The activities in the FEED program, which is being conducted by the KBR and WorleyParsons joint venture, Eos, include preliminary design for infrastructure, gas field developments, gas processing and export compression facilities, and the gas export pipeline from the Southern Highlands in PNG to the landfall at Cape York in northern Queensland.

The infrastructure design is a significant portion of the project as it is located in a relatively remote area of PNG that is not well served by roads. In order to accommodate the large number of personnel that will be present during the construction phase and then the operation of the project, the existing camps and airport facilities currently operated by Oil Search and its affiliates will also require upgrading.

The road definition involves route selection, detailed design and cost estimation for approximately 345 km of roads. This includes 128 km of new road through mountainous terrain, together with significant upgrades to a further 217 km of roads in varied terrain from mountains through to swamps. The roads will be accessible both to the project and the public. Due to the high rainfall in the area, the roads include many culverts and bridges across fast flowing rivers. This, together with limitations on available construction materials, has challenged traditional road and bridge options and provided Eos engineers with the opportunity to develop solutions which maximise local labour and materials content.

When complete the route will significantly reduce the travel distance and times and provide Esso Highlands with direct access to site from the Port of Kopi, where it is also detailing upgraded wharf facilities.

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Meanwhile, the Gas Project itself continues to gather momentum, with the likelihood of the project becoming a reality increasing as interest in the pipeline grows.

The project will develop gas reserves in the Southern Highlands of Papua New Guinea, process the gas to sales quality and export it to Australia via pipeline. A decision on whether to proceed with the project is expected to be made mid-year.

Ahead of this decision, several key developments regarding the project have already occurred in 2006. The project has been granted a 15-year holiday from regulatory tariffs from the ACCC, which will allow the project partners to meet their own profit targets for 15 years before the pipeline’s tariffs become subject to five yearly review.

Meanwhile, the Queensland Government’s declared the Ballera lateral a significant project in late January, meaning that this part of the project now requires an Environmental Impact Study. Public submissions for an EIS on the proposed 1,200 km lateral, which would run from Townsville to Ballera in southwest Queensland, have been invited.

Due to higher than expected gas demand on Australia’s east coast, the facilities for the PNG Gas Project will expand from 225 PJ/a to 260 PJ/a. Oil Search, which has the most substantial interest in the project, said in February that it will continue to seek additional markets in the Northern Territory, Queensland and Australia’s southern states for gas from the project.

AGL has also finalised its 10 per cent stake in the project, and onsold its first gas. AGL made an initial payment of $580 million to Oil Search, including interests in gas and oil reserves, production and processing infrastructure.

AGL sold the first gas from its share in the project to power company Flinders Osborne Trading (NRG Flinders) in South Australia.

With these developments, and financial close expected by the end of the year, the PNG Gas Project is looking more and more likely to eventuate. First gas from the project is expected in 2009.