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What we’ve learned in PNG ExxonMobil’s departing MD reflects

With construction and first shipment of gas completed ahead of time, the giant ExxonMobil-led PNG LNG project has proven Papua New Guinea is a viable place to carry out major resources projects. In this exclusive valedictory interview with Business Advantage PNG, outgoing ExxonMobil PNG Managing Director Peter Graham reflects on the lessons learned.

Business Advantage PNG (BAPNG): What was the critical factor in getting the PNG LNG project completed on time?

Peter Graham (PG): Alignment with the Government was critical, and I think the Government recognised very early on that this was a transformational project. That truly was critical from the outset.

Without their support and direction from the then-Prime Minister, Sir Michael Somare, and subsequently from Peter O’Neill, it would have been far more challenging to achieve what we have done. Agencies and departments across all levels of Government have stepped up and done an absolutely spectacular job.

Nothing got held up on the docks, permits and visas were processed in an extremely timely manner. That sort of achievement is world class, but the Government gave it special project status—that was critical.

Also, I think ExxonMobil made a significant difference in the execution of this project, simply through what it brought to the party in terms of experience and capability.

We have an enormous reservoir of talent from doing projects around the world, with well-honed systems and processes which means, when you run into an obstacle, somewhere in our organisation we have somebody who’s been there before who can help.

BAPNG: You’ve also mentioned that you sometimes had to have flexibility. Can you give us an example?

PG: I can give you a really simple example. It’s on the technical side. We were doing horizontal directional drilling for the onshore pipeline, and the pipe got stuck in one place.

That could have been an absolute crisis, because we needed to get gas from Kutubu up to Hides to start commissioning.

So the team didn’t just lay a pipe around the mountain. They figured out how to convert the condensate pipeline [a separate pipeline] to be able handle the gas and get the natural gas into the gas plant on schedule.

That was a problem where we could have easily just stood back and said, ‘this is terrible, and we’re now two months delayed because we’re stuck in a mountain’.

When we run into a problem, we don’t just put our heads down and apply brute force to find our way through it. We stand back and consider the options, and then make a decision on how best to proceed to meet our goals.

BAPNG: ExxonMobil was completely new to PNG when this project started. So what tips and recommendations would you pass on to newcomers?

PG: I think probably number one is learning how to deal with communities. It’s just so critical in Papua New Guinea, particularly when it comes to access to land – and you can’t do anything without access to land. I think that was probably one of the earliest and toughest lessons for us to learn.

A lot of our projects elsewhere in the world are offshore, and you don’t have landowners to deal with offshore! But with an onshore project, learning how to co-exist with landowners and understanding the strong bond landowners have with their land… it took us a while to figure out how to make it work, and how to relate to those traditional landowners and find solutions that were mutually beneficial. Now, I think we have very strong relationships and a mutual understanding and respect.

BAPNG: Did it help having a partner like Oil Search, for example, and other partners in the project who had more local knowledge?

PG: Oil Search had some local knowledge. They’ve been an operator since 2003. So we were able to learn some lessons from them and also from other operators and others with extensive experience in PNG. Ultimately, we had to find ways to work that were consistent with our corporate values and expected behaviours.

Landowner leaders themselves would come forward and offer advice on how to deal with things, too, and that was incredibly helpful. They recognised early on the transformational nature of the project and the many benefits that would come.

They were keen to find ways to get through challenges. They were almost always willing to talk and learn with us, and they understood that if there were any delays, then the “pie”, so to speak, was going to be smaller to share.

BAPNG: Would there be anything else on that list?

PG: I think doing some early works, just getting started in a small way with some construction activity. There’s nothing like experience on the ground to actually learn how things get done or don’t get done in Papua New Guinea.

If we went back in time, we’d probably do a little more early works than we did for just that reason, again to accumulate some experience without big risks. There are a lot of things happening when mobilising major EPC contractors particularly when they have little or no experience in Papua New Guinea either.

BAPNG: The challenge now is to make the most of the infrastructure that you built for the PNG LNG project, and the most obvious thing is to extend to a third train. So what are the prospects for that stage?

PG: I think the prospects are good. However, there is work that needs to be done before you can start talking seriously about the next step. The starting point for any development is accumulating proved reserves, and it’s a challenge for every development, not just us.

We are on our way, though. We recently signed an MOU for the award of a petroleum development license and associated pipeline licenses for the P’nyang field in order to provide access to the long-term natural gas reserves needed for power generation, and to enable expansion of the PNG LNG Project, which could include the development of a possible additional train. An additional appraisal well will be drilled at P’nyang in 2016, and we will start preparations for that in 2015.

Obviously, there are still steps to be taken before we can make any commitment to expansion or a third train, but we’re diligently working through the process now.

BAPNG: You mentioned Elk–Antelope as a resource. Does ExxonMobil have a position or preferred position as far as whether that project could potentially use some of your infrastructure at some stage?

PG: I think it is premature to be engaging in discussions about synergies and sharing. The licensees need to understand what resource they have. They’ve also got an arbitration ruling in front of them. So I think that until they’ve got the answers to those questions, it doesn’t make a lot of sense to talk about what can be shared. Ultimately, this will get down to a question of value.

BAPNG: Last time we had a chat, you talked also about the prospects of maybe using some of the gas for domestic energy and I think you’ve had conversations with the Government since then. What’s the latest on that?

PG: We have signed an MOU with the PNG Government to supply up to 20 million cubic feet a day of natural gas for 20 years to support government plans to improve the capacity and reliability of the country’s power supply.

A portion of the natural gas supply allocated for domestic use will enable PNG LNG to provide up to 25 megawatts of electrical power for an interim period while the government addresses long-term power generation options. The remainder of the gas supply will be used to fuel State-owned gas fired power generation units expected to be located near the LNG Plant outside of Port Moresby.

We think that this is a great step towards improved supply for Port Moresby, and will be working with PNG Power and doing our best to support them so they can quickly access the power.

BAPNG: And that would be for Moresby?

PG: It’s for Moresby, but we’ve also had a longstanding commitment under the Gas Agreement to supply four million cubic feet a day in the Highlands for power generation, and we stand ready to deliver that as well. It’s downstream of the Hides gas plant.

BAPNG: The Prime Minister is very keen to encourage onshore processing wherever possible. What do you feel are the prospects for developing an onshore petrochemical processing industry in PNG?

PG: It’s highly competitive, and really needs low cost feedstock. That’s the challenge that any developer of downstream business is going to face in Papua New Guinea; and it typically needs scale to make things work.

Today, we’re all trying to accumulate sufficient proved reserves to ensure we underpin LNG. I can understand the aspirations of the Government to want to develop downstream businesses but I think it will take time to prove up sufficient low cost reserves and develop an economic project.

We’d like to support that if it makes commercial sense, but it will take some time I think to develop that business.

BAPNG: A final question: your personal reflections on your time in Papua New Guinea?

PG: It’s been fantastic. It’s been a wonderful experience, and if you had to choose where to finish your career, I couldn’t think of a better place to finish it, or a better project to finish it on. So I leave with lots of fond memories of Papua New Guinea and lots of fond memories of the people I’ve worked with.

It’s been a great team effort to get the project over the line. It will be hard to pack up and leave, but it’s time, and Andrew (Barry) will bring a lot of new ideas and energy to the business, which is very positive for ExxonMobil PNG.