Apr 4, 2010

PNG Prime Minister says PNGLNG 'History in the making'


The PNG LNG Project ‘is nation-changing and life-transforming’

Honourable Ministers, Neil Duffin, President of ExxonMobil Development Company, Mark Albers, Senior Vice President ExxonMobil Corporation, other senior executives of  ExxonMobil Corporation, Peter Graham, Managing Director Esso Highlands Limited, project partners and guests, ladies and gentlemen.

I have great pleasure to be here in New York with all of you for this official ceremony to mark the financial close for the PNG LNG Project. It has taken us almost three years to get to a stage where the co-venturers could commence spending US$15 billion to build this grand project.

For my Government and our 6.5 million people, the PNG LNG Project holds so much opportunity and promise. It is a history-making, nation-changing, life-transforming project. Today, we are already seeing so much hope and optimism in Papua New Guinea.

The tide of change has started to grip Papua New Guinea. It is my firm belief that this tide will transform the future landscape of Papua New Guinea forever.

My Government has thoroughly enjoyed the robust engagement we have had in this journey to take one of our most important natural resources from a conceptual stage towards our mutual goal of making it a reality.

The journey has taken us from our remotest villages and electorates to the corporate boardrooms of Brisbane and Sydney in Australia, Beijing, Singapore, Dubai, Tokyo and now here in Manhattan, New York. 

During the journey, the true Papua New Guinean spirit, character and resilience was represented by our State team, led by a core of dedicated and young Cabinet Ministers.

This reminded me of my younger days when I was at the helm of a sovereign Government, after having led a core group of Papua New Guineans in our quest to secure political independence from Australia in 1975.

Today my Ministers are engaged in the task of securing economic independence and national prosperity.

Many Ministers and Members of Parliament gathered here have engaged with some of you on a wide range of issues to move the LNG project forward. I am sure these negotiations were not always easy.

I am certain they have always been frank, open and cordial and, above all, focussed on achieving our national interest objective of ensuring national prosperity. I am sure you on your side have strived to drive the best value for your organisations.

In many instances we began with positions that were far apart. We gradually worked our way to a middle ground that was mutually acceptable to Papua New Guinea and the project partners.  The way forward always represented positive outcomes for all stakeholders.

My Government came half way by providing greater fiscal security while recognising we were in competition with projects from other countries.

Our common resolve produced the joint venture with valuable fiscal stability that made it possible for us to agree on optimal corporate tax arrangements in the win-win spirit I mentioned earlier.
Our Ministerial Economic Committee and State bureaucrats outlined a broad tax structure that ensured that over the medium to long-term any major upside in oil and gas prices would be equitably shared by project participants and the PNG Government.  

This helped to underwrite the long-term security and stability of the PNG LNG Project.
Turning back to the project negotiations, I should note that the conclusion of the initial round of discussions was marked with the signing of the PNG Gas Agreement on 22nd May 2008. That was a landmark that enabled ExxonMobil to commence Front End Engineering and Design (FEED). 

The Benefits Sharing Agreement that my Government negotiated with landowners in the footprint area has been as much of a landmark as the PNG Gas Agreement and the conclusion of FEED. 

I am not aware of any other country that conducts such negotiations. Our project partners tell me the same thing. Some 2,000 landowners gathered in Kokopo to participate in the Umbrella Benefits Sharing Agreement negotiations last May. 

Last December licence-based negotiations were held at the remote gas fields and other project sites. Thousands of landowners heard first-hand details about the Project and actively debated the level of landowner benefits with my Ministers and Members of Parliament. 

The package of direct benefits landowners will reap from the PNG LNG Project is around US$7 billion over the life of the project. 

Landowner participation in resource ventures is unique to PNG – in this case there are some 60,000 landowners involved - and very much a part of the nation’s strategy of generating equitable distribution of wealth from any resource development. 

Providing landowners with a significant stake helps to mitigate risks by making the landowners an important stakeholder in the development. 

