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Benefit Sharing Resonated At 2nd Petroleum And Energy Summit

Protest over the sharing of benefits from the PNG LNG project

Post Courier | March 22, 2018

The 2nd Petroleum and Energy summit in Port Moresby concluded yesterday with many local presentations condensed around the need for better benefit sharing arrangements for PNG.
Several industry players in the country including Kumul Petroleum Holding Limited (KPHL), Mineral Resources Development Company (MRDC) and the Gas Project Coordination office called for greater benefits for gas landowners, host provincial governments and the State to reflect the equity sharing arrangement in the mining industry.
Also in line with the greater benefits is the opportunity for domestic market obligation to be made mandatory, a lesson learnt from the PNG LNG project to help in the growth and development of the Nation.
In relations to equity and royalty distribution, the State is entitled to 22.5 percent from gas while in the mining the State’s equity is 30 percent.
From the 22.5 percent equity, a two percent draw-down is offloaded to landowners, important stakeholders in terms of project security while in Mining five percent is offloaded to landowners.
In this distribution arrangement, the state has to cater for the overall population of the country, while the landowners’ benefits are then subdivided and shared among the different beneficiaries.
During the recent Petroleum and Energy Summit, director of the Gas Coordinating office, Peter Koim said the 22.5 per cent is insufficient.
He said: “I think the state equity in petroleum projects is insufficient, I think there is a room for 30 percent equity by Government, or if not, put five percent on market for other PNG companies to buy to all the rest of PNG to participate and benefit from their resources as stipulated in the constitution,” he said.
Managing director of MRDC, Augustine Mano agreed that the two percent free carry from the State equity for the landowners is insufficient and when distributed among the beneficiaries, it is insufficient.
He said there is a need to change the equity percentage distribution for equal footing benefits by increasing the percentage.
He added that provincial governments have been excluded in the equity benefits sharing arrangement and the change should also look at including the provincial government as beneficiary and equity participant and also to increase the equity benefits for the landowners, something the state and the development partners can sit and discuss.
While the monetary benefits are not enough for the beneficiaries including the State, there is also a need in all agreements to capture domestic market obligations (DMO) for the benefit of the country.
It is a decision that the Government will maintain to ensure there is provision for DMO in any future agreements, Communication and Energy Minister Sam Basil told potential investors during the summit.
Minister Basil said if there is no DMO in a project agreement then there will be no project. If any investor that wants to invest does not agree with the DMO, then they are not welcome.
Kumul Petroleum Holding Limited managing director Wapu Sonk said his company is committed and would want the country to benefit from its resources through the development of further LNG in PNG.
He said to meet the Government’s policy as captured in the Vision 2050, about 70 percent of the country’s household should be powered but so far only 15 percent is covered.
Therefore he said KPHL believes in gas reserves to allow for clean and cheap gas for energy to supply the domestic market to meet the vision of the Government.
KPHL as the mandated entity to deal, manage and negotiate on behalf of the State on all petroleum developments issues, will need to diversify the use of LNG for energy needs in the country.
He said besides the household energy needs, industrial development is critical for the long term to provide employment and open up opportunities and the diversification for the extractive industries through the DMO.
Although there is no policy provision catered for domestic market obligations, the new White Paper gas and energy policy submission would cater for the inclusion of it in all future projects.
This includes the third party pipeline access, an opportunity for the state company to develop LNG stranded fields to use existing pipeline for the domestic consumption for energy and other petroleum products.
Mr Sonk said a recent study carried out shows that they can optimise the opportunities to serve the domestic needs.
Out of 10 industries, the basic industries (mostly agricultural) needs more energy usage and the role of KPHL is to look at domestic market to have enough gas to underpin development using gas from stranded fields, by accessing the existing pipeline (third party pipeline access).
Mr Sonk said so far KPHL with a joint partnership argument with Oil Search are building a 57.8 MW gas power supply plant in Port Moresby, through their joint venture company NiuPower to meet the energy needs in the city.
He added that the two companies have entered into another joint venture to distribute domestic LNG throughout the coastal towns of PNG, also through NiuEnergy.
According to Sonk, they hope to invest in a domestic LNG vessel to distribute fuel and other domestic LNG throughout PNG to meet local demand.


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Cardinal Ribat raises concerns with rising seas, deep-sea mining

Cardinal John Ribat, archbishop of Port Moresby, Papua New Guinea, poses for a photo following a March 14 interview with Catholic News Service at the Franciscan Monastery of the Holy Land in Washington. (CNS/Bob Roller)

Papua New Guinea archbishop worries about impact of climate change on his and other islands

 Brian Roewe | National Catholic Reporter | March 22, 2018

Rising seas and new technology to mine beneath them are forefront concerns these days for Cardinal John Ribat of Papua New Guinea.

