Tag Archives: LNG

Petroleum Dept lacks ‘expertise’

PNG Liquefied Natural Gas Plant near Port Moresby. Photo: Richard Dellman.

Luke Kama | The National aka The Loggers Times | August 9, 2019

THE Department of Petroleum and Energy (DPE) has a shortfall in technical expertise that needed to be addressed by the Government through recruiting competent and qualified personnel from the open market, an expert says.

Johannes Kaman, a national resource economist who has worked around the world on various oil and gas and mining projects, told The National yesterday that PNG was a country rich with oil, gas and minerals but needed the best technical advice to get the most out of those resources, and that advice had to come from the DPE.

“Oil and gas and the mineral sector is a very technical sector that needs the best people with the required skills, knowledge and expertise in those fields to carry out the task on behalf of the State and negotiate with developers,” he said.

Kaman said the failure in addressing the outstanding landowner issues and benefits sharing matrix concerning the PNG LNG and the failure in securing a better Papua LNG deal was a result of poor technical expertise in the department.

“The government needs to enquire about why the senior positions of the DPE which were advertised externally calling for applicants in the open market was withdrawn and the advertisements done again through an internal advertisement,” he said.

“The Government needs to find out why that was the case because people in all the senior positions in the DPE are acting on the positions.

“And some of them are not qualified and do not have the skills, knowledge and the technical expertise to be there.”

Kaman said PNG needed to get a better deal from its resources and there was really an urgent need to review the technical expertise at DPE.

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Please review appointment of new KPHL chairman

Ivan Gordons | YuTok, Post Courier | August 5, 2019

Just recently I wrote a letter that was published in the local daily questioning the appointment of Andrew Baing as the chairman of KPHL on whether he was the same person who was found guilty by the leadership tribunal years back on misappropriation grounds and dismissed from holding public office.

I simply stated that this was not right for someone with such a record to be appointed to such an office that was dealing with public monies especially of such magnitude.

A reply was published also from a person saying that he was grateful for the last Prime Minister for the appointment and that he was going to prove the country proud or something along those lines.

Not much was said after that.

Fast forward to this present day and we all can see for ourselves. It is ridiculous how KPHL has addressed this saga to date.

Yes they can rant on about this law and that, this Act and that but with all that aside they are dealing with public funds.

Just provide the information to the PAC and explain yourselves to the people of this country where their money from the 500 shipment of gas has gone. There are many stories out in the public domain on the abuse and misuse of these funds benefiting the well off while the people are struggling.

I have faith and trust in our new PM honourable James Marape that he will not let his people down.

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Govt Not Receiving Fair Share: Study

Sources of revenue from extractive sector to government. Source: EITI

Post Courier | August 5, 2019

A recent study based on the PNG Extractive Industry Transparency Initiative (PNGEITI) Reports have found that the PNG Government is not receiving its share of resource benefits and recommended government broaden its economic base in order to increase its bargaining power in current and future extractive projects.

The research study titled: Does the PNG government get its fair share from the resource sector? -was presented at a public seminar at the Institute of National Affairs in July to an audience representing Government, Industry and Civil Society stakeholders.

It focused on the Government’s ability to increase its bargaining power in its current and future planned resource projects.

The study was undertaken by Economists, Associate Prof Martin Davies at the university of Washington and Lee and Dr Marcel Schroder economics lecturer at Lebanese American University.

Both researchers are also guest lecturers at the University of Papua New Guinea and the Institute of National Affairs.

The researchers constructed a new database based on the PNG EITI annual reports that documents fiscal resource revenues for a large set of resource rich countries from 2006 to 2017.

“Using this dataset, we analysed the PNG governments’ take from the resource sector and study its determinants through a simple game-theoretic model as well as regression analysis.

This allowed us to make comparisons between Papua New Guinea and other resource rich developing countries,” said Prof Davies.

“Salary and wage tax is largest payment received. Papua New Guinea is the only country in our database of 50 countries where this is the case. Corporate income tax and royalties seem unusually low,” said Dr Marcel Schroder.

The study provided potential Fiscal Regime recommendations.

“PNG is a developing country which means funds for crucial spending such as infrastructure, health and education are needed today rather than tomorrow. Therefore, avoid deals with MNCs that lead to extreme back-load of fiscal take,”

They also recommended avoiding giving too many incentives (loss carry forward arrangements, tax concessions, treating royalties as advance income tax, etc.) and recommended that the State reconsider zero rating GST.

“Many resource rich countries derive significant revenue through GST.

It is also relatively easy to administer. Consider relying more on royalties on sales.

“They have many advantages with Revenue flows today vs tomorrow, they are more stable than income tax and other payments and they are relatively easy to administer,” said Prof Davies.

