LOCATION Gulf Province OPERATOR InterOil Limited
STATUS Petroleum Prospecting Licenses 236, 237 and 238 which contains the Elk/Antelope gas/condensate field
OWNERSHIP Final Investment Decision (FID) yet to be concluded
Much controversy has risen over the InterOil led Gulf LNG Project.
The final investment decisions (FIDs) on the project with partners Mitsui (condensate stripping facility, CSP), Flex and Samsung (floating LNG plant, FLNG) and EWC of Australia (modular LNG plant) was initially scheduled to be completed before the end of 2011. However, this has been delayed to June 2013.
In September 2011- GoPNG dismissed the InterOil proposed GULF LNG on the grounds that it has deviated from the original project agreement which also provides that any disputes and disagreements go before a tribunal but apparently GoPNG has taken the extreme step.
The original Agreement between the State and Liquid Niugini Gas Ltd (LNGL) stated that:
• A world class LNG Plant of international scale and quality using internationally recognized technology with a plant size of 7.6million to 10.6 million tones of LNG per annum and to be operated by an internationally recognized LNG Operator.
(InterOil however was presenting and promoting a different project without consulting the state).
• Original InterOil LNG Plant was to be built alongside the NapaNapa Oil Refinery.
(However, LNGL/InterOil over time changed that proposing a Gulf project using a combination of different production methods. These included):
1. A land-based LNG plant using multiple mini LNG Trains to be developed by Energy World Corporation
2. Fixed Floating LNG plant to be developed by Flex and Samsung Heavy Industry
Petroleum and Energy Minister reiterated that the Government continues to support LNGL/InterOil developing the Gulf LNG but developments should adhere to the original agreement and not deviations.
A copy of the NEC decision No. NG37/2011 which PM O’Neill signed off himself stated ‘on the 21st of September 2011, The National Executive Council, rejected the Gulf Project as proposed by LNGL/InterOil as it would be an inefficient use of the State’s gas resources and is inconsistent with the Project Agreement.’
The PNG Government then announced its preference to have the internationally recognized Royal Dutch Shell to operate the Elk and Antelope gas fields in the Gulf LNG project. InterOil as explorer and discoverer of the substantial Elk and Antelope natural gas and condensate reservoirs, raised its disagreements that Shell has not spent any exploration dollars up to the project and came through the back door delaying the project development by 4 years to 2015 with first LNG cargo envisioned in 2018.
In May 2012- InterOil Corporation announced it signed a binding agreement with Pacific Rubiales Energy (PRE) to explore and further appraise the Triceratops structure on petroleum prospecting license (PPL) 237 in Gulf province which PRE can earn a 10% net (12.9%
gross).
The transaction contemplates staged initial cash payments totaling US$116 million (K245.8 million) and additional carry on a portion of the costs of an agreed exploration work program and a final resource payment. PRE’s gross participating interest is subject to the PNG Government’s back-in rights provided for in relevant PNG legislation.26)
DPE Secretary Rendle Rimua said that arrangement did not include any equity interest transfer in the Elk/Antelope fields which were also partly in PPL 237. He said the DPE is concerned that InterOil publicly released information on the transfer of the equity interest without the approval of the Minister for Petroleum and Energy.
He has advised InterOil and other oil companies to not publicly release information relating to equity interest or licence transfers until approved by the Minister and warned that although investment is encouraged;
disrespecting the laws of PNG will not be tolerated.27)
The government has served notice on Liquid Niugini Gas Ltd (LNGL) -a project company jointly owned by Pacific LNG Operations Ltd and InterOil Corporation- that it intends to terminate the Gulf LNG project agreement of December 23, 2009 for deviating from the original project agreement.
Petroleum and Energy Secretary, Rendle Rimua served the notice of intent of termination adding that the LNGL did not obtain any of three required licenses; petroleum development licence (PDL), pipeline license (PL) and petroleum processing facility License (PPFL).
Meanwhile InterOil has acknowledged the notice of intent of termination but is confident the project could be saved. As per the notice, LNGL has been given 180 days (6 months) as of Friday 11 May 2012, to show cause as to why the agreement should not be terminated.
26) InterOil enters into deal for Gulf LNG project (Thu, May 03, 2012 pg.48) The National.
Port Moresby, Papua New Guinea.
27) DPE raps InterOil for failure to comply with laws(Tue 08 May 2012 pg 46) The National Port Moresby, Papua New Guinea.
