Demand from the Asian region for natural gas will ensure that Papua New Guinea’s liquefied natural gas industry remains robust in the medium term, David Lennox, Resource Analyst for financial services firm Fat Prophets tells Business Advantage PNG. He also says growing International tensions about trade barriers may actually be beneficial for the country.

Fat Prophets’ David Lennox believes PNG gas is well placed. Source: BAI

Lennox says natural gas is seen as a transition from carbon-based energy sources to ‘a more balanced or more renewable base of energy sourcing’.

He says China will have a need for regular supply.

‘The Asian region is very short of energy sources and is also going to be a very big consumer,’ he tells Business Advantage PNG.

‘PNG is one of the first movers. It is well established and successfully operating.

‘Given the life of its fields, and the potential for further reserves to be found in the region, it would—and should—be seen as a relatively low-cost producer.’

Long term

Lennox says in the ‘near term there is certainly reserves to be found’.

Longer term, however, it may be ‘a little more difficult to start finding long-life natural gas assets,’ he says.

‘The country will have an ongoing participation in the growth but it will require further reserves to be found.‘

‘PNG as a host would have to be extremely happy with the way in which the companies have come together.’

Lennox believes the country is now viewed favourably by potential investors.

‘The country has had to open itself up to allow these giants to come in to create billion dollar assets and generate hundreds of millions of dollars of revenue.

‘It is from-start-to-finish type of relationship: the company needs to have a relationship with the country to enable it to get these sorts of projects to commercialisation. Then the company itself has to have long-term relationships with its customers.

‘If you break the nexus at one point, you haven’t got any of it.’

Lennox says negative perceptions of PNG have largely disappeared.

‘PNG as a host would have to be extremely happy with the way in which the companies have come together and put together these projects.

‘China has a reasonable energy industry, but it is not self sufficient.’

‘The days in which Bougainville [damaged PNG’s international reputation] are probably long behind—provided there is engagement with the country and with the local, indigenous population.’

Tariffs

Lennox believes that a global shift towards trade protectionism may benefit PNG.

‘China has a reasonable energy industry, but it is not self-sufficient.

‘PNG has been one of the first movers in terms of getting into the natural gas market.’

‘When you look at what is happening with trade tariffs, China would be looking to, perhaps, becoming a little more self-sufficient.’

Recent criticisms by the US President Donald Trump of Europe’s gas pipeline from Russia are increasing anxieties about energy trade, says Lennox.

‘Self-sufficiency is becoming a little more paramount in the political world and the trading world than perhaps it was 10 or 15 years ago.

‘Little nations like PNG could be well-placed if they have got energy and can deliver that energy into those types of markets.

‘PNG has been one of the first movers in terms of getting into the natural gas market and its ability to deliver is not questioned.

‘That stands investors in good stead.’

David Lennox will present an overview of the latest developments in PNG’s gas sector against the background of global trends at Business Advantage’s 2018 Papua New Guinea Investment Conference. The conference will be held at the Sofitel Brisbane on 6 & 7 August. To view the program or register to attend, visit www.pnginvestmentconference.com.