Having had the privilege of addressing this conference in past years, I am well aware of its importance to Papua New Guinea and our Mining, Petroleum and LNG industries. I am particularly honoured this year as the topic at hand is one that is in many ways, the centrepiece of all that we do as a company.
Before I begin, I would like to thank Prime Minister Hon. James Marape for articulating his vision for this country and insights on this topic to lead off the conference.
At ExxonMobil, we do not simply develop energy projects. Of course, that is our corporate mission – to meet the world’s energy needs - but the opportunity that long-term, world-scale investments create goes well beyond the development of the resource itself. It touches people, communities, companies, and institutions at all levels of society.
When done correctly, the development of the resource creates exceptional shared social value and helps to strengthen families, raise living standards, generate business opportunities and propel the economy forward.
The next slide I believe shows how resource development – in this case, the development of the PNG LNG Project and our planned Expansion projects – has become intertwined with the social and economic fabric of the country itself.
The social value of investments is shared broadly
While by no means all-encompassing, this slide demonstrates the interconnectedness of major resource development with stakeholders across this great country. We take immense pride in what we have achieved and are excited about the opportunities we have in front of us. We have worked incredibly hard to ensure the development of the PNG LNG Project benefits, both economic and social, are felt right across the country and many of you in this room today have both benefited from these as well as contributed.
Some of these benefits and impacts are directly linked to the work that we do, like stimulating the development of small-medium enterprises and the transfer of knowledge and skills to an outstanding, young workforce. While others arise from our ongoing community investments to empower and enhance the health, education and livelihoods of our neighbours.
I believe this slide might best be summed up with the following words: “The whole is greater than the sum of its parts.” Indeed, we are better for the partnerships we have forged over time with all of you, and I hope as you reflect you would share the same.
It truly took a partnership to get to the point where we at with the PNG LNG Project and our partnership is all our stakeholders including the state, Provincial and local level governments, our co-venturers, construction partners, local communities, customers, landowners and landowner companies, hospitals, universities, non-governmental organisations, and other associated industries.
And the success that has been realised has been built on our unwavering commitment to the same vision – to leverage developments to deliver immense social value to PNG and improve the standard of living for all Papua New Guineans.
Over the coming slides, I will take you through a journey, a journey of what we achieved through the PNG LNG development and what opportunities are ahead of us with our expansion plans and how these will deliver even more benefits than PNG LNG.
The social benefits generated by large scale investments like PNG LNG vary over their life cycle. So, I’ll spend a moment reflecting on its construction phase of a project that has demonstrated to the world – particularly the investment community – precisely what Papua New Guinea is capable of. We are fiercely proud of the achievements of the Project and what it has done for the country.
I am sure those who were around during its construction can attest to the economic boom that occurred:
- The Project alone generated more than 10,000 local jobs for Papua New Guineans.
- In this phase, we invested almost 11 billion kina with local suppliers in country.
- This level of economic investment had a significant multiplier effect and business in the country flourished, from the port to hotels, airlines, restaurants and well beyond.
- With an eye on building our world-class workforce of the future, over 18 million kina was invested in education support across 5 different provinces.
- We also invested more than 650 million kina in community programs and infrastructure.
- And, as our footprint traversed pristine environments, we also worked to protect and preserve more than 5,800 archaeological and oral tradition sites.
I think we would all agree the social value created during this phase was perhaps unlike any the country had previously experienced.
Production started in 2014, and in 2019 we celebrated both our 5th anniversary and our 500th cargo.
During that period, together, we have achieved a world-class safety culture with over 44 million work hours recorded—as part of that, we recently celebrated six years without a single lost-time injury at our LNG Plant.
This is a testament to our safety philosophy and the dedication of our Papua New Guineans workforce and business partners have to preventing all incidents that can cause harm. Coupled with an equally strong operations record, and we have together positioned Papua New Guinea as a world-class LNG supplier.
Simply stated, during this operational phase, we continued to build upon the success of the construction phase.
With regard to the development of our workforce, 3,200 of our employees and contractors, more than 86 percent are Papua New Guinean. And what I am so incredibly proud of is the amazing women in our organisation who contribute right across our operations. In PNG we have the highest percentage of women in our field operations to anywhere in the world.
Despite a significant weakening in the global commodity market during the Production phase, and devastating impact from the earthquake, the Project has also met its commitments to delivering billions kina of revenue back to the state and landowners since start-up. In fact, 2019 is shaping up to be a record year in terms of revenue generation from the Project to the country, making PNG LNG by far the most significant single contributor to the budget and this economy.
Developing PNG businesses
As I have mentioned, and stretching across both phases, we have strived to help create, train and employ local businesses so that they can grow and employ more Papua New Guineans.
In August of this year, we celebrated an incredible milestone - the ten-year anniversary of some of PNG’s most outstanding landowner companies; Laba, TWL, and HGDC. In many respects, these companies are the backbone of the PNG LNG Project and are critically important. Our operational success is a reflection of their success in creating thousands of jobs for Papua New Guineans. Those individuals are now better able to build a livelihood and contribute positively to their communities.
As the slide indicates, we partner with 16 landowner companies, many of them in attendance today. They support us with local labour-hire, maintenance, scaffolding, rigging, fabrication, transportation, fuel distribution, container freighting, catering, camp services, food supply and more. Every year the range of services grows as training continues to build technical skills and capabilities.
We work side by side with these Lancos, and we learn from one another, particularly in the area of safety. And I am very proud to say that our Lancos; Laba, TWL, and HGDC achieved five-years of Lost Time Injury Free performance this year. I am looking forward to many more joining them on that path.
We also contract another 250 non-landowner Papua New Guinean businesses for a whole range of different services. This number also grows year on year.
Supporting growth in SMEs
The common goal of building the capacity of local suppliers and SMEs has also featured prominently across the life of the Project. It is vital that we contribute to developing capacity, help train and incubate smaller organisations to become competitive and ensure a broad base of economic participation in activities our Project has induced.
Our primary platform for developing SMEs has been our long-standing relationship with the Institute of Banking and Business Management Enterprise Centre. Initially established in 2010 to create economic opportunities for local businesses and develop the capabilities of local Lancos and contractors, it has since delivered services to over 19,000 local entrepreneurs. Today more than 1,500 businesses, including Lancos and SMEs, are registered in its supplier database, making them more visible to other potential customers.
Our business partner Total Waste Management is a prime example of how our relationships support local SMEs and enhance their commercial development.
After witnessing the education and training opportunities offered to our staff, TWM management recognised that their water treatment operators would benefit from additional training and qualifications in their field. Their proactive approach has served as a springboard for both enhanced operational performance and for growing their customer base.
Strengthening and broadening the economic base
As an oil and gas company, agriculture is technically well outside our realm of expertise. But it does not take an expert to recognise the importance of harnessing the farming capabilities of Papua New Guineans in order to deliver enhanced social value in our operational areas and provide a long-term diversification of employment and revenue opportunities.
In addition, given the level of engagement women have in farming in PNG, agricultural projects are an outstanding – maybe even the best – way to broaden the economic base of rural areas and enhance rural livelihoods.
Through our partner ANUE, more than 700 households in Hela province have received training and ongoing support in new agricultural technologies and practices that improve the diversity and quality and their yields. In addition, the program provides mentoring and coaching that expands to many other facets of their lives as well, including health, hygiene, financial literacy and SME management.
The program’s participants have been extremely excited to reap the fruits of their hard work. They have transitioned from producing for self-consumption to producing a surplus which allows for income generation, including via sales to the Hides Alliance Group, which provides catering services for our Hides Gas Conditioning Plant.