The study encouraged the audience to understand reasons behind low income tax payments. Is it only due to fall in commodity prices.

“There seems no mechanism for government to benefit from exceptionally high commodity prices (e.g. additional royalty, excess profit tax). Therefore, in future, if deal offered by MNC isn’t attractive, valid to leave resources in the ground for later,” said Dr Marcel Schroder.

The researchers further provided economy-wide policy recommendations.

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Deputy PM Orders KPHL To Go Under PAC Scrutiny

Isaac Nicholas | Post Courier |  August 5, 2019

Kumul Petroleum Holdings Limited must do the right thing and respond to the summons of the Public Accounts Committee, Minister for Justice and Attorney-General Davis Steven said on Friday.

“I want to clarify to the people of Papua New Guinea and to the KPHL Board and management that the powers of the Public Accounts Committee are quite clear under the Constitution,” he said in a statement.

Mr Steven said there had been arguments raised questioning and challenging the PAC mandate that the oil company was separate from the State-owned entities and was not subject to processes, including scrutiny of its financial affairs by the Permanent Parliamentary Public Accounts Committee.

“These arguments, in my view, are erroneous and misleading to the general public as to the intention of the law,” Mr Steven said.

“The fact that the State owns the interests in petroleum projects and the KPHL is a nominee of the State to hold its interests for and on behalf of the people of PNG, this brings the KPHL under the jurisdiction of the Public Accounts Committee.”

He said the PAC is the body that the Constitution has mandated with that responsibility by giving it a broad mandate to examine and report to the Parliament on the public accounts of Papua New Guinea, and on the control of and on transactions with or concerning, the public moneys and property of PNG.

“It is not in PNG’s national interest and has always not been the intention of establishing the KPHL that it should not be open to public scrutiny of its financial accounts, where such requests made by the Public Ac- counts Committee.

“KPHL must now do the right thing and respond to the summons of the Parliamentary Accounts Committee,” Mr Steven said.

“I am concerned that State institutions and businesses like KPHL are questioning the authority of the Parliament. KPHL including the Mineral Resources Development Authority (MRDC ) are trust companies holding the interests of the citizens of Papua New Guinea.

“I therefore urge all government departments, agencies, SOEs to answer to the demands of our people and work together with the political leadership and the relevant bodies established by the Constitution to change PNG. Our people demand that.”

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How Exxon’s Big Gas Plan Stirred Up Papua New Guinea

‘An International Monetary Fund analysis found Papua New Guinea received “quite limited benefits” because it granted Exxon generous rights to recover costs before paying taxes or fees’

Dan Murtaugh | Bloomberg | August 2, 2019

Papua New Guinea, the impoverished Pacific nation of 8 million people, is in a bind over a $13 billion project to double natural gas exports. Political opposition to the deal has already helped take down a prime minister, and some of the world’s biggest energy companies are anxiously waiting to see what the new government is going to do with it. The drama is playing out as a flood of capacity is about to hit the global market, meaning time for the investment may be running out.

1. What’s the project?

It’s actually two cooperating projects involving a bunch of companies. Together, they will deliver capacity to export 8 million tons a year of liquefied natural gas, roughly 3% of global capacity. That doesn’t sound like much, but it’s a huge deal for a country with per capita income under $3,000 a year.

2. Who’s involved?

Exxon Mobil Corp. and Oil Search Ltd. are leading a group that plans to expand the existing PNG LNG plant with a third LNG production unit, which will be fed primarily by the P’nyang gas field in the country’s highlands. Meanwhile, Total SA is heading another venture, called Papua LNG, which also has Exxon and Oil Search as partners and a plan for two LNG production units fed by the Elk-Antelope gas fields. The projects will save money by sharing some facilities.

3. What’s the hold-up?

Both projects need agreements with the government, which include details that determine how the country will benefit. Total secured such a deal in April with then-Prime Minister Peter O’Neill, but opposition party members complained it wasn’t good enough. Finance Minister James Marape quit and left O’Neill’s coalition in protest. In May, O’Neill resigned under pressure from legislators and Marape was chosen to replace him. Marape’s government is now reviewing the Total agreement and considering changes. Exxon’s deal is on hold until that process is complete.

4. Why so sensitive?

When Exxon first opened PNG LNG in 2014, it did so with the promise of transforming Papua New Guinea’s economy. (Total gross domestic product is about a 10th of Exxon’s annual revenue.) The government estimated it would bring it about 2 billion kina ($613 million) in extra revenue annually through 2021. Instead, the project’s partners paid less than a quarter of that (about 495 million kina) in taxes, royalties, dividends and other payments in 2016. Meanwhile difficulty in identifying landowners in the highlands has delayed payments promised to those affected by drilling and pipeline construction.

