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.