil’s exploration activities and our commitment to this very beautiful and culturally rich country.
There are real, long-term opportunities for us to not only grow our business in PNG, but to draw on the success of the partnerships Andrew mentioned and help improve access to energy for the people of Papua New Guinea and across the Asia-Pacific region. The full extent of Papua New Guinea’s energy resources is still unknown – and exploration is where it all begins – so I arrive in Papua New Guinea with a sense of excitement.
There are very few industries that compare with the energy industry in terms of size or scale. Few that operate on time horizons as long or far-reaching as ours which is usually decades. Few face the same combination of risk and complexity. And I believe there is no other industry that can offer the opportunity to deliver so many benefits to people around the world on such a massive scale. These are the factors that make the energy industry so important and dynamic.
ExxonMobil is a truly global business with active exploration in multiple countries around the world, across all resource types and geographies.
We maintain a large, diverse, and balanced portfolio of opportunities to ensure selectivity and profitable growth through a wide range of investment and geopolitical environments. We choose superior exploration sites, which means our portfolio encompasses high-quality opportunities that will ultimately add significant value to our existing production portfolio.
We also have a strong record of developing and commercializing the most challenging opportunities, and we are an industry leader in this regard.
In the decades ahead, the world will need us to develop new technologies and new supplies of energy because the global demand for energy is on a trajectory to grow – and to grow significantly.
ExxonMobil’s global outlook for energy predicts that by 2040, global energy demand will increase by about 35 percent, driven primarily by global population growth and economic expansion.
Natural gas will be the fastest growing major energy source with global demand projected to rise by close to 65 percent between now and 2040. And LNG is essential to meet that demand. In the fast-growing economies of just the Asia Pacific region, LNG demand is expected to grow by more than 60 percent over the next decade and account for about two-thirds of global demand growth. In other words, the long term opportunity for PNG to capture additional value through LNG is very strong.
As you know, we are living through a period of extraordinary transformation in the energy industry. We are dealing with an evolving and challenging environment, as global markets are adjusting to vast, new supplies of oil and gas that were made possible due to the application of new technologies in North America. As we look forward, it is the most attractive and competitive resources that will win the competition to meet the global demand.
So, how will we meet the growing global demand for oil and gas while remaining competitive? Technology is the key.
Our approach is to apply research and technology to efficiently find, develop, and produce resources. Our search can take us to some of the most challenging and remote environments on the planet - and few compare to exploration in PNG with its many unique challenges.
Predicting the subsurface geology of the Highlands is one of the most technically challenging activities our geoscientists have undertaken, particularly when compared to other regions that we are exploring in around the world.
ExxonMobil’s cutting-edge technologies provide value throughout the entire exploration process - from early identification of potential resources to reservoir modeling, drilling and completion of wells.
In recent decades, 2D and 3D seismic technology has been central to most onshore and offshore global exploration programs. By contrast, the PNG Highlands seismic data, while still heavily utilized, does not yield the same level of information because it is inherently challenged by the rugged onshore terrain and subsurface complexity.
We have to use a multitude of different imaging techniques to develop a picture of the subsurface. Despite the challenges, this integrated interpretation approach provides an effective means to execute a successful exploration program.
Another unique challenge in PNG is the extreme elevation differences in the mountainous Southern Highlands region (1,800 meters to nearly 4,300 meters), which requires much of our exploration activity, including transport of drilling rigs, to be done using helicopters.
There is no doubt our technology application in PNG is at the forefront of our exploration activity around the world and we are applying what we have learned here in other challenging environments. Similarly we are using lessons learned elsewhere in the world to improve how we explore in PNG.
So with the complexity and the significant expense of exploration activities, what makes PNG competitive globally when contending for exploration dollars?
It comes back to all the factors that have made the PNG LNG Project successful. It is the cooperation between the government, co-venturers, landowners and communities. It is also about maintaining the right policy and fiscal settings to encourage the significant investment required throughout the many years it takes to develop the resources. This is crucial when it comes to maintaining competiveness against rival projects elsewhere in the world. It also requires that the necessary enablers exist for exploration and development programs to progress at a pace that meets the demand I addressed earlier.
You only need to look at the history of exploration in Papua New Guinea to realise how important technologies developed in recent decades have been in unlocking the potential of this country.
It is no secret that organizations have been searching for oil and gas in PNG for a long time. In fact, the first drilling in PNG was carried out more than100 years ago.
Significant gas resources were not discovered until the 1980s, when the now-ExxonMobil operated Juha and Hides gas fields were discovered.
The successful execution and start-up of the PNG LNG Project, ahead of schedule in 2014, is the result of ExxonMobil’s relentless focus since the late 1990s to commercialize gas in PNG. We further believe there is significant remaining potential for the discovery of new resources. Despite a long history of exploration, PNG still remains largely under-explored.
Our business has a world class portfolio of exploration acreage in Papua New Guinea, and covers discovered gas fields including Hides, P’nyang, and Juha, as well as what we believe is prospective acreage along trend with these gas discoveries.
Having a quality portfolio of exploration acreage allows us to manage risks across our business and by doing so deliver the most profitable results. Historically one in three exploration wells is successful in finding commercial quantities of hydrocarbons, and when each well costs around US$100M to drill, our significant acreage position and leading edge technical capabilities are what deliver maximum value to PNG.
In the past five years, together with our joint venture partners, we have invested more than 1 billion Kina in exploration alone.
We are currently investing to confirm resources for the potential expansion of the PNG LNG Project, including future plans with Oil Search for exploration drilling on the Muruk well north of Juha and drilling on the P’nyang field in Western Province.
In the first half of this year we completed a seismic data acquisition program covering more than 100 kilometers around the Juha and Hides fields in the Southern Highlands, which once analyzed, we hope will lead to further field drilling programs in those areas. We hope to increase the level of our exploration spend as we gain access to additional acreage and opportunities to create a more diverse portfolio.
The success of the PNG LNG Project and the quality of our exploration acreage portfolio is putting PNG at the forefront of ExxonMobil’s exploration and investment focus. And we look forward to exploring more in PNG.
While no doubt the current low commodity prices will strain resource sector economies such as PNG, it is important to appreciate the long term nature of investments such as PNG LNG. Commodity prices are cyclical and as long as the fundamentals are strong, like they are for this Project, the long term benefits will remain.
In closing, I would like to reiterate that our presence in Papua New Guinea does not end with the PNG LNG Project, which is now well and truly into production. We want to expand PNG’s legacy and help meet growing LNG demand around the world.
Thank you.