Smit Lamnalco takes key service role in PNG LNG project

November 12, 2012

A milestone has been reached in the ground-breaking Papua New Guinea Liquefied Natural Gas (PN LNG) project, following the award of the towage and marine support contract to global offshore and gas terminal service specialist Smit Lamnalco.

The award is the latest step forward in the multinational project that is scheduled to begin delivering LNG in 2014, with drilling work on the first of the fields gathering pace.

Work has been underway at the Hides natural gas field since late summer and, over the course of the project's 30-year lifespan, more than 9 Tcf of gas is expected to be sourced from the Hides, Angore, Juha, Kutubu, Agogo, Moran and Gobe Main fields at the rate of 6.6 MTPA. Investment in the initial phase of the project, excluding shipping costs, is estimated at $15.7 billion.

Each of the fields is located in the Southern Highlands and Western provinces of Papua New Guinea and the gas will be conditioned in the Highlands and transported by pipeline to an LNG plant approximately 20km northwest of Port Moresby. The PNG LNG project will supply major customers including Chinese Petroleum Corporation, Osaka Gas Company Limited, The Tokyo Electric Power Company Inc and Unipec Asia Company Limited, a subsidiary of China Petroleum and Chemical Corporation (Sinopec).

PNG LNG will have significant ramifications on the local economy and environment for decades to come. The independent research group ACIL Tasman has predicted that when the project is in production it will more than double the country's GDP, triple export revenues and create significant employment and business development opportunities for Papua New Guineans while maintaining the crucial balance between promoting economic growth and protecting the environment. More than 10,000 Papua New Guineans are reckoned to have undertaken training associated with the project overall.

All of this in line with Smit Lamnalco company policy, which is centred on developing local expertise wherever it operates. The company's 10-year marine support and towage contract will provide tugboats and crews to assist berthing LNG carriers in Papua New Guinea. It is worth approximately $120 million over the period, which could be extended to 25 years.

To meet its obligations, Smit Lamnalco has placed an order with Hong Kong-based shipbuilder, Cheoy Lee, for a series of four 32m long RAstar 3200 class Azimuth Stern Drive (ASD) tugs. Delivery of the first two new tugs from the Pearl River Delta yard is scheduled for October and November 2013 with the remaining two following in January and February 2014.

"Papua New Guinea is a proud seafaring nation and we are committed to creating local job opportunities," says Paul Grizell, Smit Lamnalco General Manager Australasia. "Over time we intend to hire nationals to operate on our vessels, trained to international standards. Timely asset deployment and crew training standards played a key role in ExxonMobil entrusting us with this contract."

Tug match
As part of its commitment to the project Smit Lamnalco will establish a dedicated operation in Papua New Guinea. "As in other markets, Smit Lamnalco will draw on its experience in cultivating strong ties with local interests in order to support our service offering ," says Mr Grizell. "We are firmly committed to matching our international standards to local needs." The RAStar series was designed by Vancouver-based Robert Allan to provide the high power levels needed to undertake escort operations in weather- and sea-exposed areas, including LNG terminals, where high standards of sea keeping are required.

Smit Lamnalco has operated 36m long, 100t bollard pull rated RAstar 3600 tugs in the Middle East Gulf since 2009. "We have had a very positive experience with this hull type, so it was the natural choice to opt for the RAstar design once again," says Phil Cornish from Smit Lamnalco's Projects Department. "However, because of the particular requirements of the PNG contract, we have opted for a shorter version with a lower bollard pull rating, which we believe will be a better match for the expected operating conditions."

The four new buildings will have a maximum bollard pull of 65 tons astern and 69 tons ahead. A number of specific safety features have been included in the specifications to meet stringent safety requirements for operations in LNG terminal environments.

The tugs will be built to the demanding FiFi class 1 rating to deliver 2400 m3 of water an hour. They will carry the Escort class notation and tow over the bow, hence the 65tons astern pull rating. The four tugs will also be equipped with a render recovery winch capable of maintaining a consistent line tension in rough seas.

"This contract shows Smit Lamnalco is willing to invest in owned tugs to enhance our capabilities in the offshore terminals market and meet the demanding requirements of customers in the LNG sector," says Mr Cornish. "This is a relatively new, but still tried and tested Robert Allan design, which we have customised to meet the particular needs of our first foray into the Papua New Guinea terminals market."

Smith Lamnalco has used Cheoy Lee in the past and opted to go to the yard again because of its track record in building to the Robert Allan design. The vessels will be the first RAstar 3200 tugs to be delivered by the Chinese shipyard.

The Smit Lamnalco will conduct all crew training in house by offering officially recognised courses on STCW and other pertinent issues. The company's long experience in operating in territorial waters and in compliance with cabotage legislation underpins its specialisation in using local labour to provide services.

ExxonMobil subsidiary Esso Highlands Limited is constructing and operating the overall project on behalf of the co-venture companies Oil Search Limited, NPCP, Santos, JX Nippon Oil & Gas Exploration, Mineral Resources Development Company and Petromin PNG Holdings Limited.

Esso Highlands has deployed the Nabors Rig 702 for drilling work on the first well. The rig has been designed to withstand earthquakes and includes containment equipment and facilities to protect the environment and the drilling team, including Papua New Guinean engineers, spent a year and a half in Melbourne studying ExxonMobil's operations before starting work.

"Helping to bring Papua New Guinea's natural gas to market while balancing economic growth, environmental protection and social development demands the integration of ingenuity, integrity, innovation and reliability with an unwavering commitment to delivering on our promises, says Peter Graham, Managing Director, Esso Highlands.

Smit Lamnalco's is the latest commitment by a participant in the overall project to use local labour sources where feasible. More than 40 Papua New Guineans have completed the welding training program at the Plant Site some 20 km from Port Moresby. During the three-week program, participants attended full-time training and learned, through sequential phases, welding techniques including structural, support and normal (or light) welding.

"We are committed to investing in and motivating our local workforce to develop skills," says Plant Site Senior Project Manager Yow-Yeen Lee. "Skills development is important to their future and that of the LNG Plant, as we need skilled workers for the site's long-term operations.

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