Kumul Petroleum’s plan to manufacture large-scale infrastructure components for major resources projects in Papua New Guinea has taken a major step forward, following the signing of construction contracts for a US$100 million (K358 million) fabrication facility outside Port Moresby. Business Advantage PNG finds out more about this ambitious project.

Fifteen months after a ground-breaking ceremony at its 60-hectare site close to Port Moresby’s International port at Motukea, Kumul Petroleum Holdings Limited’s (KPHL) has signed memoranda of understanding with two Chinese construction companies – Sinopec (Ningbo) Engineering and Construction (SNEC) and China State Construction and Engineering Company (CSCEC) – to undertake the first phase of early works for the facility.

Both companies will work with the state-owned energy company on the engineering, procurement and construction (EPC) phase of a steel, mechanical and piping module heavy fabrication engineering facility.

‘Kumul Petroleum… is proactively establishing this fabrication facility to maximise national content in future petroleum, mining, renewable energy and general heavy industry projects’

Valued at US$10 million (K35 million), the first of these contracts, with CSCEC, will result in the construction of access roads, foundations, and site work and services rights of way.

Phase one of early works is expected to be completed in the fourth quarter of 2023, with the overall facility is expected to be operational by mid-2024.

National content

‘As the national petroleum and energy company, Kumul Petroleum is proactively establishing this fabrication facility to maximise national content in future petroleum, mining, renewable energy and general heavy industry projects, through local manufacturing of products that until now have all been imported from overseas,’ says KPHL’s Managing Director, Wapu Sonk.

Based on KPHL’s preliminary financial modelling, the US$100 million (K358 million) fabrication business will be profitable and value-accretive after ramp-up to full capacity in its third year of operation, with an expected return on equity greater than 10 per cent.

KPHL has also appointed Dubai-based Fabtech International, the fabrication facility specialist, to play a leading role in running the facility.

Eyes fixed on Papua LNG

Based on KPHL’s projections, over 300,000 tonnes of SMP modules and tanks, and other oilfield equipment, will be required in PNG alone during the current decade.

‘Kumul Petroleum is expecting to work with the Papua LNG project’s EPC contractors to start using the facility when the project achieves FID and enters the construction phase later this year or early next year,’ says Sonk.

The fabrication facility will have the capacity to produce 20,000 tonnes of steel, mechanical, electrical modular and piping (MEP) packages annually, especially for LNG liquefaction and regasification facilities, petrochemical and refinery plants. The facility is also expected to cater for the offshore sector by focusing on modules for central processing platforms, and wellhead platforms.

In addition to capitalising on the construction phase of the Papua LNG project and subsequent resources projects, Sonk expects the facility to become a leading provider of MEP fabrication services to the petroleum, mining and renewables industries in the Asia-Pacific region.

Once operating at full capacity, Sonk expects the facility to provide direct employment for 1000 skilled Papua New Guineans and, indirectly, jobs for up to 3000 more locals. Assuming the facility eventually runs 24-hours-a-day, he says the number of jobs could potentially double.

Recruitment and training

Given the need for a workforce of Papua New Guineans with the skills necessary to participate in industry construction activities between now and 2032, Kumul is also establishing the Kumul Construction Industry Training Academy on the same site.

‘This is the first step in the establishment of the KPHL training and fabrication facility. Civil construction work under the contract will prepare the training facility pad, fabricating facility pad, construction lay down pad, ready for phase 2 activities,’ says Sonk.

With site works for the construction of the [fabrication] facility and training academy having already started, KPHL is already advertising for trainees through the KPHL-supported Wan PNG  job search portal.