CAPITAL: PORT MORESBY
MONETARY UNIT: KINA
REFINING CAPACITY: NONE
OIL PRODUCTION: 68,500 B/D
OIL RESERVES: 359 MILLION BBL
GAS RESERVES: 7.9 TCF

Chevron Niugini Ltd. said that despite political uncertainty in Papua New Guinea and in Queensland, Australia, the proposed $6.5 billion (Aus.), 3,500-km gas pipeline project between the two nations was likely to proceed.

In Papua New Guinea, Chevron had to suspend production briefly in 2000 at Moran oil field, one of those that were to contribute gas to the project, due to landowner protests regarding ownership.

The PNG government asked Australia for up to $650 million (Aus.) to help the PNG government take a direct interest in the proposed line.

Papua New Guinea raised $190 million (Aus.) from the European Investment Bank, but needed a further $650 million to fund the major wet gas component of the project. Any Australian contribution would be in addition to the $300 million in budget aid that it gave PNG each year.

The PNG government was entitled to take up to 30% in the project. In prior resource developments, the private partners involved had carried the PNG government through the project. But the gas pipeline venture was so large the government needed to raise cash.

The government was expected to distribute parts of its equity to local landholders and provincial government agencies in the Southern Highlands and Papuan Gulf provinces through which the pipeline would pass.

The oil companies agreed to provide up to 600 MMcfd from Papua New Guinea's Hides, Kutubu, Gobe, and Moran fields for 30 years.

But the project's timetable for development slipped as backers awaited commercial commitments from Australian gas consumers. Participants were Chevron Corp., ExxonMobil Corp., Santos Ltd., Oil Search Ltd., Mitsubishi Corp., and Orogen Minerals Ltd.

A change in operator was possible. ExxonMobil, with a 30% stake, could take over from Chevron, which had 9%, once the government allowed the pipeline and allied construction to proceed.

Meanwhile, the US Overseas Private Investment Corp. signed an agreement to finance a Port Moresby refinery for InterOil Corp., Toronto.

OPIC approved an $85 million credit facility, which, with cash from InterOil, would cover the entire refinery cost.