Last week’s announcement that ExxonMobil and friends will proceed with their plans for a $4.5 billion pipeline from Papua New Guinea first sparked this idea.
It was reinforced by the realisation that something similar has been happening at the Sunrise project which lies in the waters between Australia and East Timor.
In both projects there are strong reasons for developing the gas assets which lie in the ground – and almost equally strong reasons for adopting a safety first approach and not developing them
But as far as The Slug can see, the Australian Government has stepped in on both occasions and said something like “let’s be nice to our near-neighbours, because they need our help, so please sink a few billion into the ground, and build your nice little gas projects".
There is, obviously, a touch of exaggeration in that description, but isn’t it so often that we need simple words to sum up a complex situation.
Take East Timor for example. It has been playing hard ball with the collective conscience of Australia by arguing that it deserves special treatment because it's poor, and because it’s poor it should get the lion’s share of royalties, and be the chosen location for onshore gas processing.
As The Slug sees it, a lot of this haggling has been settled and the Sunrise project may proceed, though there must be serious questions in the minds of investors in the major shareholder, Woodside Petroleum, that someone in East Timor will try and change the terms of the deal after the project is developed – in other words, you’ve build the project, and now we’re holding it hostage until you pay more.
The PNG pipeline falls into a similar category of what The Slug calls “rich in sovereign risk”.
For a decade, at least, there has been talk of a pipeline from the Highlands of PNG, either to feed a local liquefaction plant, or to deliver it to industry in Australia. The current plan is to pipe the gas to Australia with sales made down the east coast, and possibly to the Moomba hub of Santos for distribution as far as Melbourne and Adelaide.
Chief cheer-leader for the development of the PNG pipeline is not a group of investors, the people you would normally expect in this situation, but Australia’s Foreign Minister, Alexander Downer.
From where he sits in Canberra, far from the risk of actually building and operating a gas pipeline in a decidedly dodgy joint like PNG, Alexander argues that it will aid the “political stability” of a troubled neighbour.
Give poor old Slug a break!
Since when has political stability of a risky country where law and order went out the window years ago been a factor in a group of shareholders making a $4.5 billion investment decision?
And, it should be pointed out, this is not a brick-making factory, or a some other relatively safe investment, this is a pipeline packed with high-pressure natural gas which, in case no-one has noticed has a habit of burning rather rapidly when someone applies a match or pumps a single round from an AK47 through the pipe.
As if this scenario is not bad enough for the owners of the pipeline, what about the customers who are being urged to buy gas from PNG?
Are they also being told that it’s good for the political stability of a foreign country, and not to worry too much about supply interruptions should someone accidentally drive a forklift into the pipe.
The Slug, as is obvious from this week’s rant, has deep worries about PNG and its ability to guard a pipeline as it snakes its way down to Australia – and those worries were dramatically reinforced by last week’s events in the London Underground where global terrorism has reached new lows, and could so easily spread to an easy target like a pipeline in the middle of the PNG badlands.
