Drilling Papua New Guinea: Chevron Comes to Lake Kutubu

By Kennedy, Danny | Multinational Monitor, March 1996 | Go to article overview

Drilling Papua New Guinea: Chevron Comes to Lake Kutubu


Kennedy, Danny, Multinational Monitor


PORT MORESBY - Papua New Guinea (PNG) has long been considered rich in potential reserves. Only decades after "first contact," seeps and other indications of oil were discovered in various places around the country. In the 1920s, the Anglo-Persian company (now British Petroleum, BP) commenced exploration because company scientists believed the surface geology looked similar to that of Persia. Despite several earlier gushers at wildcat wells, however, the 60-year quest for oil found its holy grail only when commercially viable bodies of oil were struck in 1986.

The Iagifu oil discovery in the Southern Highlands was led by Chevron, with BP, PNG's own Oilsearch, Australia's Ampolex, Australian BHP Petroleum, Pioneer and Japan-based Merlin International on board the exploration team. Located near the pristine Lake Kutubu, at 2,000 meters above sea level, the prospect of crude was sufficient to justify a US$1 billion expenditure by the oil companies to build Melanesia's first oilfield and export system. Operated by Chevron, the Kutubu Petroleum Project is now jointly owned by Chevron subsidiary Chevron Niugini, BP, Ampolex PNG, Merlin-Pacific, BHP Petroleum, Oilsearch and the government-owned Petroleum Resources Kutubu, which holds a 22.5 percent stake. There are more than 40 wellheads west and south of the lake, a base camp of 450 personnel and two other camps of 50 each along the length of a 265-kilometer export pipeline which pumps up to 100,000 barrels of oil a day into supertankers in the Gulf of Papua.

A Chevron manager at the site says, "It's amazing what you can do with a billion dollars." But what few Chevron staffers seem to realize is that Lake Kutubu was amazing before the company got there. It is home to the Foe and Fasu language groups, who until the late 1980s had had only limited contact with missionaries, Australian colonial administrators and the post-independence government. It also has incredible flora and fauna. Russell Mittermeier, president of Conservation International, says the area "is a unique place because it is relatively intact and tremendously diverse. It has incalculable environmental value." Now the social and biological riches of Lake Kutubu are imperiled by the oil project.

Development comes to Lake Kutubu

Prior to the Kutubu Project, many engineers had said connecting the southern coastline of PNG to the Southern Highlands would be well-nigh impossible, and certainly impractical, so rugged is the region. Once oil was identified in 1986, however, Chevron built a road, laid pipeline and installed some of the largest industrial infrastructure in the country by the lake, using 4,000 Hercules airplane flights in the space of one year's construction. One of the best hospitals in the country is maintained at the base camp for employees; another new road connects the lake to the highlands highway; and what is probably the first golf course in the Southern Highlands has been bulldozed into the Lake's shores.

The 225-million-barrel-oil reserves identified at Kutubu are sufficient to feed the fossil fuel diet of the Western world to which it is exported for just three days. The prospect for this pioneering oil development, which not only opens up a new field but a whole new oil exporting country, was made attractive by the support from national and provincial politicians, bureaucrats and the recently formed PNG Chamber of Mines and Petroleum.

Because of the low price of oil per barrel, though, developing the field has not paid off as well as the executives of the joint venture had hoped. During the establishment phase of the project, industry analysts projected prices of up to $21 per barrel. But oil prices have been depressed for most of the project's life, and were at $18 during the project's peak output period.

Many local people eagerly supported the project at first because they were convinced not simply that the oil would be developed, but that "development" would happen to them. …

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