Tag Archives: Total

Papua LNG: An Open Letter to Dr Fabian Pok by Hela Governor Philip Undialu

Philip Undialu MP | PNG Blogs | April 16, 2019 

I have some real issues for your clarification and they are;

1. Why did State ignored recommendations or proposal by State Negotiation Team or SNT backed by Ashurst, KBR, Wood Mackenzie, and signed a completely different agreement? I have confirmed with some SNT members and let’s not fool fellow leaders, professionals and our people in general.

2. Why did State signed an agreement when Total failed to submit important requirements of law? I have confirmed that the from Acting Secretary Petroleum to Chief Secretary as Chairman is real, there exist such a signed letter and State brushed that and signed.

3. Why did State ignored StateSol advice on serious implications? His media statement this week Wednesday confirms that Gas Agreement is subject to Total fulfilling necessary requirements. What do you think those necessary requirements are? And are those requirements not necessary to be complied with first? Why did we ignored advise for six months adjournment?

4. Why did State ignored 3 consecutive letters from Governor of Central Bank not to sign the Agreement until our Monetary regulatory requirements are complied with? In the letter, he warned that he let go the the first LNG project though fundamentally flawed GA but will not be allowed again.

5. Why did State give Tax Exemptions having known we lost K6.0 billion from PNGLNG? PNG stand to loose another K6b or more because of the GST and other exemptions.

6. Corporate Tax used to be 45% since first Oil Project in 1990 but reduced to 30% under PNGLNG. Why did State ignore SNT reccommendation to bring back to 45%? A lost of 15% is a serious question State need to be responsible because we will again loose Billions of Kina every yeat.

7. If we can reduce Tax exemptions and reduce Corporate Tax, why didn’t we ask for exemptions on Sunk Cost as recommended by SNT? As announced by DPM , we will pay our sunk costs after first sale of gas. Remember, any capital cost you want to pay after project construction will apply Premium costs ranging 10-30% on the principle amount.

8. On one end, we talking about better deal on DMO but I think developers playex dump fool on us. Why I say this? Because currently for NiuPower and Dirio Power, we are paying gas price at 9% Japanese Crude sales price or US$5/mmbtu. The Papua LNG agreed pay around US$5/mmbtu. That is, 9% of JCS is same as $5. Therefore, i think we have been fooled.

Why did we ignore SNT recommendation for 2% JSC and went for $5/mmbtu or 9% JSC which means the same thing?

9. Why Central Provincial Government, very host of pipeline and LNG facilities NOT invited to be a party to the agreement?

10. Did we agreed for 2% Gross Wellhead Value payment for Royalty and development Levy? Under the PNGLNG, they are literally deducting 1.6% and paying only 0.4% because of deductions such as Opex, Capex, and Premium on Capital cost. Over the last four years (2014 -2017) we lost K1.2billlion. Did we ever leant from that?

11. The SNT team had a clause called “Lessons Learned from PNGLNG”. One of the lessons learned was the confirmation that PNG lost K48 billion from construction phase to operation phase. What actions have we taken to correct that?

12. State need to explain to the parties affected by PNGLNG project wether or not there will be any implications as Papua LNG likely to share common facilities.

13. I heard that the Financial Model doesn’t even incorporated financing and refinancing in their Open Book Economic Model. The numbers used in the economic model is only Class IV – ORDER OF MAGNITUDE COST ESTIMATE of +- 50 %. The likely high case cost estimate for the overall project will be plus 50% of the current estimate of US $13 billion.

14. The Foundation Volume is rumoured to be stated as 10.3 tcf, when their outdated proven reserves is only 6.7 tcf. Where will the extra 3.4 tfc of gas will come from. What’s the Basis? For any Petroleum project, the Foundation Volumes determines everything from Field Development Plan to Cost Estimate, Financing. Etc. Also clarify how the treatment of P’nyang and PNG LNG gas will be like if there’s shortfall on committed gas supply for Papua LNG.

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Gas project pressure rising for PNG’s government

PNG Liquefied Natural Gas Plant near Port Moresby, Papua New Guinea.Photographer: Richard Dellman via ExxonMobil Corp.

Johnny Blades | Radio New Zealand | 16 April 2019

Papua New Guinea’s government is under pressure over its handling of the country’s burgeoning gas sector.

The government last week agreed terms for the $US13-billion Papua LNG project, based on the Elk / Antelope gas field in Gulf Province, to be led by French company Total.

Two days later, PNG’s Finance Minister James Marape resigned, citing a breakdown of trust in prime minister Peter O’Neill and the government’s handling of landowner participation in oil and gas developments in the Highlands.

Along with claims about feasibility, the resignation adds to a sense of uncertainty over the Papua LNG developer which traces right down to the grassroots.

A village leader in Gulf Province said local people had not been briefed yet on what having the project on their land meant for them.

For Solomon Lae, a chief in Kapai Aikavalavi village, the lack of consultation reflects how the nation’s political leaders have long milked the benefits of the country’s resources.

“We have never had the opportunity to be clear on exactly what is going to happen in the province,” he said.

“There are no public servants who can be able to tell the people, the illiterate, the silent majority, what’s going to happen in the gas and oil industry. It’s a new elephant for us.”

Mr Marape, the former finance minister, is the MP for Tari in Hela province, the hub of the PNG LNG Project the country’s first gas development.

Ten years after its project agreement, many of Mr Marape’s constituents are frustrated with the government because they are yet to see promised benefits from the venture.

ExxonMobil officers receive a petition from landowners in Hela Province, Papua New Guinea. Photo: Supplied

Meanwhile, the ‘clan vetting’ process in Gulf Province to establish the rightful landowners to receive benefits and royalties is still not complete.

According to opposition MP and the member for Kerema in Gulf Province, Richard Mendani, instability in the government’s ranks is linked to the way it is rushing through the new gas project without properly consulting all stakeholders.

“The current government is under pressure to improve on this performance. There’s a lot of talk and a lot of political movements within Waigani,” Mr Mendani said.

“I’m so surprised that the current government, the PM and Total have, without any proper consultation, gone in and signed off the project agreement.”

But PNG’s Treasurer Charles Abel said the agreement was only one part of the process and that landowners would later be part of discussions for the Benefit Sharing Agreement.

“The signing of the gas agreement, it just establishes the broad fiscal terms to enable the developer to obtain financing and give them comfort to spend a bit more money into the Front End Engineering Design process,” he explained.

“In the intervening period, they’ve got to complete all the landowner registration and more of that work has been done.”

The state has a 22.5 percent interest in the Papua LNG Project, of which two percent is on behalf of landowners, with a two percent development levy for the provincial government and local level administrations.

According to Mr Abel, other features of the project’s terms include a corporate tax rate of 30 per cent, and obligations to supply PNG’s domestic gas market at a discount price.

Compared to the PNG LNG Project, which began exports five years ago, there are significant improvements from a landowners’ perspective, Mr Abel said.

LNG Project facility, Hela Province, Papua New Guinea Photo: RNZI / Johnny Blades

This time the government has been granted a waiver on immediate payment of its share of project costs, while the venture’s benefits are carefully structured, ensuring revenues even when commodity prices are low, he said.

“The landowners are getting a better benefit but the state is not unduly putting itself into a difficult financial situation,” the treasurer said.

“When the oil price collapsed, there was very little benefit from the PNG LNG Project, and yet we were lumped with all the obligations to meet all the obligations we made to the landowners and then we hadn’t even done the (clan) vetting exercise properly. So, we’ve learnt from this process.”

Chief Solomon Lae, however, is doubtful the government has changed its approach from other resource extraction projects.

“Our people in this country, they never learn from the previous experiences. Southern Highlanders are waiting ten years and are yet to receive royalties,” Mr Lae noted.

“The leaders of this country, they’re elected to represent our people. But that is never the case. They’re milking us. Daylight robbery.”

But Prime Minister Peter O’Neill has said the Papua LNG Project’s expected investment of nearly $US13 billion will benefit local communities and create jobs.

He told local media that the domestic supply obligation was an important step for resources development in the country.

“The petroleum and energy sector looks very bright in PNG,” Mr O’Neill said.

Papua New Guinea Prime Minister, Peter O’Neill, meets Total’s Vice-President Mr. Arnaud Breavillac. Photo: Supplied

However, explosive claims have surfaced from a former senior technical officer at the Department of Petroleum that the Elk / Antelope gas field is a very marginal resource, lacking gas volumes to sustain a major project.

This was related in a review by a team of geoscientists and engineers, presented to the O’Neill government and its Papua Project partners, Total, ExxonMobil and Oil Search, in 2017.

Despite this, the government is proceeding with the Papua LNG Project, in which it has a significant financial stake. For over five years, the prime minister has been determined for the venture to go ahead.

The government’s controversial purchase of a ten percent stake in Oil Search in 2014 was an executive decision said by cabinet members to have been made Mr O’Neill without their support.

It sparked a fallout at the time with his former Treasurer, Don Polye, who was sacked for opposing the decision. Mr O’Neill is facing a potential motion of no-confidence next month in parliament, and will be looking to stem the tide of discontent within his government.

Pressure over this gas project is rising, as is the political heat in PNG.

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Papua New Guinea minister resigns over vast gas contract

One of Asia’s most impoverished nations, Papua New Guinea is rich in natural resources including large gas fields.

AFP | Daily Mail |11 April 2019 

Papua New Guinea’s finance minister resigned on Thursday, days after the country signed a multi-billion dollar gas contract with energy majors Total and ExxonMobil.