ExxonMobil, the world’s biggest oil and gas company, has secured for PNG this remarkable project. In record time, ExxonMobil has concluded the technical, marketing and financing agreements. 

We have gone in just over 18 months from detailed feasibility studies on one of the world’s most complex LNG projects to financial closure.

We are often reminded that ExxonMobil has an excellent record in implementing LNG projects around the world on schedule and within budget. This is exactly the type of credible partnership that PNG seeks.

PNG’s first LNG project represents the largest ever loan finance for any international oil or gas project.

The critical FEED phase was completed in the final quarter of last year. It provided confidence that we had a viable project that could be completed in a set time frame.

However, more parts of the complex puzzle had to be put together before the co-venturers could comfortably give the all-systems-go signal. One of these was finalisation in early March of the last of four 20-year Sales & Purchase Agreements for LNG.

At the same time negotiations were finalised with potential financiers, particularly the Export Credit Agencies. We can appreciate that partly because of the Global Financial Crisis, the Government-backed ECAs were eager to provide financing to underpin potential exports of goods and services from these countries. It was also a difficult time for financial institutions to make big commitments.

ECAs from the United States, Japan, China, Italy and Australia have come together to provide the bulk of the financing, along with 17 commercial banks and a significant slice of co-financing from ExxonMobil itself.

I am glad ExxonMobil has helped PNG to keep such good company in the world of high finance.  

I am extremely proud that today’s ceremony celebrates your ability to have raised for my country a loan of US$14 billion for the PNG LNG Project’s 70 per cent debt financing component. 

This places PNG on the global financial map. I thank the Export Credit Agencies, the commercial banks and ExxonMobil for making this possible. 

In celebrating financial close with all of you, I wish to congratulate Neil Duffin, President of ExxonMobil Development Company, and Mark Albers, Senior Vice President ExxonMobil Corporation, and their respective teams for their tremendous work in tying together every loose end to bring us here to Manhattan tonight. 

The impressive team of individual ExxonMobil executives you have brought together, under Esso Highlands Managing Director Peter Graham, are a clear sign we have many more challenges before the first LNG shipment is made in late 2013. 

I appreciate the efforts ExxonMobil has made to go the extra mile. This is a journey we have undertaken together for almost three years. Some of my key Cabinet Ministers that have made this journey are here with me to enjoy the moment. 

The construction phase offers its own unique issues and challenges. In front of all of you today, I am urging my Ministers that they too need to go that extra mile in the coming four years to make this project come together as smoothly as possible. 

Let me affirm to you Neil Duffin and Mark Albers, my Government will ensure it does all that is necessary to assist you in the challenge of commissioning this LNG plant by the end of 2013. 

I am aware that we must face these challenges together. Any delay in the project schedule would result in cost blowouts that would hurt our overall achievements and goals. Having negotiated such a large loan we will only be able to service this loan once LNG exports commence. 

Success of the PNG LNG Project is closely linked to another recent achievement of my Government in its efforts to improve the living standards of our people. 

We will soon launch our National Development Strategic Plan covering the 20 years to 2030. Revenues that will flow from this project will underpin the ambitious targets laid out in that Plan. 

The success of the PNG LNG Project will represent a country-changing event. It provides the development context and the dimension of the economic and social revolution that our current generation will witness. 

Some of the development goals can only be delivered with smooth completion of the LNG Project. In many ways, this is another journey that the partners in the PNG LNG Project, and my Government, will forge towards a brighter destiny for Papua New Guinea. 

Through the Development Strategic Plan, the Government has made realistic assessments of our current situation. It has laid down practical targets for every segment of the economy, given the resources that will be available to Government. 

As I have noted in that document, our targets are aimed at creating a four-fold increase in per capita incomes in this 20-year period; and to improve the quality of life for all Papua New Guineans. 

This is a highly honourable task that my Government intends to undertake in conjunction with you – our friends and partners in the private sector. 

Once again I express my personal satisfaction and congratulate all stakeholders for this incredible effort in bringing us to financial close.

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