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PNG Business PNG

Purari River. Photo: AECOM

HUGE COSTS LIKELY TO DELAY MORE

HYDRO PROJECTS IN PNG

By Kevin McQuillan A proposal to build Ramu 2 under a Public-Private Partner-
ship model with Chinese firms, Shenzen Energy and Sinohydro,
The development of more hydro power schemes in Papua has been delayed due to question marks over demand.
New Guinea is years away and buyers are needed if they are This project can only proceed once big customers sign on,
to be financially viable. and so far the potential targets - new mines, like Wafi-Golpu
The latest international company to sign an MOU to explore appear reluctant, says Lowy Institute Analyst, Shane McLeod.
hydro is Australia’s Fortescue Metals (FMG), owned by billion- McLeod says the most talked about possibility for FMG to
aire Twiggy Forest. develop is the Purari scheme in Gulf Province, which has been
“After extensive investigations of Papua New Guinea’s rivers around since the 1970s.
and water resources, Fortescue has determined that there is A recent study by PNG Energy Developments Ltd has shown
great potential to generate sustainable energy for a series of Purari has a potential to provide 2,000MW of power. In 2014,
environmentally friendly industries,” State Enterprises Minis- Origin Energy estimated the cost of the project at $A5 billion
ter, Sasindran Muthuvel said at the signing. but has since pulled out.
“This is more than just a hydroelectric power scheme. This “Purari is the one that has had probably the most planning
is enabling our country to become partners in the develop- done on it, so it makes sense to start there in terms of things
ment of carbon neutral industries that provide lots of employ- to look at,” says McLeod.
ment, lots of investment opportunities and growth across the But there are many other potential sites, he points out.
country, in industries that are normally built in countries like “PNG’s mountainous terrain and tropical rainfall means that
Australia and China.” there’s a lot of hydro potential right across the country. But
He added there is the potential to generate in excess of 25 there are also big issues with environmental impact, loss of
gigawatts or more of PNG’s hydropower resources to support land and the impact on local communities.”
green industrial operations for domestic consumption and McLeod says the costs to develop hydro schemes are enor-
export to international markets. mous, and without locked-in major clients to take the output,
In a statement an FMG spokesman said it was early days but the big projects struggle to stack up financially in the short
we “look forward to progressing our early stage investigations and medium term.
on the potential for renewable energy opportunities.” “PNG’s government is treading carefully. It knows that the
Already, hydropower accounts for approximately 40% of state-owned electricity company PNG Power can’t get locked
PNG’s installed capacity, supplying each of the country’s three into large-scale off-take agreements without those big cus-
main power grids: Port Moresby, Ramu and the Gazelle Penin- tomers also signing up.”
sula. PNG has an installed capacity of 250 MWs, but a ‘techni-
cal potential of 15,000 MW’, according to the International editor@islandsbusiness.com
Hydropower Association.

16 Islands Business, November 2020