3. STANELY CONDENSATE
LOCATION Western Province
OWNERSHIP Horizon Oil 50%, Talisman Niugini Pty Ltd 50%
OPERATOR Horizon Oil
The Stanley field condensate recovery project is in petroleum retention licence (PRL) 4 and is half owned by Horizon Oil and its big partner Talisman Energy. Both companies are prepared to develop a $US300 million second condensate project in PNG’s Western Province which is on track for first production in late 2013.
This is the first cab off the rank for Talisman and Horizon in PNG – primarily due to logistical considerations – but the Elevala and Ketu fields of the Horizon-led PRL 21 to the southeast have more and better quality
condensate resources.
The front –end engineering and design (FEED) for the project is complete and the project will use a pipeline to a condensate load out facility at Kiunga on the Fly River. A planned condensate stripping plant (CSP) for the Stanley condensate under PRL 4 will take some time to construct and at this stage, the most likely export route is along a track to Drimdenasuk on the other side of the river, where a similar condensate load out facility can be located. The load-out facility, which was a core part of the completed design work for the Stanley condensate project, has a very simple and cost effective design.
The Stanley condensate project aims to produce 140Mcf of wet gas per day to result in the initial recovery of about 4000 barrels of condensate per day using a two-train refrigeration plant in the field. Dry gas not sold will be reinjected until needed for sale.
Horizon has a 50% interest in the PRL 4 license that contains Stanley field with equal partner Talisman Niugini Pty Ltd. State Petromin PNG Holdings Ltd. is entitled to acquire up to a 22.5% interest in the project when a production development license is awarded by reimbursing Horizon and Talisman’s allowable past costs associated with that interest and funding ongoing project costs.28)
At that time, anticipated to be in the 2012 third quarter, Horizon Oil and Talisman’s interests will fall to 38.75% each.
Horizon has three more wells planned including two for the Stanley field and one at the Tingu prospect northwest of Elevala-2, with the drilling location for this well still subject to further planning.
28) Horizon-Talisman to develop PNG Stanley gas-condensate. Oil & Gas Journal Retrieved online at
http://www.ogj.com/articles/2012/02/horizon-talisman-to-develop-png-stanley-gas-co ndensate.html
Ⅲ. SUSTAINABLE ENERGY
Papua New Guinea has no national power grid and the nation’s only power provider, state owned PNG Power, claims that due to dense mountainous topography and long distances between load centers, it is unfeasible to construct a national grid system.
However, PNG has potential to develop and use sustainable or renewable energy.
Renewable Energy sources include29):
A) Geothermal: Installed capacity in 2010 is 53MW.
B) Hydro-Power: 41.4% of total power generation capacity.
C) Ocean thermal energy conversion (OTEC).
D) Wind: Not being used. In 2010, the wind energy project, jointly funded by the Chinese and the PNG national government was launched in the Duke of York Island in East New Britian Province.
E) Solar: Limited use
F) Biomass: households and agricultural industries
G) Potential for Bio-fuel: ( Cassava, oil palm and jatropha fruits)
The technical potential for renewable energy sources in PNG is enormous, but much of the resources are in remote locations with limited demand, and are not readily exploitable.
1. Geothermal
The Geothermal Energy Association estimates PNG’s geothermal potential at 21.92 terawatt-hours; the association also categorizes the country as an economy that could, in theory, meet all its electricity needs well into the future from geothermal sources alone. Installed geothermal capacity in 2010 is 53 MW.
The first use of geothermal energy for power generation was realized in April 2003, when Lihir Gold Ltd brought on-line a 6 MW backpressure unit to support their gold mining and processing operations which produce over
29) Policy DB Details: Independent State of Papua New Guinea (2010). Retrieved online at: http://www.reeep.org/index.php?id=9353&text=policy&special=viewitem&cid=71
600,000 ounces of gold each year. Lihir mine is currently the only mine using geothermal energy in PNG.
Lihir geothermal power plant is PNG’s first approved clean for the fifth time its drilling contract with Lihir Gold Ltd. (LGL) of Papua New Guinea.
EDC provides drilling services to LGL, which depends on geothermal energy for the power requirements of its gold mine and processing facility.
Reservoir Engineer, Grimur BJornsson, from Reykjavik Geothermal, stated the PNG has over 60 active volcanoes and geothermal potential is in access of 9000MW thus putting PNG in the top 5 geothermal countries in the world.
However, PNG has yet to develop a National Geothermal Energy Policy before any development can actually take place.
