"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".

- Papua New Guinea National Goals and Directive Principles

Wednesday, 22 December 2010

Penetrating Exxon's Spin: An Annotated Speech from the Sydney Investment Forum

Peter Graham, the Managing Director of Esso Highlands( Exxon Mobil’s Papua New Guinea subsidiary) recently updated the investment community on the progress of the PNG LNG project. In an effort to convince the investor community that the LNG project is as ‘safe as houses’ (sic), Graham has filtered his speech through a rather rosy colored lens. To negate the effect of Graham’s filter, LNG WATCH provide below an edited version of Graham’s speech, which is annotated with links to relevant LNG WATCH articles that suggest the situation is considerably more complex in the Southern Highlands than what Esso Highland’s Managing Director indicates.  

PNG Investment Conference Sydney Dec 7
 The PNG LNG Project: Business Development Update

Peter Graham
Honorable Ministers, Distinguished Guests, Ladies and Gentlemen; Good Afternoon
It is a pleasure to be here today to talk about the progress we are making on Business Development associated with the PNG LNG Project and the importance of this Project and associated business to the economic future of PNG.
The recent PNG budget predicts real GDP growth to be over 8% in 2011, reflecting the impacts of the PNG LNG Project ramp up. Clearly the budget is framed against a backdrop of strong domestic economic growth as a result of the project.
As Decie Autin explained yesterday, our construction activities are currently focused on improving and upgrading infrastructure, including road and bridge works, telecommunications, and constructing camps to house the construction workforce and completing site preparation work ahead of facilities construction.
Detailed engineering, execution planning and procurement activities for the facilities, pipelines and drilling are also progressing.
Linepipe for the onshore gas line from the Gulf of Papua to the Southern Highlands is arriving at the expanded shore base at Kopi and clearing of the pipeline right-of-way has commenced.  Trenching and pipe laying will commence in the first quarter of 2011.
Earthworks at Komo Airfield and the site of the future Hides Gas Conditioning Plant have commenced.
At the LNG Plant site, an 800-person pioneer camp is complete and site preparation for the LNG Plant is well underway.

ExxonMobil has over a century of success in helping countries around the world to develop their resources.  Esso Highlands Limited, the project operator, is a subsidiary of Exxon Mobil Corporation, the world’s largest publicly traded international oil and gas company.

Exxon Mobil has long been recognized as a leader in the oil and gas industry. The secret to the company’s success is, in fact, no secret at all. It involves maintaining the same steadfast commitment to the business principles – those sound fundamentals – that have proven successful over our 125 year history.
This business approach includes effective long-term risk management, disciplined capital investment, enduring business controls, and an unwavering commitment to safe and reliable operations.
We believe that this commitment to high ethical standards and business integrity and the importance of making a positive change in our communities is critical to our competitive advantage and it's a standard we expect from our business partners.
Through the PNG LNG project we are now very much a part of the PNG community and we are working hard to ensure we remain a valued member of the communities within which we operate. 
In project areas much of our service requirements is met by Landowner Companies – called Lancos.  These companies, common throughout the resource industries in PNG, are typically owned by landowners within the vicinity of the work site being serviced.  They provide local employment in areas such as labor, camp management, security and ground transportation and when successful pay dividends to their shareholders.  Lancos also often assume a social responsibility within their local communities, contributing during times of need.
Esso Highlands Limited’s objective in local business development is to provide opportunities for Project Area landowners by supporting the development of capable, nationally competitive service companies that remain operational long after Project construction is completed.
In April 2010, we opened a supplier resource center, the “Enterprise Center” in temporary premises at the well known Papua New Guinea Institute of Bankers and Business Management in Port Moresby. It’s expected to move into a permanent facility on the same site soon.
The Enterprise Center is an independent organization set up to support local businesses, including Lancos, to develop business opportunities and promote sustainability by facilitating communication between project stakeholders, including contractors, subcontractors and domestic PNG businesses.
It is also building capacity of some Papua New Guinean businesses to meet the Project’s business standards.
The PNG LNG Project needs a large construction workforce, as well as a highly trained workforce to operate and manage the facilities once built. Businesses need skilled people and we are adding to the pool of qualified Papua New Guineans. 
On Nov 30 we officially opened our new trade training facility at the Port Moresby Technical College. This represents a significant investment in PNG's future.
This centre will provide training to construction workers for the LNG Plant site, and along with a smaller facility we are building at Juni in the Highlands for the Hides Gas Conditioning Plant, will together train about 1,000 people per year, both men & women.
In May 2009 government representatives and landowners demonstrated a landmark commitment to resource development democracy when they reached agreement on how the benefits from the Project will be distributed.
I'd like to congratulate the national and provincial governments for the way in which they have risen to the challenge of supporting the Project.
The Government has launched its medium term development strategy and building workforce and supplier capability in PNG is a key for successful realization of this vision.  Substantial funds have been committed to infrastructure projects. The expectation is that Papua New Guinean companies, including companies that have honed their skills and capabilities in working with the PNG LNG project, will play a significant role in executing these projects.   As construction work on the Projects phases down, opportunities in the public sector are expected to develop for PNG companies that have demonstrated sound business fundamentals and an ability to compete.
Beyond the construction phase of the PNG LNG Project, revenues from the project will flow to the State and into various investment funds, including an infrastructure fund.
Returning to the theme of my talk - the importance of “sound business fundamentals” - the PNG LNG Project offers an opportunity to raise the bar; to build capacity in the Papua New Guinea workforce and to build capacity in Papua New Guinea businesses to successfully compete.
A safe and secure work environment is a realistic expectation when communities are engaged – engaged in vocational training, engaged in work, and engaged in businesses that support the project and other ventures. 

Our record project finance agreement in March this year represents a huge vote of confidence in the project, in our ability to deliver as operator working with our joint-venture partners, and it represents a huge vote of confidence in the PNG Government, and the people of Papua New Guinea.
While this was an historic milestone, it was only the beginning.
International gas customers, shareholders and lending institutions have shown confidence in our abilities and potential. Now we recognize that it's up to all of us to deliver – and we know that the world is watching.
Thank you.

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