Tag Archives: Oil Search

Low Tax Revenue From PNG LNG ‘Being Addressed’

Charles Abel

Post Courier | June 8, 2018

Audits into several major resource companies will run parallel with a joint exercise with commercial banks to identify taxpayers, Treasurer and Deputy Prime Minister Charles Abel announced yesterday.

“Audits are also underway by the Bank of Papua New Guinea into foreign currency accounts held by resource companies,” Mr Abel stated in an email.

“This is to ensure compliance with the remittance of proceeds in foreign exchange back to Papua New Guinea.

“Increased expectations for revenue collection at the IRC and Customs have also been factored in the 2018 budget, and collections are on track to date.

“I’ve been assured by the Internal Revenue Commission in writing that Kumul Petroleum is fully meeting its tax obligations.

“The implementation of these measures does not mean that we are relaxed. We have set clear objectives in terms of taxation revenue, as a percentage of GDP, to push up to 14.6 percent in 2018.

“I would like to see this rise to 20 percent eventually.

“Put simply, our revenue to GDP needs to improve, and that means maintaining efforts to grow the economy with a more efficient tax system and smarter project agreements.”

Abel was responding to Opposition leader Patrick Pruaitch’s accusation that PNG LNG partners were evading tax.

Mr Abel said the existing taxation structure was set by Pruaitch when he was in government.

“It is good to see the former longtime treasurer suddenly talk about these issues now,” Mr Abel said.

“The taxation arrangements with the PNG-LNG Project were established under the former National Alliance Government.

“These arrangements have seen relatively little tax paid to the government since production began because of a combination of low gas prices and accelerated depreciation.

“Treasury is now developing a fiscal template to establish a reviewed tax framework that does not impose extra burden on resource projects, but provides smoother and more consistent revenue to the Government and is easier to administer.

“In terms of the Internal Revenue Commission, our Government has invested significantly in capacity building there supported by an additional K19 million funding in this year’s budget.”

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Hela governor hits out at LNG project developers

ExxonMobil’s LNG Project cuts a swathe of ‘development’ through Hela province in PNG’s Highlands. Photo: RNZI / Johnny Blades

Governor: “corporate giants bullied PNG politicians into a substandard agreement”

Radio New Zealand | 16 May 2018

The Governor of Papua New Guinea’s Hela province has criticised developers of the LNG gas project over lack of payments to his province.

Philip Undialu said when establishing the project, corporate giants bullied PNG politicians into a substandard agreement.

The Governor said Provincial Governments of the LNG Project area lost nearly US$240 million in Development Levies and Royalties over the last four years.

Mr Undialu said there were hundreds of millions more dollars in royalties which Hela people should have been paid.

He called on lead developer ExxonMobil and its project partner Oil Search to admit this failure and pay Hela what belongs to its people, saying the province desperately needs money after February’s major earthquake.

His comments come after the Oil Search chairman said community discontent and violence around the project was not his company’s fault but a result of the PNG government’s failure to distribute royalties.

“It is pathetic for Chairman of Oil Search to attack the Government after robbing it’s people through a flawed agreement the Somare Government facilitated between 2008 to 2010,” Mr Undialu said.

“It’s by time we take everything back to round table and ascertain who is to be blamed.

“This is a human rights issue and I will not allow my people being deprived of. I need those monies to rebuild infrastructure devastated by the earthquake disaster… so we will rebuild our communities.”

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Exxon LNG is hurting Papua New Guinea economy – new report

Photo: Michael Nagle

Jubilee Australia | 30 April 2018

A new report on the economy of Papua New Guinea shows that despite predictions of a widespread economic boost from the ExxonMobil PNG LNG project, on most economic indicators the economy has actually gone backwards relative to predictions.

Jubilee Australia’s new report ‘Double or Nothing: The Broken Economic Promises of PNG LNG’ is co-authored by Paul Flanagan, director of think tank PNGEconomics. Paul has worked for the Australian government in senior executive positions and with the PNG Treasury where he was Team Leader and Senior Advisor to the SGP Program from February 2011 to August 2013.

“In 2008 Australian economics consultants ACIL-Tasman provided inflated projections of growth in employment, essential services, household income and the broader economy if the PNG LNG project went ahead. This new analysis proves just how misleading these promises were and how PNG has slipped back into the poor policies associated with previous experiences of PNG’s resource curse. Currently, on almost all economic indicators, the people of PNG would have been better off had the project not happened at all,’ said Paul Flanagan.

The aim of this study was to compare the projected benefits for the early years of the PNG LNG project with the actual outcomes.

By building an ‘underlying growth path’ based on how the economy would likely have performed without the PNG LNG project, this study has made the following findings:

  • Despite predictions of a doubling in the size of the economy, the outcome was a gain of only 10% and all of this focused on the largely foreign-owned resource sector itself;
  • Despite predictions of an 84% increase in household incomes, the outcome was a fall of 6%;
  • Despite predictions of a 42% increase in employment, the outcome was a fall of 27%;
  • Despite predictions of an 85% increase in government expenditure to support better education, health, law and order, and infrastructure, the outcome was a fall of 32%; and
  • Despite predictions of a 58% increase in imports, the outcome was a fall of 73%.

These findings are even more extraordinary given that PNG’s exports (due to PNG LNG) have actually exceeded projections (106% relative to the higher figure of 114%).

The PNG LNG pipeline is an Exxon-led project which supplies about 8 million tonnes of LNG a year to Japan, South Korea and China from the gas fields of the Hela region. It is projected to run for 30 years. The project’s partners are Exxon, Oil Search, Santos and the Government of PNG. The Australian government lent AU$500 million of taxpayer’s money to the project.

“Over the next 9-12 months, a final investment decision is expected to be made about whether or not Total, in partnership with ExxonMobil and Oil Search, will start work on the development of the new Elk Antelope gas field in PNG. The new project, known as Papua LNG, has been projected to produce as much as 8.8 million tonnes per year for around 15 years.

“The economic findings of this report, are crucial to understanding the difficulties that large resources project can pose to a small economy like PNG. A decision on new gas projects should be informed by an accurate assessment of the impacts of PNG LNG,” said Dr Luke Fletcher, Executive Director of Jubilee Australia and co-author of the report.

‘‘Exxon and Oil Search should be paying half a billion dollars (AUD) to the PNG government every year, since the gas started to flow in 2014. Instead, they are paying a fraction of this amount, partly because of their use of tax havens in the Netherlands and the Bahamas.

“The fact that the revenues are not flowing at the levels that was predicted is a key reason why ordinary people in PNG are not seeing the sort of economic benefits that were promised to them when this project was first proposed.

The reports also demonstrates the dangers of relying on economic projections based on dodgy economic models that are paid for by the companies. The people of PNG should never let this happen again by insisting on independent and verifiable analysis before approving these sorts of projects concluded Dr Fletcher.

‘Double or Nothing: The Broken Economic Problems of PNG LNG’ is the first of two papers on the PNG-LNG pipeline that has been commissioned by Jubilee Australia. The second paper will discuss the unpaid royalties and development benefits and the escalating violence as a result of the PNG LNG project.

 

BACKGROUND

The PNG LNG pipeline consists of gas wellheads in the Hela Province in the Southern Highlands of PNG, a gas pipeline running from the highlands to just north of Port Moresby and an LNG liquefaction plant. The lead operator is Exxon-Mobil, although there is also significant involvement form the ASX-listed Oil Search.

It is the largest development project (in monetary terms: US$16 billion, further blowing out to US$19 billion) in the history of the Pacific region.

Construction on the project was started in 2010 and completed in 2014, at which point the gas started to flow.

Concerns about the economic non-viability of the project and the dangerous risks of social conflict in the project area were raised by Jubilee Australia in an open letter to Australia’s then Trade Minister Simon Crean in October 2009, two months before the decision was taken.

The letter to Mr Crean predicted that the PNG LNG project would not likely lead to poverty-reducing growth in PNG and would likely entrench a culture of corruption in the country. It argued that there was a serious risk of the project increasing social disruption and violence in the project areas. Finally, it claimed that the project would undermine the aims of Australia’s aid program in PNG.

