PNG’s LNG Province risks falling into the hands of criminals – police

Papua New Guinea police say they are losing control in Hela Province which is at the epicentre of the Exxon-Mobil LNG project. Photo: RNZ / Johnny Blades

Radio New Zealand | 22 March 2018

Papua New Guinea’s Hela Province is at risk of falling into the hands of armed criminals, local police say.

The Post Courier reported Western Highlands police commander Martin Lakari as saying the provincial capital Tari was a “battle field” where there was no respect for law and order.

Tribal enemies in the province have reportedly been searching and murdering each other in the capital, and police officers have become targets when they try to enforce the law.

On Friday, a ward councillor was brutally shot at close range and killed in front of a large crowd outside an illegal gambling house beside the airport.

During the same day, a young woman was gang raped by armed men who had set-up a roadblock in Tigibi along the Highlands Highway outside Tari.

Mr Lakari called for immediate intervention by the police hierarchy and Government or he says criminals will take total control of the province.

Hela was one of the worst hit provinces when a 7.5-magnitude earthquake struck in February.


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Exxon still assessing damage to Papua New Guinea natural gas facilities

The ExxonMobil Hides Gas Conditioning Plant in Hela Province

Florence Tan | Reuters | March 21, 2018

A senior Exxon Mobil Corp executive said on Wednesday the company is still assessing damage to its natural gas processing plant in the mountains of Papua New Guinea, knocked out by a strong earthquake last month.

A powerful 7.5 magnitude quake struck near Exxon’s Hides facility on Feb. 25, killing dozens of people and halting production at the site. The temblor damaged power infrastructure and also led to the closure of the Komo jungle airfield, making access to the remote facility difficult.

Several aftershocks, as well as the remoteness of the gas field and processing plant – more than 700 kilometers from the export facility near the capital, Port Moresby – have made it difficult to assess and repair any damage, making it unclear when production and exports can resume.

“We’re doing a full assessment right now…We had a few aftershocks so you have to go through the assessments again up in the mountains to recheck the facilities,” said Neil Duffin, President of ExxonMobil’s production company, speaking during an oil and gas industry event in Kuala Lumpur, Malaysia.

Prior to the shutdown, Exxon’s Papua New Guinea Liquefied Natural Gas (PNG LNG) export project, had been producing at about 20 percent above its nominal capacity of 6.9 million tonnes a year.

Exxon has previously said it plans to restart shipments within eight weeks of the shutdown.

“I’m hoping we can actually start flowing gas within that two-month period,” Duffin said.

Led by Exxon, with a one-third stake, and its Australian partners Oil Search and Santos, PNG LNG is the impoverished country’s biggest revenue generator, bringing in around $3 billion in sales per year at current LNG prices. But the facility has also faced local criticism due to accident, as well as claims it did not spread wealth locally.

Exxon said in February it plans to almost double the facility’s export capacity to 16 million tonnes per year, together with its partners.

The partners in Papua New Guinea are racing to start producing from new trains by around 2023 or 2024, when the LNG market is expected to need new supply due to rapidly growing demand in Asia and a lack of other new projects.

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K660m in royalties from Lihir

Loop PNG | March 20, 2018

The people of New Ireland have received K660 million in total royalties from the Lihir Gold Limited (LGL) since 1997.

Of the total royalty payments made between 1997 and December 2017 (K660m);

  • New Ireland Provincial Government (+ districts) had received K330,057,253
  • Nimamar Local Level Government had received K198,034,351
  • Special Mining Lease Block Owners had received K132,022,902

From January to December 2017, Lihir Gold Limited royalty payments to the people of New Ireland have added to a total of K75,065,077 as highlighted (in yellow) in the table below.

What are royalties?

The PNG Mining Act defines royalties as payments by a mining company to the State based on 2 percent of the value of all gold sold.

The Mining Act further states that it is up to the State to decide how it wants to redistribute the royalties.

