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    Gas project deal to be signed next week
    THE secretary for the Department of Petroleum and Energy, Mr Joseph Gabut, said yesterday that US$3.5 billion (K14 billion) PNG to Queensland Gas project agreement is expected to be signed next week.
    Mr Gabut told the two-day PNG Institute of Engineers conference at the Crowne Plaza Hotel yesterday it was one of the biggest single investment in the country with a capital expenditure of K14 billion, of which K10 billion would be spent here.
    "It is vital to the future of our petroleum industry because of the ongoing decline in oil production," said Mr Gabut.
    He added that there were outstanding issues, which needed to be resolved in relation to the taxation regime, state participation and foreign exchange controls.
    "We are still awaiting the Central Bank approval and it's all in their hands.
    "The project has suffered many delays but we are now very close to signing the Gas Agreement between the State and the project companies," he added.
    Mr Gabut added that the department would be mounting pressure on the companies involved to begin front-end engineering and design (FEED) in September this year.
    He stressed that he was determined to maximise PNG business involvement in both the construction and operational phases of the project.
    It is estimated at US$50 million (K198 million) and would last for six months so it a very significant investment.
    The FEED would provide the detailed engineering for the facilities required.
    Mr Gabut explained that the project would be in two phases and the first phase would include taking gas from the existing oil fields of Kutubu, Gobe and Moran, while the next phase would take gas from the Hides field.
    He stressed that phase one would need additional gas handling equipment and facilities at Kutubu and Gobe.
    "I am optimistic that the front-end engineering design (FEED) will begin soon. If that goes well, construction work should begin in 2003 and the first gas sales planned for 2006," said Mr Gabut.
    There will be a new gas pipeline from Kutubu to the main processing facility (MPF) on the Gulf Coast, which would run close to the existing oil pipeline although the route is expected to diverge close to the Gulf.
    "The gas from the PNG fields is known as wet gas because it includes a relatively high proportion of liquids and at the MPF the liquids - propane and butane will be separated," said Mr Gabut.
    He added that the dry gas would then be exported via another pipeline to the marine border with Australia and from there to the customers in Queensland. The liquids would be loaded into tankers for distribution within PNG and overseas.
    "I must stress that the liquids are a very important part of the project economics and they will account for 50 per cent of the revenues," he added.
    However, he added that phase two would begin when the gas from the oil fields starts running out.
    Mr Gabut said a new pipeline would be laid from the Hides gas field to link up with the gas pipeline in Kutubu.
    "There will also be a need for more wells to be drilled and new facilities at Hides," said Mr Gabut.
    However, the two largest customers are expected to be the Comalco aluminum refinery in Gladstone and a new state-owned electricity generating station in Townsville.
    The Townsville power station contract has gone out to tender and PNG is one of the three supply sources on the short list and is also a strong favourite.
    Operator ExxonMobil has also been marketing gas to customers outside Queensland and possibly, there would be a link up with an existing pipeline running south from Moomba.
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