PNG opens door to LNG Investment

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And we thought PNG had been difficult.  

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PNG opens door to LNG investment

By Regan Pearson | The Motley Fool Australia

Many countries are fiercely protective of their natural resources, but Papua New Guinea’s Prime Minister Peter O’Neill has thrown open the door to foreign investment in the country’s rich gas and mining industries, encouraging more joint ventures with local operators. Spending on resource projects in PNG is expected to slow significantly this year as current projects come online, and the government is keen to counter that with a new focus on LNG production.

The encouragement is good news for Austrian companies already involved in gas in the region including Oil Search Limited(OSH.AX) and Santos Limited (STO.AX) who are participating in the Exxon-Mobil (XOM) led the US$19 billion PNG-LNG co-venture project which is expected to make its first delivery in 2014. The project is developing capacity to produce 6.9 million tons of LNG per year, with a reported total production of over nine trillion cubic feet of gas over the projects life.

Mr O’Neill’s declaration may offer new opportunities to big LNG players like Origin Energy Limited (ORG.AX) — who are currently undertaking the vast Australia Pacific LNG (APLNG) joint-venture — Woodside Petroleum (WPL.AX) who have a history of getting involved in big LNG projects and most recently brought online the flagship Pluto LNG project.

Woodside Petroleum in particular may be able to leverage off previous experience in dealing with governments, such as its current Sunrise LNG project; a joint venture between the company and Timor-Leste government which is estimated to contain 1,717 billion cubic feet of dry gas and 75.6 million barrels of gas condensate.

The opportunities in PNG are estimated to be significant. A February report by ANZ Banking Group (ANZ.AX) estimating PNG’s export revenues capable of growing six-fold by 2030 to US$25 billion on the back of the country’s natural resources.  The report estimated this would require up to US$130 billion in investment in the country; investment the government is happy to encourage.

Foolish takeaway

Papua New Guinea has historically represented challenges for exploration and production due to the country’s rugged geography and remote site access.  However new technology and government support may turn the country into a valuable new prospect of Australia’s LNG players.

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Thais and JP had O'Neill's red carpet rolled out to them last week.  Leaders don't do this without knowing the 'rest of the story'.  Thai and JP involvement is more than an extractive transaction.

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Media Release

For Release: 4 February 2013

ANZ highlights significant growth opportunity for Papua New Guinea’s natural resources sector

- potential for annual export revenues to exceed US$25 billion by 2030 requiring US$130 billion investment in PNG -

In a major speech to the Port Moresby Chamber of Commerce and Industry today, ANZ Chief Executive Officer Mike Smith outlined new research findings that indicate PNG’s natural resources sector could quadruple by 2030 producing US$25 billion in annual export revenues.

Mr Smith told the Chamber that on more optimistic assumptions, export revenues could grow to US$38 billion by 2030 – six-times higher than current levels - with a continued focus on policies which maximised PNG’s participation in the global commodities cycle.

“Fundamentally, like Australia, PNG’s economic growth is now being driven by the urbanisation and industrialisation of Asia, and the prosperity of both countries is being underpinned by a super cycle in mining and energy, and increasingly in agriculture.”

“While this research is only broadly indicative, even the more conservative estimate implies resource-related capital investment in Papua New Guinea of around US$130 billion between now and 2030, and could involve the creation of more than 100,000 new jobs in mining, energy and support services.”

Mr Smith said that urbanisation and higher living standards in Asia were also driving an increase in global demand for food.

“I believe agriculture has the potential to be the next sector in PNG to experience significant Asia-led growth. Here there is enormous up-side in commodities like palm oil and coffee; an up-side that will also require significant investment which could in-turn create a new wave of additional jobs in rural communities.”

Mr Smith however cautioned that the scenarios for growth in the resources sector were not a given with significant competition for projects from other resource rich nations and that a continued focus on policies that boost capacity of the whole economy would be needed.

“The real challenge is stepping back to see the bigger picture and to focus on how we grasp this opportunity.

“Prime Minister O’Neill has already highlighted a number of important priorities that support the resources opportunity. These include increasing the proportion of people who participate in and benefit from the resources sector, upgrading PNG’s national infrastructure and increasing productivity,” Mr Smith said.

“Just as important is that the current pipeline of projects must succeed. This is not only about ensuring PNG continues to build its reputation as a credible destination for resource investment but growing its market position.

Australia and New Zealand Banking Group Limited ABN 11 005 357 522“While PNG faces some significant challenges in both the short and long-term to grasp this opportunity, I have a bullish view about PNG’s future.

“This is because of the enormous potential in natural resources and in agriculture, and the opportunity this presents for sustained economic growth and improved living standards. I’m also optimistic because there is an increasing focus by government, business and the community on the major issues PNG needs to overcome to ensure it takes advantage of the Asian Century, Mr Smith said.

For media enquiries contact:

Paul Edwards Group GM Corporate Communications Tel: +61-434-070 101 Email: Paul.Edwards@anz.com

Note for Editors:

Emily Kinnear Communications Manager, Pacific Tel: +61-478-401 280 Email: Emily.Kinnear@anz.com

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"Spending on resource projects in PNG is expected to slow significantly this year as current projects come online, and the government is keen to counter that with a new focus on LNG production."

Come To Papua. Smelling like a photo op.