2. Hydropower
PNG has significant hydroelectric potential. Its land area includes nine large hydrological drainage divisions (basins). The largest river basins are the Sepik (with catchment area of 78,000 sq km), Fly (61,000 sq km), Purari (33,670 sq km), and Markham (12,000 sq km).
There are other catchments of less than 5,000 sq km, in areas that are very steep. On the mainland, the mean annual rainfall ranges from less than 2,000 mm to 8,000 mm in some mountainous areas, while the island groups receive a mean annual rainfall of 3,000–7,000 mm. The gross theoretical hydropower potential for PNG is 175 TWh per year.
Yonki Dam, located in the Eastern Highlands Province , was built in 1976 and is an earth-fill embankment dam over the Ramu River that supports the Ramu 1 hydroelectric power plant and the (under
construction) Yonki Toe of Dam power plant.
In May 2012, the Minister for Public Enterprise announced the National Executive Council (NEC) recently authorized a new special-purpose company within PNG Power, Yonki Hydro Limited, to rehabilitate the Yonki power assets and expand the scheme.
PNG Energy Development Limited, a 50-50 joint venture between PNG Sustainable Development Limited and Origin Energy of Australia, has joined the Project Steering Committee recently set up by the Independent Public Business Corporation (IPBC). This committee will continue with its technical, social, environmental and social investigations.
The Yonki project has three phases. They are:
① The refurbishment and upgrade of Ramu 1 power station, at a cost of K58 million. Further work will be needed to return the station to full operational capacity, which is expected late this year.
② The completion and commissioning of the Toe of Dam generation system. The Toe of Dam project is designed to generate 18 megawatts of power from water flowing down the dam spillway that would otherwise be wasted. Construction began in 2009 but was suspended owing to problems with the contractors. PNG Power has now resumed construction work with support from two Japanese companies - Nippon Koei and Daiho – and expects the plant to be commissioned by the middle of next year.
③ The construction of a new powerhouse, Ramu 2, which would generate an additional 120 -180 megawatts bringing the total power generated at Yonki to from 45 megawatts to 180-240 MW.
The transfer of assets into Yonki Hydro would be subject to due diligence,
and a final feasibility study would be needed for Ramu 2.
Prior to this approval, in January 2012, the NEC approved a submission on the issue from the Minister for Public Enterprises and Minister for Petroleum and Energy on the Purari Hydro Electric Scheme.
The Purari is a river in that originates in the south central highlands of Papua New Guinea, flowing 470 kilometers (292 mi) though the Gulf Province to the Gulf of Papua. The Purari has a 33,670 km2
(13,000 sq mi) drainage basin and is the third largest river in Papua New Guinea.
Project worth: Between K10.51 billion to K21 billion
It will be the biggest power project in the Oceania region and one of the biggest projects of any sort in Papua New Guinea.
Benefits:
• Electricity to southern region including Gulf, Western and Central Provinces.
• Create jobs for disadvantaged areas
• Spur agricultural and industrial developments Support:
From IPBC in partnership with PNG Energy Developments Ltd (EDL) 50-50 joint venture between the PNG Sustainable Development Program (PNGSDP) Ltd and Origin Energy of Australia. Substantial equity will be offered to the government if the project goes ahead.
Status:
• Directions have been given by Cabinet for a working group of relevant departments and government agencies be formed to liaise with PNG EDL on a range of issues including ownership of assets, state equity, taxation arrangements and State, provincial and landowner royalties.
• A K250 m study is underway which PNG EDL is looking at the project’s technical, social and environmental feasibility.
Preliminary studies show that the project has potential to generate 2500 megawatts of electricity, almost four times the nation’s present generating capacity.
The huge output can feed into the Port Moresby and Highlands grids and there’s potential for electricity export to Australia.
3. Ocean-based (OTEC)
OTEC (ocean thermal energy conversion) system is a potential method of generating power using the temperature gradient between ocean’s surface water and ocean’s deep water. A temperature difference, as small as 15 -20C is enough to generate power using Kalina cycle, like geothermal energy systems. Commercial plants using this technology are already in operation in few countries. The biggest advantage with open cycle ocean thermal energy conversion system is the fresh water (desalinated ocean water) as a by-product. This technology is unique because it can generate not only power but also drinking water from sea without polluting the air with greenhouse gas emissions. In fact this technology should be deployed commercially is many islands around the world, where there is always a demand for power and drinking water.
