Foot on gas for $4bn PNG pipe
ENERGY giant AGL has breathed new life into the stalled $4 billion Papua New Guinea gas pipeline project, saying it would consider "incremental" development rather than abandon the project.
AGL last month cast doubt on the viability of the project after writing off $18 million it had spent on design and engineering and scaling back future work.
But AGL chief executive Paul Anthony told Sky News Business Sunday its upstream partners in the PNG gas reserve were considering new options, which would still bring gas from the PNG highlands to Australia's east coast markets "around 2010 or 2011".
AGL took the decision after the project failed to attract enough customers, but Mr Anthony said there might be other ways to proceed.
Expected costs on the project have blown out from around $3 billion to almost $4 billion.
"As it stands, it's a large pipeline development and the construction costs are very high, so you need the maximum amount of load, which requires a number of customers to sign on to support that," he said.
"But what we are considering is incremental development of the pipeline, and as the load appears you build the pipeline out to it.
"It lowers the capital cost and allows the project to be fast-tracked and allows organic growth of the PNG development."
Mr Anthony said AGL had not given up on the project, which would ensure a supply of cheap gas to Australia. "We strongly support the PNG project but it's just with the current route and the current load it was making it difficult because customers wouldn't commit," he said.
"So now, we are looking at a different way of doing things and we, and the other owners upstream, are looking at a range of alternatives to monetise gas, and one of those is definitely going to be bringing it to the east coast of Australia."
Santos had been widely blamed for the delay for not agreeing to take more gas from PNG, but Mr Anthony said he "wouldn't particularly want to name Santos".
"We are not responsible for marketing the gas but the lack of foundation load for that project has been a fundamental hurdle."
Santos is attempting to secure longer term supplies of liquids-rich gas from PNG to offset its declining Cooper Basin assets and meet longer term supply contracts for customers such as Qenos Plastics in Sydney.
Santos chief executive John Ellice-Flint and PNG Deputy Premier Moi Avei met in Port Moresby last Monday.
Santos, which owns 25 per cent of the Hides gas field in PNG, has been negotiating to bring up to 50 petajoules of PNG gas to the Moomba gas hub in far north South Australia.
PNG sources said last week's meeting was "robust", with Mr Ellice-Flint arguing that Santos needed a long-term contract - possibly as long as 15 years - to justify its contribution to developing the PNG gas project. Santos's interests in the Hides gas field, which contains about 5trillion cubic feet of gas (Origin and Exxon Mobil are the other partners) would be put into the PNG Gas project in return for an equity stake of 12.5 per cent in the huge development to deliver PNG gas to customers in eastern Australia.
Within weeks, the PNG Gas project joint venturers hope to confirm sales contracts with Alcan, Comalco, Queensland Alumina and CS Energy - which would add to the sales agreement it already has with AGL. Mr Ellice-Flint told Sir Moi that given the capital cost increases, Santos believed the PNG project would have to capture higher gas prices to offset the rising costs.
PNG originally blocked the export of liquids-rich gas, arguing that it should get the direct benefit of the higher export value that could be obtained.
But Sir Moi agreed to allow liquids to be exported for a short period to allow the gas project to achieve an early cash flow to help offset higher capital costs
Monday, September 04, 2006
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment