During the 2023 PNG Resources and Energy Investment Conference and Exhibition in Sydney last 11 December, Brett Darley, Santos Executive Vice President for Eastern Australia and PNG, highlighted Santos as one of Australia’s biggest domestic gas suppliers and a leading Asia Pacific LNG supplier.
Darley expressed his gratitude to the PNG Chamber of Resources and Energy for hosting the event.
"As the Chamber has said, this is an exciting, yet crucial time to be having a conversation about the future of the Mining and Petroleum sectors in Papua New Guinea. It is important that we all come together to understand PNG’s resource sector now, and to discuss how it will be developed over the next 10 years. I’m grateful that Santos can be part of this important conversation."
Darley said Santos has been operating in Papua New Guinea since the 1980s, with interests in PNG LNG and Papua New Guinea producing oil fields and development projects with Papua LNG and the P'nyang Gas Project.
"Since then, our interest and activity in the country has increased. In fact, it was two years ago yesterday when we completed the effective merger between Santos and Oil Search. The merger delivered many benefits for Papua New Guinea – benefits that the nation is still reaping,” he said.
Macro and investment environment
He talked about challenges in the industry and critical global events.
"The war in Ukraine is still underway and with more recent conflicts in the Gaza Strip, the geopolitical issues are generating instability on our doorstep. These battles – while thankfully far from home – are affecting our energy markets with increasing volatility."
“Australia has built a reputation for being a stable, reliable provider of resources for our neighbours. But as the geopolitical threats continue, that reputation is at risk."
"Currently, we’re seeing concern from our customers as Australia’s position as a leading and trusted gas supplier for energy-consuming economies of Asia is in decline, despite the clear role that gas will play in the region for decades to come. Which is why, as a resource-rich nation, PNG will continue to be relied upon for its vital resources for its closest neighbours in Asia."
PNG key to a diverse portfolio
Darley also noted that on top of the geopolitical instability, the resources industry in Australia is facing threats of its own, referring to the challenges related to the regulatory approvals in Australia.
"Although our sector provides essential services and immeasurable benefits to people who need it most, the agendas of a vocal minority are risking the destruction of an entire industry, complete with the destruction of thousands of jobs."
"Recognising those issues, Santos is very fortunate to have a portfolio of opportunities that allows us to pivot and look at other opportunities in other jurisdictions.”
“As a company, we are actively prioritising investments in supportive regulatory jurisdictions and with it’s very large resource base and strong and reliable plateau production, PNG continues to be a key to Santos’ diverse portfolio."
"Now, more than ever, our strategic decisions about sovereign risk and future growth opportunities are being considered in light of the jurisdictional support.”
Oil Search Merger and Santos Foundation
Darley reported that Santos’ merger with Oil Search two years ago has been “remarkably successful” as this created greater alignment in Papua New Guinea to support key projects like Papua LNG. This will deliver new jobs, support the local economy, and further encourage investment in PNG, he said.
He added that the merger has not caused any local job losses, and gave his assurance that the PNG workforce will reap the benefits of their global experience.
Last October, Darley said they hired 34 new local apprentices in PNG as part of their apprenticeship program for 2023. They are composed of six women and 28 men in the field of electrical, mechanical and instrumentation – the largest cohort to join Santos in PNG since the program’s inception. They travelled to Malaysia to undergo world-class technical training as part of the apprenticeship program.
"As part of our commitment to PNG, we will continue to build on the great work of the Oil Search Foundation through the launch of the Santos Foundation."
"In PNG, over 92% of leaders in Santos Foundation are Papua New Guinean and this includes the first four roles now supporting the expanded Foundation from PNG. Going forward with the Foundation programs, Santos will have strong focus areas around building resilient communities and advancing economic pathways, as we continue to work collaboratively with national and sub-national governments to empower our communities."
“We have commenced a four-well drilling program in our operated area and are evaluating further opportunities. Our committed spend on the infill wells is about $220M USD (Gross).”
“We will also be looking to tie in one of our operated facilities to export more gas to PNG LNG in the future. (AGO project).”
“The year ahead won’t be without its challenges; however, PNG will continue to play a key role in Santos’ portfolio,” he said, thus enumerating Santos’ 2024 plans, namely:
- To optimise our local assets, maintaining its new high facility reliability performance for oil optimisation and gas export.
- To add reserves delivering on its remaining infill drill program.
- To continue to evaluate the option to have a Floating Storage and Offtake (FSO) solution to replace the aging Kumul Marine Terminal, which has been around since the late ‘90s to export the highlands liquids – this would be the very first facility of this kind in the country.
- To ensure Hides GTE is ready for export, to support Porgera Mine’s re-opening.
- In addition, Papua is scheduled for FID (final investment decision) in 2024 with first production in 2028.
“We're using our infrastructure position to get value out of Papua by leveraging our position and reaping the value, not just through the additional gas we produce, our equity share of the Papua production, but also through tolling,” Darley said.
“I am excited to also announce that we will soon launch a pioneering initiative, the Services Centre of Excellence (SCE) in Port Moresby. The program will create new opportunities for the country’s workforce and continue elevating local technical expertise. The project is scheduled to commence in February 2024 and represents a significant milestone for PNG and Santos as it promises to bolster employment and harness the potential of local talent.”
In closing, he said: “Santos remains committed to PNG – and the collaboration we have undertaken over many decades is something we want to see continue into the future.”
Present during the session were Prime Minister James Marape, Minister for Petroleum and Energy Kerenga Kua, State Ministers and business leaders.
On 13 December, Sigurdur Jonsson, Santos Vice President, PNG Operation, was a speaker on the final day of the conference.
He pointed out the company's commitment to supplying critical fuels such as oil and gas in a sustainable manner through their decarbonising projects, namely the Moomba and Bayu-Undan carbon capture storage projects. Santos also have a carbon offset project such as the Afforestation/Reforestation project in the Markham valley in PNG.
"We became a producer in 1998 in the South East Gobe oil project in the Gulf province, Hides in 1999, and took over operatorship from Chevron in 2003. Over the years we have invested in PNG’s oil fields and projects such as PNG LNG and Papua LNG with our joint venture partners."
"We proudly showcase our operated oil position, comprising of the Agogo, Central, and Gobe Production Facilities, as well as our operations at the Kumul Marine Terminal, with multiple high-value LNG backfill projects on the horizon."
Jonsson mentioned Santos’ successful longstanding operations in the highlands and that through 2023, they have increased oil production based on various strategies, enumerating them as slickline resource management for downhole and zone changes, flow assurance management, and high gas capacity trial to prioritise oil production.
Synergy Benefits and Reliability
In relation to the Oil Search merger, Jonsson said it has proven to be a "resounding success, aligning interests in Papua New Guinea which in effect has improved the local economy.”
He noted, "For our operating assets, we have delivered substantial synergy benefits. The integration efforts enabled delivery of more the US$115 million per annum of benefits through a number of work fronts."
"Our commitment to reliability is evident by our delivery of improved facility reliability through integration synergies, leveraging the experience, capabilities, and scale of the merged entity. This has resulted in a notable incremental improvement of +13% in operated facility reliability from 2021 to today. This equates to 0.85mmboe STO production YTD."
Jonsson mentioned some of the plans of Santos for 2024. "As we move forward, our focus remains on optimizing our local assets, ensuring the reliability of our facilities for both oil optimization and gas export. This commitment reflects our dedication to maintaining operational excellence in the region."
"A key component of our future endeavours involves adding reserves by completing our active infill drilling program. This proactive approach ensures the sustained and efficient extraction of valuable resources, contributing to the long-term energy needs of Papua New Guinea."
He pointed out that to continue the company's commitment to being a reliable exporter, Santos are evaluating the option of a Floating Offtake and Storage (FSO) solution, replacing the aging Kumul Marine Terminal which has been around since the late 1990s. If the FSO plans are successfully deployed, this would be the first of its kind in the country, he noted.
Jonsson also emphasised their dedication to ensure that Hides GTE (Gas to Electricity) Project is ready for export to support the Porgera Mine reopening. Once this is launched, this will contribute to the economic vitality of the region and will highlight the company's commitment to responsible resource management.
"In summary, our vision for the future is anchored in continuous optimization, innovation, and sustainability. Through these initiatives, we aim to solidify Santos' position in Papua New Guinea as a responsible energy partner," he said.
Celestine Ove, PNG Communications Manager, Santos
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