Efic’s National Interest Account approval process was completed behind closed doors and, despite requests by politicians, journalists and Jubilee, the official advice given to Minister Crean, upon which the loan decision was taken, has never been revealed.

The Export Finance and Insurance Corporation (Efic) is Australia’s export credit agency. Efic provides loans, insurance and other financial services to Australian companies that do business overseas. Historically, around one quarter Efic financing by value goes to companies involved in the resources (mining, oil and gas sector). Projects supported by Efic have been implicated in environmental disasters (Ok Tedi mine, Panguna mine) and human rights abuses (Porgera mine, Panguna mine) and tax evasion (Oyu Tolgoi mine, Mongolia).

Exxon and Oil Search’s Use of Tax Havens

The report shows that since 2014, the project companies should be paying revenues of approximately 1.4 billion Kina (AUD$560 million), and yet they are only paying a fraction of this amount. The lack of revenues flowing are seriously undermining potential positive benefits to the PNG economy. The report argues that these missing revenues are a result of two phenomena: a secret commercial agreement struck between the companies and the government, and ExxonMobil and OilSearch’s use of tax havens in Holland, Delaware and the Bahamas. Indeed, Exxon appears to be using the same techniques to avoid paying taxes from its operations in PNG as, a recent Australian Senate inquiry has heard, it is also using for its operations in Australia.

About Paul Flanagan

Paul Flanagan is a Canberra-based economist and former federal public servant with many years of experience working in the field of aid, development, and economic policy. He worked in a range of policy and program roles in Australia’s overseas aid program from 1986 through to 2002. After this, he held a number of important roles within the Australian Treasury Department including head of the International Finance and Development Division during the Global Financial Crisis from 2008 to 2011. Paul was then seconded to PNG Treasury, where he was Team Leader and Senior Advisor to the SGP Program from February 2011 to August 2013 – a position at the same public service level as Australia’s High Commissioner to PNG. Since 2015, he has been the Director of PNG Economics.

About Dr Luke Fletcher

Dr Luke Fletcher is the Executive Director of the Jubilee Australia Research Centre. He is the principal author of a number of Jubilee’s reports, including Pipe Dreams (2012) about the PNG LNG project and Risky Business (2009) on the activities of Australia’s export credit agency, Efic. Dr FLetcher has a PhD in Politics and International Studies from the University of Cambridge and has been involved in Jubilee in both staff and Board roles since 2005.

About JARC

The Jubilee Australia Research Centre (JARC) engages in research and advocacy to promote economic justice for communities in the Asia-Pacific region and accountability for Australian corporations and government agencies operating there. Jubilee’s work has been quoted in Australia

and international media: The Australian, ABC, The Guardian, Reuters, The Asia Pacific Report. Jubilee has made Parliamentary submissions to a number of government inquiries as well as provided testimony. http://www.jubileeaustralia.org

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Govt Urged To Investigate Cause Of Earthquake

Locals surround a house that was covered by a landslide in the town of Mendi after the February earthquake. Francis Ambrose/via REUTERS

Post Courier | April 9, 2018

The government has been urged to investigate the cause of the recent earthquake that caused destruction and loss of lives in the Highlands provinces of the country.

Sinasina Yongomugl MP Kerenga Kua said during grievance debate in Parliament that the people wanted answers whether the earthquake was natural or induced by exploration of oil and gas in the area.

“The series of the earthquake is of an unprecedented type both in its intensity and in its frequency, it is unprecedented usually you have a one-off earthquake of a certain magnitude and its over, but this one is almost like continuous, it hits off at a very high level and it maintains a high level for many days and even weeks and that is something completely unprecedented and somehow it coincides with the major projects, the gas extraction projects we have on-going in the country,” Mr Kua said

“Within the period of two years of the commencement of the gas project, big earthquake happens, it hits precisely the area where the projects are located, so it raises an obvious question in our minds. Is it mere coincidence an occurence by an act of nature or is there some connectivity to the human activities that is taking place in those localities? It is important for us to know, it is important also for our people to know what the answers are.

