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PORT MORESBY, Papua New Guinea (May 30, 2002 - Post-Courier/PINA Nius Online)---The Papua New Guinea government wants Papua New Guinean engineers and small businesses to play a greater part in construction and operation of the PNG Gas to Queensland project.

Petroleum and Energy Secretary Joseph Gabut told the Institution of Engineers Papua New Guinea conference he has been disappointed at the level of participation by PNG businesses in existing projects.

He is determined to see that it is not repeated with the PNG Gas Project, he told meeting participants in Port Moresby.

He said that companies had only paid "lip service" to the Oil and Gas Act-1998.

This required companies operating in Papua New Guinea in the construction and development of a project:

§ to use and purchase goods and services supplied, produced or manufactured in PNG,

§ encourage and help PNG citizens go into business to provide these services, and

§ maximize the use of PNG contractors and subcontractors.

The State and the developers are expected to sign the gas agreements for the project "in the next few days," Mr. Gabut said.

Mr. Gabut said that the signing follows the resolving of a number of sticky issues that were causing delays.

He said the government team led by Chief Secretary Robert Igara had been negotiating the terms and conditions for over a year now.

Mr. Gabut said there had been some very difficult issues to resolve, notably on the taxation regime, State participation and foreign exchange controls.

"However, I am pleased to announce that we have reached agreement on all these issues and it is expected that the Gas Agreement will be signed by the various parties in the next few days," Mr. Gabut said.

He said the current timetable for the project is to:

- sign the Gas Agreements this month,

- finalize the sales agreements next month,

- start front-end engineering design work in September (to end in March next year), followed by financial close in July,

- start construction in August next year and first gas sales to Queensland in April 2006.

Mr. Gabut said he expects front-end engineering design to start in September, "although I shall be putting pressure on the companies to begin it as soon as possible."

He said it would last about six months and cost about US$ 50 million, "so it is a very significant investment for the project."

Mr. Gabut said the front-end engineering design would provide the detailed engineering for the facilities that are required.

He said the project would be conducted in two phases -- the first would involve taking the gas from Kutubu, Gobe and Moran while second phase would involve getting gas from Hides.

Mr. Gabut said extra gas-handling equipment and facilities would be needed at Kutubu and Gobe, with a new gas pipeline running from Kutubu to the main processing facility on the Gulf Coast.

It would run close to the existing oil pipeline, although the route is expected to diverge close to the Gulf.

He said the second phase would start when the gas from the oil fields runs out. A new pipeline would then be laid from the Hides gas field to link up with the gas pipeline at Kutubu.

Mr. Gabut said they expect to sell about five trillion cubic feet of gas to Queensland, with daily gas production of about 500 million cubic feet, with the sales contracts tied up for a 30-year period.

"The gas to Queensland project will be the single biggest investment in the PNG economy, with the capital expenditure of about K 14 billion (US$ 3,883,600,000, of which K 10 billion (US$ 2,774,000,000) would be spent in PNG," Mr. Gabut said.

"It is vital to the future of our petroleum industry because of the ongoing decline in oil production."

He said the project had suffered many delays but "we are very close to signing the Gas Agreement."

For additional reports from The Post-Courier, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Post-Courier (Papua New Guinea).

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