5. Why such small benefits?

An International Monetary Fund analysis found the country received “quite limited benefits” because it granted Exxon generous rights to recover costs before paying taxes or fees. For example, Exxon is able to subtract its operating costs, debt amortization and capital costs from its gas revenue before taxes and royalties are calculated.

6. What’s the backdrop?

Extractive industries are key to Papua New Guinea’s economy, comprising nearly 30% of the country’s gross domestic product and 85% of its exports. Disputes over how to split the revenue have long been a source of social unrest. In the 1980s, a civil war erupted in the island of Bougainville over what was then one of the world’s largest copper mines. As many as 20,000 people died in the fighting and the mine has been shut since 1989. The island’s residents are scheduled to vote in a referendum in October that could lead to independence.

7. What’s at stake?

For the energy giants, the impasse couldn’t come at a worse time. Assuming deals are struck, they’ll still need a year for preliminary engineering work before being ready to sign off on the $13 billion building cost. Meanwhile, they have more than $300 billion worth of LNG projects from Russia to the U.S. to Mozambique that will be vying for a limited number of potential customers. A lengthy delay could put the PNG expansion at the back of the line. While Marape says he doesn’t want his country to miss out on the investment and jobs (at one stage expected to be more than 20,000), he’s also committed to securing a larger return for his country from its natural resources.

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Pundari Cautions KPHL Against Confusing Public, Private Monies

Post Courier | July 31, 2019

The Public Accounts Committee chairman Sir John Pundari has cautioned Kumul Petroleum Holdings Limited management against confusing public funds with private revenue.

He said this yesterday following a letter from KPHL director Wapu Sonk outright rejecting to meet with the permanent parliamentary committee and present their audit reports.

In a media statement yesterday, Sir John said that KPHL needed to identify the clear distinction between the two different types of funding and subject themselves under the same scrutiny as other statutory bodies.

He said that as an organisation which was instituted by the Independent State of PNG (by operation of the Kumul Petroleum Authorization Act 2015), KPHL was subject to scrutiny by the Public Accounts Committee.

Sir John that the overarching consideration in the matter was the Constitution. And that in the event of any contradictions with other laws, that applicable provisions within the Constitution naturally overruled these contradictions.

“KPHL merely collects on resources (property) owned by the people of Papua New Guinea and this is where the mandate of the Public Accounts Committee kicks in. The Public Accounts Committee’s key function is to examine and report to the parliament on the public monies and property of Papua New Guinea,” said Sir John.

“This is a constitutional mandate under Section 216 of the Constitution, the mother law hence any other laws whose provisions are contrary to the Constitution is invalid to the extent of that contradiction.”

This statement was made following a recent statement by KPHL chairman Andrew Baing that KPHL was a government business governed by its own laws, and was not subject to the Public Finance Management Act.

The ongoing stalemate between the Public Accounts Committee and KPHL reached a head last Wednesday when the PAC gave KPHL two weeks to produce details of liquefied natural gas (LNG) shipments and payments since the first delivery in 2014.

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Public Accounts Committee to investigate LNG proceeds

Rebecca Kuku | The National aka The Loggers Times | 25 July 2019

THE Public Accounts Committee wants to know where the proceeds from the multi-billion kina PNG Liquefied Natural Gas (LNG) project are.

It has therefore given the Kumul Petroleum Holdings Limited (KPHL) two weeks to provide the committee with information on the aggregate income generated from more than 500 shipments of LNG to overseas buyers since the first one in 2014.

Committee chairman Sir John Pundari, said they wanted KPHL to explain:

  • How much has been has been made so far from the export of the liquefied natural gas;
  • How much of that money had been given to the State and landowners;
  • how much has been given to the provincial government of the affected areas for development and infrastructure; and,
  • How much was used on KPHL’s cost of operation. 

Sir John said people had the right to know how much was made from the shipments of LNG and where the money was right now.

“KPHL is not a private business. It is not your money or my money,” he said.

“It is the people’s money. So why are we being secretive? KPHL belongs to the people and the Public Accounts Committee has the mandate to enquire.”

But KPHL board chairman Andrew Baing said it was a government business governed by its own legislations and was not subjected to the Public Finance Management Act as the other state-owned enterprises.

Baing said yesterday that he had said all he needed to say on the matter.

“I will comment later in the week after I consult my office and lawyers,” he said.

The committee wants KPHL to provide all the information by August 7, failing which officials will be summoned before the committee.

The first shipment of LNG from ExxonMobil PNG Ltd’s US$19 billion PNG LNG project left the country on May 25, 2014, carrying a cargo bound for Japan.

It was reported at that time that the cargo had been sold on the spot market to Tokyo Electric Power Company Inc.

Since then over 500 shipments of liquefied natural gas had been made.

The committee published a notice this month on its intention to hold an inquiry into the operations of KPHL.

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