During a 12-day U.S. trip along the East Coast that concludes March 22, the head of the Port Moresby archdiocese on the South Pacific island nation has in numerous settings expressed his worry with the continuing impact of climate change on his and other islands, as well as the development of first-of-its-kind deep seabed mining in waters off his homeland.

Ribat, 61, has long spoken out about the impacts of climate change on the people of the Pacific islands, considered one of the ground zeros of global climate change, where rising seas have submerged portions of islands and have already led to communities relocating from their homes to nearby islands.

Last week, Ribat raised his concerns about climate change again on Capitol Hill in meetings with Sen.Edward Markey (D-Massachusetts) and officials for Sen. Jeff Markley (D-Oregon). Both sit on the Senate Committee on Environment and Public Works, and its subcommittee on fisheries, water and wildlife.

In their meeting, the cardinal pointed out on a map to Markey, who is Catholic, the locations of the islands as he described how rising seas have forced people to relocate farther inland every few years as the tides rise and come in farther themselves.

On Bougainville, one of Papua New Guinea’s roughly 600 offshore islands, the diocese has offered a piece of land to help people resettle from the Carteret Islands, which have shrunk under rising ocean tides. Ribat said that during a trip around Easter last year to Ahus and Andra islands he witnessed similar scenes of shorelines and agricultural lands that had washed away.

Sea level rise is driven by two primary factors: the oceans expanding as waters warm, and increased water mass due to melting ice from glaciers and ice sheets. According to a climate science special report, published in November and compiled by 13 U.S. federal agencies, global mean sea levels have risen roughly 7 to 8 inches since 1900 — three inches since 1993 — with human-driven climate change making “a substantial contribution” during that period. Scientists project further rise of 1 to 4 feet by 2100 and have not ruled out a rise as high as 8 feet.

“When you’re on an island, you get it, when you got to keep moving your house,” said Franciscan Fr. Michael Lasky, who helped organize the cardinal’s trip.

In the Capitol Hill meetings, Ribat also raised another problem accompanying rising tides: seawater seeping into the freshwater table underground and turning some crops inedible. “When they harvest them it’s salty. They cannot eat them anymore because the sea is rising,” he said

Clean water impacted

The impact of rising seas on clean water came up as well during a meeting March 15 with officials at the U.S. Environmental Protection Agency. He also reiterated concerns he shared with the senators’ offices about new seabed mining technology set to begin next year in waters east of Papua New Guinea.

Nautilus Minerals, a Canadian-based company, in 2011 received a mining lease from the Papua New Guinea government for extracting deposits of copper and gold from the floor of the Bismarck Sea. The project will be the world’s first attempt at mineral extraction from the deep sea.

The mining operation — which would occur 1,600 meters, or nearly 1 mile, under the sea about 20 miles off the western coast of New Ireland and 31 miles north of New Britain, both islands east of Papua New Guinea — is set to begin in 2019. According to Nautilus, the deposits of the deep sea Solwara 1 Field (“salt water” in the Tok Pisin language native to Papua New Guinea) contain copper and gold at grades much higher than typically found in land-based mines.

The potential mining site holds added significance for Ribat, who calls home Watom Island, off New Britain’s north coast. While on the island at Christmas, fishers shared with him anxieties over how the mining may impact fishing grounds. During meetings with U.S. government officials, the cardinal described the seabed mining process as “taking the lawnmower over the reefs where people fish,” according to Lasky.

Ribat told NCR he is concerned that the project does not include the necessary oversight and monitoring of any underwater mining operations, particularly since the machines would be remote-controlled from a large sea vessel, and that not enough is known at this point to what effects such mining will have on local marine life and people reliant on fishing and the sea for their livelihoods. A particular concern is the mining operation’s proximity to a tuna breeding ground.

“There’s no clear information about how or what the negative effect it will bring to the environment and also to the marine life that we have,” he said.

In an August 2016 statement, the Federation of Catholic Bishops Conferences of Oceania, of which Ribat is president, voiced their opposition to seabed mining, and instead endorsed sustainable development in coastal communities through tourism, fisheries and agriculture.

“The sea is a treasure for all and should never become a ‘playground of exploitation,’ ” the statement said.

Ribat suggested it would be best “to delay this operation until we have people better prepared to assess and monitor this operation, so we’re not destroying the environment for the sake of just testing this technology.”

In an emailed response to NCR, a Nautilus Minerals spokeswoman called the Solwara 1 site “one of the best studied deep sea ocean sites on the entire planet,” and said the company’s work has been reviewed by external independent experts for the Papua New Guinea government and the International Seabed Authority.

“All of these reviews have confirmed that seabed mining has limited environmental impacts, and has positive net benefits,” said Noreen Dillane, corporate communications manager for Nautilus Minerals.

