Volatility in oil prices is forcing energy companies in Papua New Guinea to find ways to reduce costs, says Gerea Aopi, President of the PNG Chamber of Mines and Petroleum. He tells Business Advantage PNG that one option is for the major companies to work together.

The Chamber of Mines and Petroleum’s Gerea Aopi

‘If you look at the PNG LNG project, and the Papua LNG project, you have two world class operators and it is important for PNG that they can share synergies and pursue integration to reduce costs. So you could have TOTAL operating the upstream and Exxon Mobil the downstream.

‘This is good for all stakeholders and in particular the State.’ The challenge, he adds is to build relationships between different operators and he believes this is happening.

‘They are looking at the best way of doing things in an efficient way.’

Aopi says the last two years have been a ‘roller coaster ride’ for the resource industry. He believes the situation ‘remains challenging’ but he is optimistic about the future.

‘You have to look at the best way of distributing the costs. We are all affected by the low oil price so people are looking at ways to reduce costs.

‘They are talking to the service providers: in bad times you have to share the pain. They are also looking at better and more innovative ways of doing things, and looking at the best way of doing things in an efficient way.’

Benefits

Aopi says the distribution of benefits to landowners has been ‘agreed at the macro level’. The next steps are more problematic, however.

‘It is really getting down to the next level as to how the benefits are distributed, within the licence areas, between the different clan groups and between families?

‘It is going to be there for a long time and you have to have that relationship on a good footing from day one.’

‘It is quite complex and I think at the moment, because some of the land owners may feel that they might not be part of that process, they take out restraining orders against the Government for the distribution of benefits.

‘But the funds are obviously there in the Central Bank.’

Long term

Gas projects are long term in nature. (Hides gas field. Credit: ExxonMobil)

Aopi says gas projects are long term in nature, and this represents challenges.

‘If you look at the gas projects around the world, they are not 10, 15 years; you are looking at 30 plus years.

‘So you need to build that relationship with all stakeholders whether they be the community or the government. It is like a marriage.

It is going to be there for a long time and you have to have that relationship on a good footing from day one.

‘It is challenging but you have to manage the expectations.

‘The industry is going to be there for a long time. It is really about sitting down with the people and explaining to them that this is not something that is going to happen in the next five years.

‘That education process is really about getting the whole community involved, including the young people, and getting everybody appropriately briefed on the project, its implications, the benefits it is going to bring and how long it is going to be there.’