Collaboration key for PNG: Risc

A successful Oil Search takeover of Interoil will be one factor that could help trim billions off the cost of LNG projects in Papua New Guinea in the next two decades, according to consultants RISC.

Risc partner Geoff Barker said PNG would need to learn from recent mistakes in Australia, and with the correct government policy settings, it could save $US5 billion across 20 years.

“Perhaps the most disappointing aspect of the LNG boom in Australia was the lack of any meaningful collaboration between the projects until after they had been built,” Mr Barker.

“Over $US220 billion has been invested in these projects and Risc estimates that poor decision making and duplication of infrastructure cost the industry over $US30 billion in the downstream sector alone.

“This excludes synergies in the development, logistics and operations in the upstream portions of these projects.

“History has shown that hubris and corporate ego played a bigger a role in decisions than economic rationalism.”

One LNG project is currently in production in PNG, the PNG LNG project.

Headed by Exxon Mobil, there are a few Australian connections, with Santos holding a 17.7 per cent stake.

AGL holds 3.2 per cent while ASX listed Oil Search holds 34.1 per cent.

The PNG LNG project achieved financial completion in February 2015, a few months after shipping its first cargo.

A second facility, led by Total, is additionally possible, with Interoil and Oil Search involved in that potential project.

“There are substantial additional gas resources which may remain stranded unless infrastructure is put in place,” Mr Barker said.

“Often, it’s only governments that can take the long-term view to ensure this happens.”

He said the PNG government should consider a DBNGP style project to connect the western part of the country, and creating industrial estates near ports for value adding.