She said that “independent expert observers” chosen in consultation with nearby provinces would be aboard the vessel to ensure compliance with the permit conditions. Its environmental impact statement, completed in 2008, found there would be no impacts from mining on reefs or tuna fisheries, and that any impacts would be limited to a 27-acre area and beneath 1,300 meters (.8 miles) below sea level.

Critics of the seabed mining project contend there has been no independent environmental study and the present one contains gaps. In December, the Guardian reported that the Centre for Environmental Law and Community Rights, in Port Moresby, filed suit on behalf of several coastal residents over the operation, alleging that key documents were withheld and that residents had a constitutional right to that information. They have also questioned the relationship between Nautilus and the Papua New Guinea government, which holds a 15 percent share in the Solwara 1 project.

Dillane said that Nautilus has conducted “regular awareness meetings” in the coastal communities near the project site and has reached more than 30,000 people through such programs since 2008. She added that information sessions were being held in the western coastal areas of New Ireland this week.

As for communication with Ribat, Dillane said Nautilus Minerals and the government have made numerous attempts to meet with him.

“To date the Cardinal has not accepted any of these attempts to meet in person to discuss the topic, and provide him with all the independent expert advice in person. Similarly, the Company has never been approached by the Federation of Catholic Bishops to provide information on the Project, or to discuss their concerns one on one,” she said in an email.

The cardinal did not respond for follow-up comment.

Raising awareness

The cardinal said he hoped his visit to Capitol Hill and EPA headquarters would raise awareness of what’s happening in the South Pacific and amplify efforts to address issues they’re facing, given that other islands in the region are U.S. territories.

While also in Washington, Ribat, who was elevated to cardinal in November 2016, spoke about climate change and mining March 13 at the Catholic University of America, and later met with a group of roughly 80 religious seminarians to talk about his vocation.

Before departing for home, he was set to meet in New York with members of Franciscans International, the religious order’s NGO at the United Nations, to further discuss sea rise and seabed mining. He was also scheduled to meet March 21 with Karenna Gore, the founder of the faith-based Center for Earth Ethics at Union Theological Seminary; Gore is also the daughter of former vice president and climate activist Al Gore.

It was an award from the Church of St. Ignatius Loyola, in New York City, that spurred the trip for the first cardinal of his island country. On March 11, Laetare Sunday, he presided at Mass and was honored with the parish’s Loyola Medal, which recognizes people who have made significant contributions to their community.

“Our [parish] Lenten theme is healing,” Elizabeth O’Sullivan told NCR. “And we believe that Cardinal Ribat’s work in climate change, which is healing on a global level, is worthy of acknowledgement and worthy of honor.”

Throughout his time in the U.S., Ribat has received updates from Papua New Guinea about the aftermath of an earthquake that rocked the island in late February.

In the early morning Feb. 26, a magnitude-7.5 earthquake struck the Southern Highlands province, that along with a landslide, has killed at least 145 people and displaced upwards of 35,000 others. The inland region is a remote part of the island, overlapping with the Mendi diocese led by U.S.-born Bishop Donald Lipert, which has made relief efforts and communication more difficult.

“The earthquake has been very devastating,” Ribat said.

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Flaws In Landowners Benefits says Mano

Jeffrey Elapa | Post Courier | March 21, 2018

There are fundamental errors in the distributions of the royalties and equities to the landowners and provincial governments, Mineral Resources Development Company managing director Augustine Mano said.

Mr Mano said MRDC as the fund manger of the petroleum and mining equities of landowners believes the distribution and percentage given to the landowners and provincial governments were not sufficient when distributing the shares to the many groups.

He said the 2 percent was not enough and there was a need to relook at the benefits for the provincial governments and landowners,

He said in the mining projects, the landowner equity was about 5 per cent and another 25 per cent for the state, a total of 30 per cent but in the petroleum projects it was not the case.

He said after 26 years there was a need to change the way benefits were going to the affected landowners and provincial governments.

He said a benchmark was set in the Kutubu oil project, the first petroleum project when it was given 6.75 per cent where the landowners were given 4.05 per cent equity and provincial government 2.7 per cent but that was never followed in subsequent projects.

“In the petroleum projects like Moran, Gobe and Hides, the provincial governments have missed out equity and there is a need to increase equities to cater for the provincial governments and also the equities for the landowners,” Mr Mano said.

He said that ttimes and expectations had changed over time and needs a complete change in the way the equities and royalties had been offered to the landowners and the provincial government with the increasing in demand.

Mano said another project was that the landowners’ identification was a major problem which the stakeholders should address before production.

He said as a result, more than K450 million was still parked in the trust account because the matters had gone back to court following the failure of the State and the developers to do proper identification.

“You are dealing with my landowners who are voiceless and they have to have sufficient funds,” he said.

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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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