The success of this intervention got us thinking about how we might be able to serve as a catalyst for more broad-scale agricultural development in Hela Province. This led to the birth of a public-private partnership with Innovative Agro Industry – in partnership with MRDC, and the Hela provincial and local level governments. As envisaged the Project would train and equip small-holder farmers to produce stock feed, and later fresh vegetables and coffee. Its target is to positively impact as many as 5,000 small-holder farmers, all the while supporting SME development to unlock the incredible business potential that exists in the region. A Phase 1 scoping study was completed successfully, and we hope to continue toward progressing into Phase 2 in the near future.
We are looking forward to working with Honourable Prime Minister, Governor Undialu, Vice-Minister Makiba and Member Thomas on this exciting opportunity as part of our Expansion plans. We also see this model as a pilot to opportunities across the other provinces in which we operate including, Southern Highlands, Western, Gulf and Central provinces.
Partnering to support positive social change
A committed social partner must be responsive to the needs of the communities in which it operates, and step in to assist where it can add additional value. Nowhere has this approach been more visible in 2019 than in and around Komo. Komo has recently suffered through a prolonged period of unrest that has economic activity ground to a halt.
But this year something happened. People–particularly youth leaders–decided to employ sport to heal their community and resolve their differences. The Komo Rugby Football League has emerged as one of the most inspiring examples of positive social change we have seen. It has been supported by ourselves and local companies including HGDC, TWL and Hides Gas Security Forces.
The league has become a local hub each weekend, with thousands of people attending and economic activity thriving – with literally hundreds of stalls set up to sell everything from food to clothing.
Given our company’s support of the PNG LNG Kumuls and the Hunters we have also helped to support visits to Komo by Michael Marum, Cathy Neap, and players from the region such as William Mone from Hela and Stanton Albert from Southern Highlands. These Rugby League stars encouraged and inspired local youth – both girls and boys - to continue on their peaceful path and told them that they too could achieve their dreams, that with hard work and perseverance anything is possible.
Just over this past weekend, we also had Justin Olam up in Komo and Angore continuing the amazing positive work to strengthen the community environment that is so important for long term peace and security of the region.
Thanks to the support of Governor Undialu and all from the Hela province, we are also pleased to announce that from November 19 this year Komo is open to commercial flights. Also, thanks to the support of the Department of Works and Minister Nali we have been able to progress with road sealing works in and around the community. We have supported the completion of more than 20 kilometres of road sealing works that are continuing to open up the area for more economic development. As we look forward to the expansion project, we are focused on even more road and community projects. So, now that Komo is open for commercial business, I encourage each of you to buy a ticket and go up and see some of the great rugby and community activities that are taking place.
The photo on the right, represents a historic occasion with the United Nations flag raised over Hela Province for the first time, an outcome of the first-ever Hela Peace and Development Workshop held in Tari in October. Recognising that we all have a role to play, the workshop brought together government, civil society groups, churches, development partners and the private sector to create a roadmap for peace in the province.
Participants forged a strong partnership to build synergies between existing and new initiatives in support of the roadmap, to mobilise additional resources and to prioritise program implementation.
The road ahead may be long, but the seeds for positive social change have now been sown.
Providing fuel for power generation
By this point in my presentation, it should be readily apparent that the industry’s role in social value creation may take many forms.
In this instance, I want to highlight the role we have and continue to play with regard to fuel for power.
As the major producer of natural gas in the country, we have always believed that the benefits of abundant, affordable natural gas should be shared both with international customers as well as the local community.
In fact, for many years, PNG LNG has played an essential role in reliably providing around 20 percent of Port Moresby’s domestic power demand – saving PNG Power around 300 million kina in fuel costs in the process.
As the country’s energy infrastructure continues to develop, so will the ways in which we encourage and support that development. We are now providing gas to the new 58-megawatt NiuPower power plant which has added 40 percent of capacity to Port Moresby’s market. This project alone is expected to save PNG Power around 180 thousand kina per day that would otherwise have been spent on running higher-cost diesel generators.
