Business Advantage speaks to the man responsible for delivering the PNG LNG Project, Peter Graham, managing director of ExxonMobil subsidiary, Esso Highlands.

Aerial onboard activity photos of the Semac 1 pipelaying vessel, working on ExxonMobil’s LNG project in Papua New Guinea, December 2011. © ExxonMobil

Do you foresee any issues with meeting the posted completion date for the PNG LNG project? What will be the major challenges and milestones over the next 12 months?

2012 is a big year for us. We expect to finish piling at the Hides Gas Conditioning Plant, start mechanical completion of sections of the onshore pipeline, finish the LNG tanks and start hydrotesting them, energise Train 1 at the LNG Plant, finish the offshore pipeline, spud the first well, and land the first plane at the Komo Airfield. It’s also a big year for PNG, with elections due in June. We have developed plans to ensure business continuity through the election period in order to meet those milestones.

Esso Highlands’ Peter Graham

One of the challenges is around logistics, particularly with disruptions along the Highlands Highway because of road closures, weather impacts and roadblocks. The Government has done a lot of good work in upgrading parts of the highway, but it will continue to be a challenge.

There have been reports of increased costs on the project. What’s the real situation?

Since the participants made their final investment decision in December 2009, we have seen significant foreign exchange movement. The US dollar is substantially weaker. While our project utilises contractors from all over the world, the bulk of our work over the last two years has been non- US dollar-denominated expenditure, resulting in a foreign exchange-driven increase in capital expenditure. Costs of project components often fluctuate and we’re managing these as part of our operatorship. We have a long history of successfully managing and executing complex, integrated, large-scale projects.

‘We have a long history of successfully managing and executing complex, integrated, large-scale projects.’

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Some of the work on the project is being allocated to local companies, many landowner-owned. How well are local businesses responding to the challenge?

We are getting great support from local businesses. So far, we’ve spent more than K3.6 billion (US$S1.8 billion) in PNG on goods and services. Of this, around K685 million (US$337 million) has been spent with landowner companies (‘lancos’). Lancos are providing services such as camp maintenance, catering, security and labour recruitment.

The Project-initiated Enterprise Centre has played an important role in supporting local suppliers. It is run by the Institute of Banking and Business Management in Port Moresby and offers training, advisory services, coaching and mentoring, and facilitation services. At the end of last year, it had supported more than 10,600 PNG business entrepreneurs. The centre also conducts business assessments. These look at a company’s organisation in great detail to help identify gaps in their operations and develop plans to address those gaps. This is important so that companies can meet the challenge of supplying large projects such as ours.

With other parties now seriously looking at PNG as a source of LNG, what prospects are there that ExxonMobil will either expand the existing project or look for further LNG projects in PNG?

We get this question a lot. Our priority is to deliver the commitments we already have. However, we do regularly assess opportunities as they arise. There are many opportunities in PNG. We are undertaking an appraisal drilling program and have started drilling the P’nyang South-1 well in the Western Province northwest of the Hides field.

This article first published in Business Advantage PNG 2012/2013