By DANIEL KORIMBAO
There were a lot of angry and worried faces in PNG when it was announced three years ago that the PNG-Queensland Gas pipeline project would not proceed.
There were those in Australia who thought the eastern seaboard could feed its energy needs with coal seam gas, and that the cost of building the pipeline from Southern Highlands province to Queensland had gone up considerably.
They also thought the political environment in PNG had become very unstable.
But Oil Search and the PNG Government believed a better option lay ahead, to build a LNG plant onshore.
At the PNG LNG project sanction announcement on Tuesday, Treasurer Patrick Pruaitch said dropping the pipeline was a blessing in disguise.
“For many years we were conditioned to believe that the discovered natural gas resources were going to be piped all the way to Queensland, Australia, because there were no other suitable development options available.
“Even though there appears to be some regret that this pipeline was never built, I can assure you all that Mr Agiru in particular, along with our Prime Minister and the entire Cabinet are extremely glad that this proposed project has been written off.
“Thanks to delays that hounded that development, world oil and gas prices have skyrocketed in recent years and made LNG a viable alternative.
This is arguably the best thing to have happened in our comparatively brief history as an independent country.
“The pipeline to Australia would have restricted our role to that of a passive seller of natural gas at near rock bottom prices. By contrast, LNG is opening up major domestic opportunities for PNG and its six million people.”
An industry source supported Mr Pruaitch, saying the price being fetched for our LNG now was 300% higher than what we would have got selling our gas to Queensland.
On top of that, the reinstatement of the additional profits tax in this project means that windfall gains from this project would be shared by both the government and developer.
“When the PNG gas agreement was negotiated, our bureaucrats were confronted with the expectation that spiraling oil and gas prices could result in super-profits to the project developers.
“We believed this situation would be untenable in the medium to long term and decided to pursue reintroduction of the APT.
“After considerable resistance I am glad to say the project sponsors led by ExxonMobil were able to see the wisdom in this policy change.
“Key government negotiators convinced project developers that future governments would be unlikely to accept a situation where windfall gains from PNG’s resources would flow mainly to foreign owned corporations.
“As a result the PNG gas agreement reinstated an APT that operated at two tiers. At the higher level, the government tax take would increase by 10% when the rate of return on the project reaches 20%, making the sharing of excess profits an equitable affair.”