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Interview on Papua New Guinea energy market

Enerdata has just released the new Papua New Guinea energy report.

Pierre Buisson, analyst at Enerdata, assesses the challenges facing Papua New Guinea on the brink of a big opportunity.

Is Papua New Guinea a country of opportunities regarding the energy industry?

Papua New Guinea will be the setting for major changes in the energy sector very soon, because of the PNG LNG project. Papua New Guinea could be very lucrative for foreign investment in the liquefied gas market. It's a country with a lot of underexploited potential, and our report defines the existing structure of the energy sector, and the issues and prospects Papua New Guinea faces in regards to energy.

How is the energy sector organized in Papua New Guinea?

The energy sector in Papua New Guinea mostly depends on three main types of energy: electricity, oil and gas. The energy sector accounts for 14% of the country's GDP. Png Power Limited is the (publicly traded) national electricity company. Because of population distribution (the majority of Papua New Guinea's population occupies rural forest areas) and geographical issues; the electrification rate is still low in Papua New Guinea--only 7%. Oil Search, in which the Papua New Guinea government holds 17.6% of shares, is the largest oil company. Inter Oil, a vertically integrated company with petroleum licenses covering about 8.7 million acres of land, is the second largest oil company in Papua New Guinea. Both companies dominate the gas market in Papua New Guinea as well. There is only one oil refinery in Papua New Guinea, held by Inter Oil. This might explain the level of country's oil product importation, which is high considering the amount of crude oil that they export. Papua New Guinea has the resources, but falls short when it comes to exploiting them.

What are the biggest opportunities for foreign investment in Papua New Guinea?

Most of the investment opportunities are linked to the pipeline. The PNG LNG is one of the largest projects undertaken in the country's history. Other investment opportunities lie in technological support or liquefaction plants.

How do you think the PNG LNG project might affect the country's economy?

The PNG LNG project is a huge priority for the country. Even the economic crisis did little to deter its development. This project will allow Papua New Guinea to attract more foreign investors in a way that it didn't before. This will lead to widespread change; notably better technology, more skilled labor and a higher GDP.

Last year Inter Oil reported record setting finds in its Antelope natural gas field. Is this, in your opinion, another important development opportunity?

Papua New Guinea has a sort of asymmetry in regards to energy. There are impressive amounts of resources, capacities too large to be used domestically. Despite demand these remain severely underexploited for organisational and technological reasons. Natural gas exploitation negotiations are still in their infancy, but could definitely prove to be just as appealing to investors as the PNG LNG project.

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