For the Lihir operation, the State, in a Memorandum of Agreement (MOA) – signed with NIPG, NLLG and the Lihir Mining Area Landowner Association (LMALA) – agreed that the National Government shall ensure that all royalties be distributed in the following way;

  • 50 percent be paid to NIPG
  • 30 percent be paid to NLLG
  • 20 percent be paid directly to the SML block owners.

The MOA further states that the 50 percent portion for the NIPG be divided as:

  • 20 percent to the Namatanai District for infrastructure projects and programs pursuant to its district and provincial development plans. (Lihir comes under the jurisdiction of the Nimamar Local Level Government in the Namatanai district.)
  • 20 percent to the Kavieng District for infrastructure projects and programs pursuant to its districts and provincial development plans.
  • 10 percent for general administration as well as for the administration of the MOA obligations.

The MOA allocation of royalties for infrastructure projects and programs in both Namatanai and Kavieng fulfils Recital C of the MDC’s Social Impact Monitoring Plan for the Lihir operation. It therefore makes Lihir a business that is benefitting the whole of New Ireland Province.

For the 30 percent NLLG portion of total royalties, the MOA states that it be split further in the following way:

  • 20 percent to be spent on community development and programs
  • 10 percent to be spent on long term growth-driven investments

For the 20 percent royalty portion for SML block owners, an arrangement was made between the SML block executives and LMALA for Newcrest Lihir to deduct 20 percent and pay it directly to LMALA to put in a financial savings scheme for the landowners. The remaining 80 percent is paid to the SML block executive to distribute to the SML block owners.

In a statement, the mining rm said: “LGL as a corporate citizen and development partner for New Ireland and PNG honours the MOA and other agreements and complies with all laws of PNG.

“LGL pays royalties every month and reports to the Mineral Resource Authority (MRA), the Internal Revenue Commission and other stakeholder government agencies.”

Newcrest Mining Limited, owner of LGL, is a publically [sic] listed company on the PNG and Australian stock exchanges. As such it is required to regularly report its financial performance through various communications channels, including its website

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Oil Search sees Gobe plant operational this week after PNG quake

Tom Westbrook | Reuters | March 20, 2018

Australia’s Oil Search Ltd said on Tuesday that it expects its Gobe processing plant and oil export pipeline in Papua New Guinea to be operational later this week, after a deadly earthquake hit last month.

Oil Search said the Gobe facility and its export pipeline were largely undamaged in the magnitude 7.5 quake that struck on Feb. 26.

The company said its condensate handling facilities, part of the giant PNG liquefied natural gas (LNG) project, were also ready to receive PNG LNG condensate once production at the Hides gas conditioning plant comes back on stream.

The Hides plant was shut down after the quake by operator ExxonMobil, which said earlier this month the PNG LNG project would be shut for about eight weeks for inspections and repairs.

Oil Search said it expects its central processing facility at Kutubu, another oil and gas field, to be “progressively restored from late March”, while its Moran oil and gas field would take longer.

“The Agogo processing facility and the Moran 4, 6, 9 well pad, which are in the area most impacted by the earthquake, will require some repairs before production from the Moran field can recommence,” Oil Search said in a statement, without giving a repair timeline.

At least 100 people were killed when the powerful quake hit the remote and rugged highlands three weeks ago, triggering landslides that buried villages and destroyed infrastructure.

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Hela Government casts doubt on PNG Earthquake Report

ONE PNG | The National | 20 March 2018

Hela Governor Philip Undialu has cast doubt on an Australian government report which cleared resource companies of blame for the recent earthquake.

The report by Australian government agency Geoscience Australia cleared mining and hydrocarbon companies of any wrongdoing over the 7.5 magnitude earthquake which caused much devastation in the Highlands. Undialu and Hela provincial administrator William Bando were given copies of the report by Oil Search staff in Moro last Saturday.

He said an independent investigation must be conducted into the earthquake under the terms of reference of the Hela government.

The report said there was significant public concern that industrial activities such as mining or hydrocarbon exploration and production in the Highlands, could have contributed to the earthquake.