“For example if we find that it is induced by human activities then that knowledge alone will help us mitigate future incidence of that nature, and to take evasive action and that is within our powers to do that and if we did not know or if we refuse to know the answer than we will be inviting future further incidence of similar devastating magnitudes, more dense, more injuries, more damage to property and the environment and we will continue to come back to pull our hairs out trying to understand, find answers to do relief and do restoration.”

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HOW PNG LNG IS SHAKING UP THE EARTHQUAKE

The damming of the Tagari River by a landslide that occurred on 26 February 2018 (photograph by Barbara Lokes).

Michael Main* | EnviroSociety | March 28, 2018

The word for “earthquake” in the Huli language is wonderfully onomatopoeic: dindi dumbirumbi (literally “earth moving and shaking”). During fieldwork conducted in 2016, I interviewed an elderly Huli ritual leader named Dali Ango at his home in Koroba, located in Papua New Guinea’s (PNG) Hela Province. Huli ritual leaders, who inherited their position, were holders of a vast amount of traditional historical, genealogical, and cosmological knowledge. Ango talked of ancient land spirits (dama in Huli) named Hu and Hunabe, who, along with dindi dumbirumbi, formed the earth and the mountains. Earthquakes were just one of several indications that the earth was tending toward disaster. Earthquakes, droughts, floods, periods of famine, or even major warfare were held to be signs of impending doom that required the performance of large-scale dindi gamu (“earth spell”) rituals as a remedy (Ballard 1998: 73). In cultural terms, the most significant and influential seismic event that occurred in Huli history was the Plinian eruption of the Long Island volcano in the late seventeenth century (Blong 1982: 131). The resultant ash cloud that blanketed the landscape came to be known throughout Huli territory as mbingi, or “time of darkness.” The volcanic ash resulted in greatly increased fertility of the land and a period of abundant harvest for the years that followed. Mbingi was thought to be preceded by events such as earthquakes (which it quite likely was). Crucially, if people followed the correct procedures and behaviors during the event, then mbingi would result in a time of plenty. If social taboos were ignored and moral laws broken, then mbingi would be prolonged and all the crops would fail, and people would starve to death (Glasse 1995: 69).

Although these forms of knowledge have been largely forgotten, there is substantial evidence to suggest that seismic activity has been a major influence in Huli spiritual belief and practice. Before the recent and devastating magnitude 7.5 earthquake that struck Mount Sisa in Hela Province on 26 February this year, the last nearby earthquake in the order of magnitude 7 occurred near Tari, the largest Huli town, on 3 March 1954 (Ripperl and McCue 1983). The effects of this earthquake were recorded by missionaries and Australian government patrol officers who had established a permanent presence in Tari less than three years prior. A missionary with the Unevangelized Fields Mission wrote of the intensity of the earthquake and the disappearance of water from their well and the nearby spring (Twyman 1961). The aftershocks continued for months, and the impression this made on the Huli population was recorded in a patrol report conducted in October of the same year (Esdale 1954). The constant tremors were causing wide cracks in soft ground and Huli were noted to refer to dama spirits as being a cause.

A dominant motif of Huli spiritual belief and practice is the strange behavior of bodies of water. Lakes are said to disappear and move from one place to another. Lakes can rise up, and the movement of ripples is read in terms of good and bad omen. Hidden spirit lakes, with the names bume and deme (pertaining to the heart and the eye), are said to inhabit mountainous areas. After the Tumbi limestone quarry collapsed in 2014, killing more than a dozen people, the collapse was explained to me in terms of the blockage of bume and deme that was caused by ExxonMobil’s contractor, who constructed a road that blocked a stream emerging from the base of the quarry. The limestone karst system that dominates the Huli landscape has been instrumental in shaping these Huli beliefs and much of Huli mythology. Beneath this landscape can be found a complex network of underground rivers, sinkholes, and caves. Earthquakes can easily disrupt this system, causing instant changes to lake levels, and stream behavior. Major earthquakes do not usually occur as single events but are accompanied by a long period of aftershocks, as had been the case since 26 February this year, and recorded after March 1954. In 2016, I visited Tuandaga, a major Huli site of ritual significance, and one of the few still in use. At Tuandaga, as had been the case at ritual sites all across Huli territory, oblations are made of cooked pork for the appeasement of the dama spirit in the lake. The lake is said to rise up to meet the offering. Other rites involve throwing the offering into the water while the behavior of the ripples are observed. A certain type of rippling foretells of bad times for the fate of the land. Very large earthquakes that occur in this steep and brittle landscape can result in major landslides and the blockage of rivers, as is presently the case. At the time of writing, the Tagari River, which is the main river the runs through Huli territory, is dammed by a major landslide that is threatening a mudslide and flooding downstream once the unconsolidated dam is overflowed.

