(QldGovSpin) Premier Welcomes Significant News On PNG Gas Pipeline

Submitted by Editor on Wed, 06/10/2004 - 21:21

The proponents of the Highlands Gas Project, which includes a gas pipeline from Papua New Guinea to Queensland, have today announced their decision that they will be proceeding to the Front End Engineering and Design or FEED stage of their Project.

Kens Comment: Told you so! Check out the Altnews database for other PNG and Timor oil related articles.

Premier & Trade, Peter Beattie


"This is a very significant announcement by the project proponents ExxonMobil, Oil Search Ltd, Nippon Oil and MRDC (a PNG land owner company)," Premier Peter Beattie told the Queensland Parliament.

"The decision commits the proponents to significant expense over the next twelve to eighteen months to prove up the commercial viability of the Highlands Gas Project.

"Apart from the downstream 3,000 kilometre dry gas export pipeline from PNG to Central Queensland, the Highlands Gas Project includes an upstream section in Papua New Guinea involving the development of the Hides gas field and the conversion of the existing Kutubu oil fields to gas production, the integration of a gas processing facility with the existing Kutubu oil production facilities, and the installation of a wet gas pipeline to a liquefied petroleum gas facility.

"The total cost of the Highlands Gas Project is said to be between $6 billion and $7 billion.

"The decision to proceed to FEED is not a decision to construct the project.

"Rather, FEED is an engineering and design and feasibility process that will cost the proponents between US $80 Million and US$100 million ($114 million to $145 million Australian) over the next twelve to eighteen months and will enable the proponents to make a decision about whether to proceed with the project in late 2005 or the first half of 2006.

"As I understand it, the proponents have a significant amount of work ahead of them over this period to prove up the commercial viability of their project, including securing sufficient gas sale contracts on commercial terms by the end of the FEED process to make the whole project bankable on a commercial basis.

"To get to today's FEED decision the proponents have signed up a number of conditional gas sales agreements and term sheets, including Energex in relation to the Comalco Alumina Refinery and others, Western Mining Corporation in relation to Olympic Dam in South Australia, and more recently CS Energy and the Queensland Alumina Ltd refinery in Gladstone.

"I understand that the project will require a significantly greater commitment to be in place by late 2005 or early 2006, but nevertheless the proponents are confident of achieving this target during the course of the FEED process, which will also settle the pipeline route and other matters.

"The conditional contracts involve the Government-owned corporations Energex and CS Energy.

"These are commercial arrangements and in this regard the normal Government approval process will be applied.

"The Queensland Alumina Ltd contract was, I understand, one of the last to be signed.

"In early July the Commonwealth Minister for Industry, Tourism and Resources the Honourable Ian Macfarlane MP approached both QAL and the Highlands Gas Project proponents and offered some $25 million to $30 million to assist QAL with the significant cost of converting its coal fired boilers to gas fired operation.

"While the Queensland Government agreed to a request it received from Mr Macfarlane's for a significant matching contribution by the Queensland Government, including a direct link to the Highlands Project, Mr Macfarlane later dropped the Commonwealth offer to $10 million.

"The Minister for State Development and Innovation, Tony McGrady, is engaged in direct negotiations with QAL in order to secure QAL's commitment.

"The Queensland arrangement remains however conditional on Commonwealth assistance and overall need.

"If the Highlands Gas Project is proven to be commercially viable as a result of the FEED process and sufficient gas sales are achieved for the project to ultimately proceed into construction some time after late 2005, then this achievement will represent a significant boost to the gas-on-gas competition which this Government has been seeking to introduce since before the PNG gas project was first mooted in 1996.

"The Government's efforts in promoting gas-on-gas competition have seen the development of the coal seam methane gas industry as a viable supplier in Queensland.

"The development of the Highlands Gas Project, if it proceeds, will deliver a significant new infrastructure capability to Queensland opening up the potential for gas applications requiring the higher volumes and level of reliability which a large capital project like the Highlands Gas Project can provide.

"Ultimately however the Highlands Gas Project needs to be able to demonstrate viability on a purely commercial basis to potential investors and financers in order to survive. This means that its gas prices must be competitive for the volumes and level of reliability offered.

"The Queensland Government will continue with its long standing efforts to promote gas-on-gas competition in the upstream market and also to promote the greater use of gas overall.

"The Queensland Government welcomes today's announcement by the proponents of the Highlands Gas Project of their decision to undertake Front End Engineering and Design for the Project as a significant vote of confidence in their belief in the commercial viability of their project."

"More importantly this is a vote of confidence in the Qld economy. The project proponents can take this decision knowing that the growing Qld economy will provide significant new industrial development opportunities.

"This project, together with the $2 billion that has been invested in CSM provides real gas on gas competition for the first time in Qld.

Gas wholesale prices are much lower than they were 2 years ago, comparable to the best prices in Australia and internationally and this will flow through to the competitiveness of Queensland industry.

"In a greenhouse friendly world, this is really positioning Queensland well in terms of both coal and gas.

"Gas fired base load power stations become a real competitive possibility, particularly if an emissions trading regime is in place.

"The State Government has a firm agreement in place with Joel Fitzgibbon, the Federal Opposition spokesperson.

"I again thank the Minister for State Development and Innovation, Tony McGrady, for his work on this project."

Contact: 3224 4500



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