Moving to give economy more gas

Papua New Guinea is now looking at ways to maximise the benefits from its gas industry. NiuPower chief executive RICHARD ROBINSON explains how.
Business reporter MARK HAIHUIE reports.

ELECTRICITY generated by gas from the PNG LNG project is expected to be part of the Port Moresby power grid by the first quarter of next year, says NiuPower chief executive Richard Robinson.
“The government electricity industry policy 2011 contained a number of initiative of which a key one was to bring more private investment into the sector,” said Robinson when speaking at the PNG Petroleum and Energy Summit. He was giving an overview of the emerging power company and its role.
“In response to this policy, both Oil Search and Kumul Petroleum Holdings were independently looking at options to invest in the PNG power sector, generally, and in particular to look at using PNG gas to build power stations here,” Robinson said.
“It did not make a lot of sense to be duplicating efforts so these strongly aligned interests led to Kumul Petroleum and Oil Search to join forces in late 2016 and form two new businesses.
“NiuPower, which is a business focused on the generation of electricity domestically using PNG gas, and NiuEnergy, which is a business focused on the broader distribution of gas within the country.
“Both companies are currently 50 per cent owned by both Oil Search and Kumul Petroleum Holdings and both operate on an independent and commercial basis with a focus to ensure that PNG maximises the opportunity of PNG-produced gas to fuel electricity generation and industrial development across the country.”
Robinson also gave an update on the ongoing work at the NiuPower Port Moresby Power Station which is being built at a cost of about
K325.4 million.
“With regards to our Port Moresby gasified power station the work on the project is already well advanced,” he said.
“The power station is of course our first investment and hopefully the first of many. It is a 58-megawatt facility based on high efficiency Wartsila reciprocating gas engine generators. The station will cost around a US$100 million and should be online in the first quarter of next year.
“A few weeks ago the main engine core earthworks were complete and the generator sets themselves have now been fully factory acceptance-tested and will now be on site in July and hopefully this is just the beginning.
“It will connect into the Port Moresby grid via our new transmission line to be constructed from the power station into Gerehu. The investment itself is underpinned by our long-term purchase agreement with PNG Power and the gas sales agreement with the PNG LNG project.”
The power station is expected to generate electricity comparatively lower than other similar energy sources in the country, with considerable potential for expansion, Robinson said.
“The levelised cost of electricity provided by this power station is materially low than that available from any other thermal generation operated in the country and, in addition, it uses a much cleaner burning fuel source.
“Moreover, it is readily available to be expanded as demand grows and if that is shown to be the best option for the nation.
“We are using PNG gas to generate electricity for PNG’s development and the project itself provides a model for future power station development here in Port Moresby, in the Highlands and potentially well beyond.
“The total focus of NiuPower and NiuEnergy business is that we will be facilitating the use of PNG gas for the domestic development of the country.
“Also, the development of the gas-fired power station in the Hides area into the Ramu grid should be a clear priority for the country and we would certainly be pleased to play a part in that if that was desired.
“From a NiuPower perspective, if gas can be made available at the major domestic ports across the country then we are certainly very keen to invest in the infrastructure that will turn this gas into cost-effective electricity generation and supply into the grids in those areas and support industrial developments and increased electrification of the country. We are also very keen to bring other PNG investors into these developments as they become real.”
Robinson emphasised the need for coordination between all stakeholders in the sector to contribute to the right policy setting for utilities and their investments and ultimately Papua New Guineans.
“Of course success on this must be based on commitment, capacity and the right policy settings,” he said.
“PNG is indeed very fortunate to have an abundance of natural gas resources and industry has already demonstrated that these resources can attract substantial investment capital and generate significant and much needed export income. But ensuring this gas is also available to support power development, industrial development domestically is no less important.
“These are definitely not mutually exclusive objectives and many may argue that historically perhaps that the settings may not be ideal.
“I certainly believe that if we can get the policy settings right and adopt an approach on cooperation, collaboration getting appropriate strategic planning across all key stakeholders then we can be very successful in continuing to grow both the export opportunities and the use of gas domestically to benefit all Papua New Guineans.
“There is certainly plenty of capital available for investment in the power sector if we get the policy settings right. I have been a bit overwhelmed at the number of people who have approached over the last few months who want to invest in this sector.
“The NiuPower Port Moresby Power station is clearly demonstrating that gasify commercial generation can provide a very cost effective solution. The key challenge and opportunity for all of us is to ensure that these policy settings are optimized and to keep them stable. This is best done jointly by
industry, government and relevant state agencies and we are certainly very keen to play our part in that process.”
Robinson gave a strong message on the need to balance gas
exports with the needs of domestic users.
“To the question of gas supply. This is not an issue that is unique to PNG and there are many experiences available to draw on and help guide us,” Robinson said.
“But we should never again allow ourselves to get into the situation where a bonafide domestic customer wanting to contract gas for use in this country and prepared to pay the market price is told that there is no gas available as it has already been committed to sales overseas.
“This country should regard such a response as unacceptable and those offering such a response could be considered to be risking their social licence to operate.
“We see the concept of 15 per cent or some other number of domestic reserve floated over recent years and such an approach has been adopted in many other jurisdictions.
“The concept in ensuring that there is sufficient gas available to support domestic needs is to be applauded. But locking up gas in the ground that will never be produced reduces value for all parties, including the State, and drives away investment,
“We need to be innovative, we need develop arrangements that will provide opportunities for offsetting the value of domestic reserves in a way that directly supports the distribution and use of gas in PNG to support the government here without really leaving the resources underutilized.
“We have a fantastic opportunity in front of us right now as the framework underpinning the next phase of LNG development in PNG is progressed. We all need to work together to get this right.”