PNG LNG Huli landowners at Komo with Mount Sisa in the background (photograph by the author).

At Komo in 2016, just a few kilometers from the epicenter of the recent earthquake, I was told a Huli mythological tale about a man with no anus. A great feast was held, and the man with no anus just kept eating. His friend noticed that the man was unable to relieve himself and his belly was becoming bigger and bigger. So his friend built a house and inside he dug a hole in which he stuck a sharpened stick vertically into the ground. He covered up the hole with banana leaves and invited his friend inside to sit. When his friend sat on the sharpened stick, it pierced for him an anus, and when he pulled it out all his waste rushed out of him covering the whole place. This story, and versions of it, bears resemblance to the effect of a landslide that blocks a river, which is a not uncommon occurrence in the history of the Papua New Guinean highlands.

In the aftermath of the 26 February earthquake, the question that is dominating the minds of Huli residents is the role that the giant PNG LNG (Liquefied Natural Gas) project played in the earthquake’s cause. The PNG LNG project, constructed and operated by ExxonMobil, is the largest resource extraction project in PNG’s history and has been a source of intense anger for the vast majority of Huli landowners, who have yet to see any benefits from the extraction and sale of gas from their land. There is widespread belief that the earthquake was caused by gas extraction activities, which is an opinion that comes on top of an already existing resentment over the development failures of the project. This perception also extends to many of PNG’s politicians who requested that the Australian government provide an independent assessment of the earthquake’s cause. The perception of the earthquake’s cause is driven by a combination of scientific evidence and cosmological belief. The earthquake occurred along the Papuan Fold Belt in a region where earthquakes of magnitude 7 are predicted to occur approximately every 60 years (Ripperl and McCue 1983). The independent assessment provided by Geoscience Australia concluded that the earthquake was naturally occurring, yet this finding was disputed by the governor of Hela Province, who called for an independent review to be conducted according to the terms of the Hela Provincial government (The National 2018). Skepticism over the cause of the earthquake is supported by issues with gas extraction projects in various parts of the world, particularly in relation to newer technologies and the increase in the use of fracking (Kuchment 2016). Recognizing this, the managing director of Oil Search, Peter Botton, responded that this perception should be treated as “a communications issue” (Barrett and Gloystein 2018).

Resentment toward the PNG LNG project, which has intersected with the horror and trauma experienced by the recent earthquake, is not a communications issue. It is a development issue. Huli cosmological belief that the extraction of their gas will bring about the end of the world has been fueled over the past four years by growing resentment over the failure of the project to come good on its development promises. Last month’s devastating earthquake only provides confirmation of a widely held prophetic belief in the disaster that will befall the Huli population should they give away their gas. Gas for the PNG LNG project is extracted from a mountain ridge named Hides Ridge after the early Australian explorer Jack Hides. The Huli name for this mountain is Gigira. Moist air that rises over Gigira tends to form clouds that give the appearance of smoke oozing from the ridge, similar to the smoke from a traditional kunai grass-roofed house with a fire inside. This visual effect provides the basis for the belief that there is a fire burning underneath Mount Gigira. A giant log of hardwood commonly used in fireplaces, a type of tree known in Huli as lai, is said to run the length of the Gigira range. One day, the ancestors said, a man with red legs will come to take the fire. You may give him some of the fire, but do not give away all the fire lest the world will end. When ExxonMobil began to drill for gas on Mount Gigira, local residents packed up and left in the fear that the fire would spill out from the mountain and engulf them. In the absence of development benefits from the PNG LNG project, one thing is clear: the landowners have given away all their fire.

