Wednesday, October 19, 2011

Use LNG money to build infrastructure

Source: The National - Monday 17th October, 2011

THE LNG project has all the attri­butes to become a world-class gas project.
Let me qualify the reasons for my statement.
First, the project entails more than US$15 billion in direct capital investment and ExxonMobil, a world leader in the energy business, is dri­ving this project.
Second, the project is built based on a 10 trillion cubic feet (TCF) of natural gas reserves with a LNG plant capacity of about seven million tonnes per annum.
Third, our gas is of premium qua­lity that contains no impurities such as sulfur.
Fourth, all the rich liquids such as LPGs (cooking gas) will be spiked into the LNG stream and sold as LNG to fetch the premium price in the robust Asian LNG market.
Fifth and most importantly, the LNG project is a huge gas project with a “big oil project inside its belly” because of the significant volumes of recoverable condensates of premium quality that will be produced concurrently with natural gas during the operation of the project.
What does this mean?
The LNG project has a robust cash flow and a relatively shorter netback period.
Investors and lenders simply love this sort of projects.
Most importantly, the LNG project provides a good opportunity for the first time for PNG’s petroleum industry to benefit from the foundation and infrastructure that ExxonMobil will build.
PNG’s upstream petroleum exploration sector will benefit from the LNG in-field infrastructure and the main gas transmission pipeline and other facilities.
The project will generate an unpa­ralleled demand for massive capital investment in transportation and public infrastructure because of the corresponding increase in new business and economic activities in all other sectors of the economy fuelled largely by the economic multiplier effects of the project.
I call upon the government to abandon the sovereign wealth fund concept and do not see the logic of keeping large sums of money in an offshore account when basic and strategic national infrastructure is shamefully and shockingly absent or deteriorating at the moment.
The government must seize this opportunity by riding on the project by investing heavily in building quality and permanent national infrastructure nationwide.
There is an inherent need for world-class railway and road network systems to be considered, funded and developed to open up new economic opportunities for our citizens.
A Sepik-Highlands-Gulf-Central-Port Moresby-Lae-Madang railway network system must be considered and funded by the government.
I do not think having all the re­venues from the LNG project flowing back into the national economy would trigger inflation in a significant way if a large proportion of those revenues are injected in large and impact projects such as major national infrastructure projects and these projects managed in a prudent way.
The sovereign wealth fund concept would have been good only if more than 95% of PNG’s infrastructure requirements were already fully met.
Unfortunately, this is not the case.
Our people deserve world-class and state-of-the art infrastructure projects in the transportation, education and health sectors.
The LNG project offers a unique and special opportunity for our go­vernment to seriously look at investing heavily in infrastructure pro­jects.
This is the only way our people are given real economic hope.

K. Koya

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