OBG talks to Peter Botten, CEO, Oil Search

Interview: Peter Botten

The first liquefied natural gas (LNG) cargos have left Papua New Guinea en route to Asian markets. What does that mean for PNG and Oil Search?

PETER BOTTEN: PNG was able to deliver one of the most complex projects in the energy sector to date. Having begun construction in the middle of a global financial crisis, the project was delivered ahead of schedule against all odds. I believe all stakeholders in the project should be congratulated, including governments, landowners and project participants for this outstanding achievement, which has undoubtedly surprised a lot of people who thought it could never be done in PNG.

The commencement of production is the result of more than 15 years of work. For Oil Search, which has 29% interest in the $19bn PNG LNG project, it means that our annual production will quadruple starting from 2015 onwards, turning us into a significant regional LNG exporter. Furthermore, the Elk/Antelope field in the Papua Basin, the largest undeveloped gas resource in PNG, provides an additional potential source of gas for LNG development. The currently active drilling campaign and resource assessment programme there will soon reveal the true potential of the field for either a standalone plant or for an expansion.

Detractors of the project allege that PNG’s citizens have not benefitted from the PNG LNG project. Is this a fair criticism?

BOTTEN: Having the benefits from the resources sector appropriately distributed among the different beneficiaries is key for PNG and I believe that 2015 will be a critical year, as the government will have to start delivering on its promise of responsible development. This can only be done by overhauling the country’s infrastructure and finally bringing services to where they are most needed to lift the population’s living standards. Failing to do so may lead to social tension, as the PNG LNG project has naturally raised expectations among the local population, especially in the Highlands regions. In all fairness, a lot has been done already during the construction period in terms of reaching out to the local communities, so now it is a question of sustaining the same effort over the long run. This project is already an integral part of the country’s socioeconomic fabric, but it will account for little if outside the barbed fences of billion-dollar projects, the roads continue to be plagued by potholes, and electricity and water remain limited for families and businesses alike.

What should be the role of the private sector, especially energy companies, in contributing to the country’s social and economic development?

BOTTEN: The country would certainly benefit from better coordination between the government and the private sector, and public-private partnerships are clearly the way forward. While local governments often struggle with implementation, because of limited capacity, the private sector cannot just sit and watch. It should help them to deliver services where it can. This is true for the entire private sector, not just energy companies. We will all benefit from a stable operating environment. A concerted effort is needed, especially in a country like PNG, which inevitably falls behind in many aspects of socioeconomic development.

As the country’s largest oil producer, we are continuing to support the growth of PNG LNG, as well as keeping the country’s oil production from further declining through more efficient appraisal and exploration. At the same time, we are heavily involved in critical sectors, like power generation, as we know that a series of industries would consider expanding if they could count on a reliable supply of power at a cheaper rate. Specifically, we are working on a biomass power generation project in Lae, which could provide as much as 35 MW for the city plus the wider northern region, while involving a large amount of landowners growing trees to fuel the station. It is time for the private sector to step up and help the government in delivering these sorts of services, otherwise we risk long-term social dislocation and disruption to all our businesses.