Cloud formation over the Gigira range (photograph by the author).

Earthquakes, which were once understood in the context of a complex set of intersecting beliefs, are now attributed to a single cause that has come to dominate the Huli landscape both physically and cosmologically. The old knowledge and practices have long been abandoned, and a space for new interpretations based on contemporary realities has opened up. The PNG LNG project, with its promise of abundant wealth yet delivery of disaster and neglect, has become the new mbingi. Before the earthquake, there were mounting threats being made against the project, including an armed blockade in August 2016. These threats are a direct result of the development failures of the project, such that it has become in the best interests of the landowners to shut the project down in the hope that a change in development outcomes can be forced. With the PNG LNG project currently in forced shut down because of the damage caused by the earthquake, it is in the landowners’ best interest to blame the earthquake on the project. A PNG LNG project that had kept its promises would have been viewed favorably by a population that might be turning its attention to the challenges of developing the highlands in the context of life in an earthquake zone.

In 1954, the missionaries at Tari watched their newly built houses collapse around them while the local bush material houses would “sway with the earthwaves like a tree in the wind” (Tomassetti 1997: 65). The highlands missionaries were later required to build their houses according to New Zealand Earthquake Standards (Wood and Reeson 1987: 75). The extent of suffering in this most recent major earthquake is partly because of the amount of built infrastructure that has collapsed, none of which existed in 1954. If the PNG LNG project had delivered on its promises of education and training opportunities, infrastructure, business development, and alleviation of poverty, then the concern of its Huli landowners might be over how to utilize their resource to better develop their province to cope with earthquakes into the future. As it is, the PNG LNG project is logically understood in the context of their resource curse. If the proponents of the PNG LNG project had a better understanding of these dynamics, then they might be prompted to do something about it. Communications issue indeed.

*Michael Main is a PhD candidate in the School of Culture, History and Language at the Australian National University. Michael’s research is focused on Huli society and culture in Papua New Guinea’s Hela Province, as well as the rapid changes that have been unfolding since the colonial period of the 1950s, culminating in the construction of ExxonMobil’s giant PNG LNG project.


References

Ballard, Chris. 1998. “The Sun by Night: Huli Moral Topography and Myths in a Time of Darkness.” In Fluid Ontologies: Myth, Ritual and Philosophy in the Highlands of Papua New Guinea, ed. Laurence R. Goldman and Chris Ballard, 67–86. Westport, CT: Bergin & Garvey.

Barrett, Jonathan, and Henning Gloystein. 2018. “Shakes and Superstition: Exxon Faces Backlash in Papua New Guinea.” Reuters, 7 March https://www.reuters.com/article/us-papua-quake-exxon-insight/shakes-and-superstition-exxon-faces-backlash-in-papua-new-guinea-idUSKCN1GJ12S.

Blong, Russell J. 1982. The Time of Darkness: Local Legends and Volcanic Reality in Papua New Guinea. Canberra: Australian National University Press.

Esdale, F. V. 1954. Tari Patrol Report No. 2 of 1954/55. Retrieved from Patrol Reports [microform]. Port Moresby: National Archives of Papua New Guinea:

Glasse, R. 1995. “Time Belong Mbingi: Religious Syncretismand the Pacification of the Huli.” In Papuan Borderlands, Huli, Duna, and Ipili Perspectives on the Papua New Guinea Highlands, ed. Aletta Biersack, 57–86. Ann Arbor: University of Michigan Press.

Kuchment, Anna. 2016. “Drilling for Earthquakes.” Scientific American, 28 March. https://www.scientificamerican.com/article/drilling-for-earthquakes.

Ripperl, I. D., and K. F. McCue. 1983. “The Seismic Zone of the Papuan Fold Belt.” BMR Journal of Australian Geology and Geophysics 8: 147–156.