The report said:

“While the Feb 26 earthquake was the largest earthquake in the Highlands since 1900, its occurence was consistent with the known seismic characteristics of the region;

“The high frequence of earthquakes in this region is due to natural tectonic processes that have been recognised by many geological studies of the region over the past half-century;

“The size of the earthquake and intensity of the ground shaking of this event are consistent with the regional plate tectonics that have formed the New Guinea Highlands over millions of years;

“The depth at which this earthquake started (17km or more) is not consistent with earthquakes triggered through mining or hydrocarbon and extraction activities, which generally occur at depths less than 5km; and “The Feb 26 earthquake is highly unlikely to have been triggered through mining or hydrocarbon exploration and extraction activities.”.

Meanwhile,  Papua New Guinea Prime Minister Peter O’Neill has commended the partnership between the Government, private sector and development partners towards the relief efforts after the recent earthquake.

He told the PNG Petroleum and Energy Summit in Port Moresby the earthquake was the worst PNG had experienced.

“The disaster has been terrible but I have no doubt that we will recover and we will further promote the industry in our country,” he said.

“We’ve seen an ongoing rise in the prices in oil and gas which has been good. But we have seen the worst earthquake that hit the Highlands region in nearly 100 years.

“The scale of this disaster is substantial and the impact on the local community is devastating.

“We still haven’t got the final confirmed death toll but we know it is well over 150 lives lost.

“There still remains a high risk threat of diseases to be present and the aftershocks are continuing.

“Working together with the private sector, our development partners, and the governments of Australian, New Zealand and China for the swift and effective response to the disaster.

“I thank the private sector for their outstanding contribution to this effort, in particular Oil Search who have demonstrated their commitment to our people, swinging into action very early just after the earthquake struck.

“This response has saved lives and continued to give hope to the people in the disaster area who are scared and confused.”

O’Neill also acknowledged ExxonMobil, Mineral Resources Development Company, Defence Force, Australia and New Zealand governments and other partners.

O’Neill commended Ok Tedi and Kumul Petroleum Holdings, both donated K50 million (US$15 million) each.

“I am very encouraged by the partnership. There is no doubt that we will continue to enhance this so we can support many of the affected communities for years to come,” O’Neill said.

The participants observed a two-minute silence for those who lost their lives during the earthquake.

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Independent mining consultant questions Papua New Guinea government role as both shareholder and regulator

Mining consultant Jerry Garry (centre) on site in Sierra Leone. Source: Jerry Garry

Kevin McQuillan | Business Advantage PNG | 20 March 2018

To remain impartial, the Papua New Guinea Government should not be a shareholder, but only maintain regulatory oversight of mining projects, according to geologist and mining consultant, Jerry Nombri Garry. He tells Business Advantage PNG there are other ways for the country to derive healthy revenues from mining projects.

Simbu-born Jerry Garry has worked in some of the toughest mining environments in the world: Indonesia, Sierra Leone, Tanzania, Afghanistan—and PNG.

After returning home in 2013 to work as Country Manager for Crater Gold, he describes the PNG mining industry as ‘mature and operates upon a very stable regulatory framework and friendlier tax regime compared to other jurisdictions.’

But he believes some regulatory processes and legal requirements require fine-tuning to ensure that projects are established quickly and provide fair and equitable revenues.

He argues that in the interests of impartiality, the government should only play a regulatory role.

‘Government participation underpins confidence in the developer and financiers.’

‘Whenever the state exercises its option to acquire a portion of the allowable 30 per cent equity in any mining project, it automatically becomes a player.

‘Government participation underpins confidence in the developer and financiers; [adopting a] dual role as operator/regulator can compromise enforcement of the laws and regulations.’


The aim, he says, is to maintain healthy revenues for the country.

Solutions could include negotiating increased royalties on a sliding scale at different benchmarks; introducing the compulsory participation of state-owned enterprises (SOE) in mining projects (e.g. PNG Power); or reserving a reduced equity percentage for PNG-based entities (such as super funds and investment companies).

