Origin May Build Papua New Guinea Hydropower Project Supplying Australia

Origin Energy Ltd. agreed to study building a hydro project in Papua New Guinea that would feed into Australia’s national power grid and may help the country meet its carbon emissions reduction targets.

The 1,800 megawatt venture would cost “many billions of dollars,” Grant King, managing director of Australia’s second-biggest electricity and gas retailer, said on a conference call today. It may supply power to Queensland by as early as 2018, state Premier Anna Bligh said on the call.

Australia, the world’s largest exporter of coal, has set a target of generating 20 percent of its power from renewable sources by 2020. The hydropower project would be Origin’s second-biggest investment behind a proposed $31 billion Queensland liquefied natural gas venture with ConocoPhillips.

The 50-50 venture with PNG Sustainable Development Program Ltd. involves building a dam on the strong-flowing Purari River at Wabo, 350 kilometers (217 miles) north-west of Papua New Guinea’s capital, Port Moresby, Origin said in a statement.

“The flows in this river would fill Sydney harbor in two days,” King said on the conference call with reporters. “It’s an extraordinary resource. We’re very confident that in the long run, once we satisfy all the important areas around social and environmental development that this project would, and should proceed.”

Undersea Cables

Electricity will be carried to Australia by two undersea cables of around 250 kilometers each, running through Weipa on north Queensland’s Gulf of Carpentaria and connecting to the national grid at Townsville on the eastern coast, Origin said. About 1,200 megawatts of the power would be for Queensland and 600 megawatts for Papua New Guinea, Bligh said.

An engineering and environmental study is expected to be completed by 2012, Origin said. Its shares dropped 1.1 percent to A$15.48 by the 4:10 p.m. close in Sydney, compared with a 0.8 percent gain in the benchmark S&P/ASX 200 Index.

Talks about supplying power to resource projects in north Queensland will start “very soon,” Origin spokesman Tim Scott said by telephone in Sydney today.

While Queensland state won’t provide funding for the project, it will assist in establishing a corridor for a transmission line connecting to the national grid, Bligh said. The proposal will need to satisfy questions of environmental impact and land title, she said.

Dollar a Day

The Papua New Guinea project would increase power supply to local villages and rural communities in a country where about 40 percent of the population lives on less that $1 a day, according to estimates from AusAID, the Australian government agency responsible for managing overseas aid.

“This remarkable resource is not new or unknown,” Bligh said in the statement. “Significant engineering and environmental studies were undertaken by the Snowy Mountains Engineering Corporation and Nippon Koei around this resource in the 1970s.”

Australia’s government describes the Snowy Mountains Scheme in southern New South Wales as “by far the largest engineering project ever undertaken” in the country. It includes 16 major dams and seven power stations, and was built between 1949 and 1974.

Origin’s King said it’s appropriate to compare that project with the proposed Papua New Guinea venture as, while it would be smaller in overall capacity, it would provide a larger base load, or continuous, supply to the national grid.

“It’s a Snowy Mountains Scheme,” King said on the call. “It’s not a scheme that diverts rivers, nor takes water off to irrigation, so that distinction is also important.”

Origin owns 2,833 megawatts of generation capacity, excluding New Zealand unit Contact Energy Ltd., according to its website. Its largest power plant is the 665 megawatt gas-fired Uranquinty site in New South Wales state. One megawatt can power about 1,000 Australian homes.

AGL Energy Ltd. is Australia’s largest electricity retailer.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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