The National. 2018. “Report: Earthquake Natural.” 20 March.

Tomassetti, Berard. 1997. Papua New Guinea Encore. Victoria, KS: St. Fidelis Friary.

Twyman, Eva. 1961. The Battle for the Bigwigs. Melbourne: Unevangelized Fields Mission.

Wood, A. Harold, and MargaretnReeson. 1987. A Bridge Is Built: A Story of the United Church in the Highlands of Papua New Guinea. Sydney: Commission for Mission Uniting Church in Australia.

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ExxonMobil conservative on PNG LNG restart despite ramping up of activity

Platts | 5 April 2018

Papua New Guinea LNG-operator ExxonMobil is adhering to its initial restart plan for the second half of April, despite activity ramping up at the site, including the delivery of a cooling cargo from Indonesia’s Bontang and the imminent arrival of an unloaded project vessel at the facility.

The LNG carrier Kumul, loaded with a cargo from Bontang , arrived at PNG LNG April 1, with the purpose of maintaining the temperature of the facility’s tanks and loading infrastructure, and avoiding a lengthy re-cooling period once production restarts.

“The purchase of this cargo does not reflect a change in our earlier projection of eight weeks for return to production,” an ExxonMobil spokeswoman said Wednesday.

Elsewhere, a project vessel, the Papua, is heading towards PNG LNG at close to full speed, according to Platts’ trade flow software cFlow, signaling a potential imminent restart.

Trading sources have also noted the possibility of spot offerings from PNG LNG following its restart, adding bearishness to the thinly traded spring market of Northeast Asia.

PNG LNG closed on February 26 due to a 7.5-magnitude earthquake in the PNG Highlands. The facility has a nameplate capacity of 6.9 million mt/year, which it consistently operates above. In December, the plant averaged 8.6 million mt/year and is expected to be able to maintain rates above 8.5 million mt/year when operational.

Approximately three LNG cargoes have been lost per week by the shutdown, but this has been partly offset by lower shoulder season demand in the key markets of North Asia.

Project participant Oil Search announced Tuesday that its Central Processing Facility, which also shut because of the earthquake and is integral to the operation of PNG LNG, has resumed operations.

“The recommencement of operations at the CPF and oil production at Kutubu, just over a month after the main earthquake struck is a testament not only to the robustness of the facility but also the remarkable efforts of our personnel in the field, who continue to address the challenge of restoring camps and production at our other operated facilities,” Oil Search Managing Director Peter Botten said. “There is still a lot of work ahead of us,” he added.

ExxonMobil has a 33.2% stake in PNG LNG, Oil Search holds 29% interest, Santos 13.5%, National Petroleum Company of PNG 16.8%, JX Nippon Oil and Gas Exploration Company 4.7% and Mineral Resources Development 2.8%.

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Australia’s Oil Search resumes operations at Kutubu complex

Christina Martin | Reuters | 3 April. 2018

Australia’s Oil Search Ltd said on Tuesday that operations have resumed at a facility closed in the wake of a major earthquake in Papua New Guinea in February, with oil output under way from a number of wells in the Kutubu field.

Production has resumed at an initial rate of about 4,000 barrels of oil per day, the company said. Oil output from the array of Kutubu complex fields is expected to be restored gradually through April.

The company said its condensate handling facilities at Kutubu, connected to a giant Papua New Guinea liquefied natural gas (LNG) project operated by Exxon Mobil, were also ready to receive LNG condensate once the project resumes gas production.

Oil Search did not give any further information about the resumption of gas production, or the status of LNG operations at Exxon’s Hides gas processing.

Exxon did not immediately respond to a request for comment on Tuesday and has previously said it expected to resume production within two months of the Feb. 26 quake.

Oil Search said it will release revised guidance for production, as well as operating and capital costs in 2018, when it reports its first-quarter results on April 17.

Shares of the oil and gas explorer dropped as much as 1.7 percent to their lowest in more than two weeks against a 0.1 percent decline in the broader market.

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