‘The benefits of extinguishing equity participation, will not only promote impartiality, but safeguard the state from unnecessary debts and debt financing, and commit itself fully to the service delivery obligations.’

He points out there have been many missed opportunities associated with the extractive industries.

‘For example, PNG Power/Elcom [the former PNG Electricity Commission] missed out completely on power generation and the distribution business in mining projects.’

PNG Power could now have double its installed capacity of 300MW, if it had been involved at mines like Bougainville (135MW), Ok Tedi (110MW), Porgera (75MW) and Lihir, (56MW), he observes.


Some new opportunities are emerging, he says, listing Frieda River (estimated at about 150MW) and Wafi-Golpu (estimated at more than 100MW).

‘SOEs must re-think their business model, by expanding their capacities through direct participation in the extractive industries, rather than increasing tariffs as a business profitability norm.

‘The onus is on the government to draw a national master plan for infrastructure (e.g. roads, power) that meaningfully connects all major natural resource areas.’

In doing so, shared-use infrastructures can be jointly funded by mining project and Government under Public-Private-Partnership (PPP) arrangements and foster sustainable economic growth.

Simbu born

Born in 1967 in the Gumine District of Simbu Province, Garry was raised in a rural setting. He completed high school at Kabiufa SDA in Eastern Highlands Province.

What attracted Garry to geology were stories from an older student about his helicopter adventures and the job potential associated with the course.

After graduating in 1990, the Ok Tedi mine employed him under their Graduate Development Scheme and sponsored him to complete his Honours degree at the University of Ballarat, near Melbourne, Australia.

‘Field geology is fun, because you always get to see new places, people, rocks and minerals.’

Negotiation skills

One of those places was Sierra Leone. When he arrived, in 2001, the country was going through a disarmament phase after a 10-year civil war.  It is there he nurtured his negotiation skills.

‘Crafting the right balance in our negotiations for access, and to re-gain trust from each chiefdom, were crucially vital survival skills.

‘The country was devoid of its experienced and skilled mining workforce.

‘Mentoring young national graduates, from basic survival skills, to exploration and mining techniques, gave me a sense of usefulness.’

He was excited by the challenge to understand West African mineral potentials including diamonds, banded iron ore formations, rare earth elements and Archean gold deposits.

From Sierra Leone, Garry moved onto Tanzania, where, as General Manager for Savannah Diamonds, he commissioned a dense media separation plant and ‘x-rays flowsort’ to recover macro-diamonds.

In 2009, he went to Afghanistan, where he was involved in nation-building and restoration programs, including rewriting the country’s mining laws.

‘We trained the entire geological survey staff and guided more than 20 intelligent, young Afghans for post-graduate studies in Japan, India, the UK and US.’

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Exxon Mobil buys LNG to chill quake-hit Papua New Guinea project: traders

Jessica Jaganathan and Oleg Vukmanovic | Reuters | 20 March 2018

ExxonMobil Corp has bought a liquefied natural gas (LNG) cargo to keep its Papua New Guinea plant cold after a powerful earthquake triggered a production halt last month, several trade sources said on Monday.

The cool-down cargo could be a first step toward restarting LNG production at the facility ahead of schedule or it may simply be needed to maintain operational readiness, traders said.

Stopping the liquefaction process which condenses gas into a liquid at minus 162 degrees Celsius causes LNG plants to warm up, requiring cargoes to be imported to keep cryogenic tanks and equipment operational.

“If LNG is loaded directly into warm tanks, the tanks will crack,” an industry source said.

Exxon’s Papua New Guinea project was shut in late February after an earthquake disrupted feed-gas supplies from the gas-producing Highlands region.

Exports were to resume by early May.

The cool-down cargo is for delivery in early April and was bought from oil major BP, three of the sources said.

Exxon did not immediately respond to an email seeking comment outside of office hours.

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