Philippe Blanchard, Managing Director, Total PNG: Interview

Interview: Philippe Blanchard

How is Papua New Guinea’s second liquefied natural gas (LNG) project at the Elk-Antelope fields expected to influence the local gas industry?

PHILIPPE BLANCHARD: We are committed to moving this project forward, as we understand the socio-economic impact it can have on the development in PNG. While the appraisal programme is ongoing, the joint venture has made other efforts to further progress on the project: securing financing, undertaking gas marketing and conducting environmental and societal studies, with the objective of making the financial investment decision in the second half of 2017. The government may also enter the joint venture, as it can take a stake of 22.5%.

In an environment of low oil prices, it is important to emphasise that we should prepare ourselves to be competitive in a variety of price scenarios. Over the long term, our view of the supply-demand fundamentals has not changed, so we anticipate that prices will rebound and we do not view this project as being at risk. When you are dealing with multi-billion-dollar developments like the Elk-Antelope gas field, delivering on time and within the budget is the main priority, and major oil and gas firms can manage such projects.

I understand the government’s intention to diversify the oil and gas industry in PNG and this is why they have welcomed a second major operator for the next LNG project. A country like PNG can rely on the experience and support of a major firm to develop assets and use its expertise at every stage of the value chain, from upstream production to trading LNG products.

To what extent has the perception of PNG as an investment destination changed since the $19bn PNG LNG project first began exporting gas?

BLANCHARD: Undeniably, it is a very good sign when an oil major completes a project in a new marketplace, as it confirms that the country is mature as an investment destination. Certainly PNG’s reputation has changed as a consequence of that. From an industry perspective, PNG has been very attractive due to its potential and its location in the Asia-Pacific region. This is not only because of its proven reserves – in the case of the Elk-Antelope fields, the appraisal study has not yet been completed – but also because PNG has fostered a more business-friendly environment than more mature markets. The government is providing the right incentives to operate in a challenging environment, considering the remoteness of the fields and the lack of infrastructure. Each project is different and while the new gas fields in Gulf Province are closer to Port Moresby than the Highlands, the quality of the gas is different, adding technical complexity to its development. It will require renewed engagement with different communities than those affected by the first project. At this stage, it is difficult to say whether the new project will be easier or more difficult, but it will be different.

What strategies should be employed to more equally distribute wealth arising from new projects?

BLANCHARD: We already know that there are high expectations for major projects in PNG, so early stakeholder engagement and awareness campaigns will be extremely important to initiate at the beginning of the project. We need to be sure that communities understand what a project of this kind can deliver and how it will affect them. They should be engaged through every stage of development, as it will take years to complete.

The aim of engagement is to provide support in a way that is efficient, reliable, economical and acceptable to communities and stakeholders. The slogan that we refer to is “sustainable growth”, recognising that it is a difficult goal to achieve. In the long term, the objective is not just to help communities, but to empower them. Multinationals can help start businesses, but the development model should be sustainable so that newly created institutions can be independent. There is no use building schools if there are no teachers, or if a lack of infrastructure and transport options prevents children from accessing them. Development projects must be designed with a global perspective to be effective.