PNG (Papua New Guinea) is one of the biggest islands in Pacific Ocean where there is s severe shortage of power and water. OTEC will be an ideal solution for such islands. Fresh water supply is going to be a major issue in parts of the world due to global warming and climate changes.30)
However, there is very limited knowledge of PNG’s potential for OTEC, tidal energy or wave energy. Near Port Moresby, the tidal range is 2.7 metres, compared to 1.1–1.6m in much of the country. Reportedly, there is a 6m range in parts of the Torres Strait. There have been preliminary proposals to tap tidal currents (peaking at 7–11 km/hour) at Buka Passage, near Bougainville.
4. Wind
There have been no systematic estimates of wind energy potential since the
30) Ocean-the largest source of clean energy retrieved on line at http://ahilan007.wordpress.com/tag/otec/
1970s, when the best potentials were assessed in portions of Central, Western, Milne Bay and New Ireland provinces, and the Port Moresby area.
A pilot wind energy project was installed in the Duke of York islands in 2006 jointly funded by the Papua New Guinean and Chinese governments.
5. Solar
Solar energy is among the largest potential sources in PNG. Average insulation in much of the country is 400–
800 W/m2, with 4.5 to 8 sunshine hours a day. Of 23 locations assessed, Port Moresby has the largest resource, with 2,478 sunshine hours per year. The lowest is Tambul, Western Highlands, with 1292 hours. The best locations for solar PV are the offshore islands, and in the southern regions of the country.
The World Bank and Global Environment Facility (GEF) funded the Teachers Solar Lighting Project (2005-2010) and implemented through the Rural Energy Fund. The provision of lighting in rural PNG is mostly through diesel or kerosene lamps and these solutions have become very expensive and given the logistics of the islands it makes a sound case for stand-alone renewable energy systems.
The Teachers Solar Lighting Project was to improve the life of service providers in the rural areas of PNG as well as:
• improve the delivery of education and health services throughout rural PNG
• provide affordable financing with the intention of making solar technology affordable for teachers and the general public
• develop knowledge amongst stakeholders and create extensive outreach and support programs
• develop the markets through international standards and getting companies certified
• remove the barriers to wide spread use of solar PV (photovoltaic) for
electricity
• to sell 2,500 solar home lighting kits to out-posted schoolteachers while also supporting the growth of local, renewable energy industries.
However, the project was terminated before its target end-date and only one solar kit was sold.
Review of the project outlining the reasons behind the disinterest and failure of this project have been published this year (2012) through a book called Unsold solar: A post-mortem of PNG’s Teacher’s Solar Lighting Project by D’Agostino, A and Sovacool, B.31)
6. Biomass
Although two thirds of PNG are covered with forest, much of it is inaccessible or unsuited for energy use. 58% of land is subject to strong or severe erosion, and 18% is permanently inundated or regularly flooded. The main practical biomass energy potential is in areas such as logging and agricultural production, using either the crop output or residues. Log exports are roughly 2 million m3 per year, but very little is processed locally, leaving only small amounts of biomass for energy production. There are 18 major wood-processing facilities, but the amount of residue produced and it's availability for energy use is unknown.
7. Potential for Bio-fuel
Bio-fuel is one option that PNG also has potential to develop. These include:
Cassava Plantation in Rigo of the Central Province
Korean company Changhae Tapioka (PNG) Ltd is the developer of the multi-million kina project and the first project in Papua New Guinea that uses the starch from cassava to produce ethanol to use for fuel.
Jatropha fruit
Thompson Benguma, the engineer behind the promotion of Jatropha in the country said this could change if and when rural population starts planting
31) Obtain a copy of this book from this link
http://www.scribd.com/doc/79020630/%E2%80%9CUnsold-Solar-A-Post-Mortem-of -Papua-New-Guinea%E2%80%99s-Teacher%E2%80%99s-Solar-Lighting-Project-%
E2%80%9D-by-Anthony-L-D%E2%80%99Agostino-and-Benjamin-K-Sovacool
and cultivating jatropha in the villages. Then each month, each family supply a bag of jatropha seeds as payment for supply of electricity to their respective houses.
The seeds will be expressed for oil in an expeller and used as fuel to generate electricity for the village. The fuel can also be used in motor vehicles and boats by installing a conversion on the engine compartment to allow petrol and diesel engines to run on a dual fuel system.
Ambulances and police vehicles can benefit more as they do not have to worry about fuel expenses but use this to carry out their work to assist the public.
Mr. Benguma said he could supply each village with a 14.5kva power generator, a jatropha oil expeller machine and a filter press-all that was needed to generate electricity in a village.
Mr. Benguma said he could supply each village with a 14.5kva power generator, a jatropha oil expeller machine and a filter press-all that was needed to generate electricity in a village.