It is also exciting to see the progress being made by Dirio on their gas-fired generation plans. We will be supplying gas to Dirio for additional power generation in Port Moresby as well as looking at other opportunities around the country as part of our expansion plans. The core focus of our expansion plans is to reduce the cost of energy in the country across multiple different aspects with gas-fired power being just one of those.
Expanding local business opportunities
Access to reliable, affordable energy – in all its forms – has an incredibly transformative impact for economic development. As my previous slide demonstrated, access to cheaper power directly impacts the bottom line for both domestic household consumers and industry.
The key to growing social value is to look closely at what you are good at, study the demands around you, and adapt to fill the gaps that you see.
I believe our petrol business is a prime example of how that creative adaptation can grow opportunities for locally-owned SME businesses in the country.
The development of traditional fuels stations can take years and typically involves the installation of underground tanks, which is costly. But what if we were able to tweak the model and reduce the cost and time required to develop one? If we could change the model of development, more landowners could put their land to productive use by converting it to a fuelling station and turn in reducing the cost of fuel to the end-user.
Our Mobil Speedy Sites will do just that. With their above-ground tankage, and the incredible training and skills transfer to local entrepreneurs that we provide, landowners wishing to become entrepreneurs can do just that.
In addition to supporting the Government’s SME initiatives, local communities stand to benefit from increased access to reliable fuel and the development of their land for a viable commercial enterprise. Our goal is to develop at least 20 Speedy Sites between now and the end of 2021 throughout Papua New Guinea.
This approach to driving down local energy costs while supporting SME businesses is just an example of the ideas we have been working on as part of our expansion plans.
Together we can unlock new social value opportunities
As I conclude, one theme that should stand out from these remarks is how together we have grown, adapted and delivered social value for PNG in incredible ways. We have demonstrated adaptability and flexibility to continue to meet our communities and stakeholders where they are in their development process with the objective of helping to propel them even further.
The past decade has been an incredibly exciting one marked by so many positive developments. I wholeheartedly believe that the best, is yet to come. The next decade stands to serve as the defining period for economic and social development in PNG for generations to come.
What will this next decade look like? With the past as precedent, I believe this presentation – while historical in nature – should serve as a strong indicator of what is possible when committed stakeholders collaborate to achieve a common vision for a country and its people.
It is no secret that ExxonMobil and Total, as operators of the proposed P’nyang LNG and Papua LNG Projects, seek to unlock the incredible productive capacity of PNG’s natural gas.
In doing so, these investments will create tremendous economic impacts, similar to those outlined throughout this presentation. Equally important, are the new ways that we may all collaborate together to continue to unlock additional social value.
The expenditure with these projects – and their associated multiplier effects – can help fuel the PNG economy for years to come, help alleviate foreign exchange concerns and broaden the tax base to allowing for the expansion of social programs.
The multiplier effect of increased employment will increase purchasing power and raise standards of living.
Our focus on domestic gas opportunities will reduce the cost of energy in the country, meaning that the cost of domestic power will benefit from these developments – and are aligned with many of the items the previous presenter has talked about.
And as I’ve outlined, when power becomes more abundant and cheaper, existing businesses become more profitable and new business opportunities arise.
The infrastructure these projects develop creates the opportunity for new Lancos, new SMEs and countless new commercial opportunities.
Expanded pipeline infrastructure for P’nyang, in particular, will help to stimulate the future development of additional stranded fields. It also should enhance access to power in remote areas.
And as history has demonstrated, countless other opportunities to step in and partner will arise along the way, including in health, education, and livelihood enhancement.
In conclusion, it has been my great pleasure to share my thoughts with you today on a very successful first decade of social value creation in PNG, and I truly look forward to the incredible opportunities the second decade of development will bring. The second decade will be even more focused on reducing the cost of domestic energy across the country and helping to assist and grow local talent and SMEs.
It is an exciting time to be a part of the Country as it decides its future.