James Marape, who also leads the government in parliament, resigned citing the failure of the government to ensure national firms and locals benefit from the contract.

On Tuesday Prime Minister Peter O’Neill announced the $13 billion project that includes the extraction, pipelines and an upgraded LNG facility to ship the gas overseas.

The leading companies involved are France’s Total, US firm ExxonMobil and Oil Search, a firm partially owned by the Papua New Guinea government.

Peter O’Neill and James Marape in happier times

“This decision is not easy to make,” Marape said in a statement obtained by AFP, adding that trust between him and the prime minister was at its “lowest.”

“Whilst we don’t have any personal differences, we do differ on some work and policy related matters,” he said, citing the need for more local “participation in our gas, oil sector” and mining industry.

Marape’s departure could prompt further cabinet resignations that are problematic for the government and may spur local protests against the gas projects.

He represents a district in Hela Province that an oil pipeline traverses.

The project would almost double Papua New Guinea’s gas exports, but local communities have complained bitterly about not getting benefit from similar deals in the past.

One of Asia’s most impoverished nations, Papua New Guinea is rich in natural resources including large gas fields.

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Oil Search, Total, Exxon sign long-awaited gas deal with PNG

A logo is pictured at French oil and gas company Total gas station in Marseille, February 11, 2015. REUTERS/Jean-Paul Pelissier

Reuters | 9 April 2019

Australia’s Oil Search, France’s Total SA and Exxon Mobil on Tuesday signed a deal with Papua New Guinea that will allow work to start on a long-awaited project which could help double the nation’s liquefied natural gas exports.

Oil Search said in a statement that the agreement would allow the parties to start activities related to so-called Front End Engineering and Design (FEED) such as contractor selection for Papua LNG – a project led by Total, with Exxon and Oil Search as minority partners.

“FEED is expected to result in a Final Investment Decision in 2020, which will ensure that first production from … LNG trains is available in 2024,” said Oil Search’s managing director, Peter Botten.

Oil Search had initially hoped the project, to fuel an expansion of Exxon Mobil’s PNG LNG plant, would be approved in 2018, but talks with the government took longer than expected after an earthquake hit the country.

The project intends to develop the Elk and Antelope gas fields to feed two new processing units, or trains, to be built at the PNG LNG plant run by Exxon Mobil.

The Total-led Papua LNG project is also looking to sign-off on the development of a third new train to be supplied from its existing PNG LNG fields and the new P’nyang field.

All together, the developments are expected to double the PNG LNG plant’s output to around 16 million tonnes a year, with analysts estimating the overall expansion will cost around $13 billion.

Shares of Oil Search and sector peers such as Santos were over 2 percent higher against a slightly lower benchmark index.

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Landowners Threatening To Derail Major Resource Extraction Projects

Landowners protest against Barrick Gold and the Porgera mine earlier in 2019

Mal Taime and Gorethy Kenneth | Post Courier | April 3, 2019

LANDOWNER groups are threatening to derail two major resource developments in the country.

These are the Papua LNG in the Gulf of Papua and Porgera Gold Mine in Enga, where a Wardens Hearing on developer Barrick’s bid for renewal of its licence was conducted yesterday with hundreds crowding the Paiam Oval in Porgera.

The event nearly turned into factional disagreements which almost turned nasty before police cooled the situation to allow Chief Mining Warden Commission Andrew Gunua to hear the company and landowner representatives.

Porgera Joint Venture executive managing director Tony Esplin, in presenting the company’s application to extend its operations, appealed for the people’s understanding saying PJV mining operations was for the people.

Locals supporting PJV’s extension bid wore yellow with banners saying “Barrick PJV to stay” while those opposed also came with banners.

The fracas occurred when former Porgera Development Authority chairman Jonathan Paraia objected and said his faction would be represented by their lawyer.

Mr Gunua told Mr Paraia that he will conduct the warden hearing fairly and listen to all parties, but this did not go down well with Mr Paraia’s faction.

Meanwhile, in Port Moresby, a landowner group from the Gulf Province aggrieved by the Papua LNG announcements demanded in a letter to Prime Minister Peter O’Neill to defer the signing of the agreement for the Gulf (Papua) LNG project until all legal requirements are met. Failing that, they will go to court to stop the signing if no response is forthcoming by Thursday (tomorrow).

They claim they are the legitimate landowners and only owners of the PRL 15 land sites where the wellheads are located.

Executives of the Aumake Nairu Orumako Land Group, in a press conference claimed they own over 100,000 hectares of land in the Elk Antelope.

The incorporated landowner group (ILG NBR 513) chairman Apae Koivi and secretary Kepsy Koivi said from day one they have never been engaged in any negotiations pertaining to the Papua LNG despite them being the legitimate landowners.

“Of course for the last three years we have not made any noise because we wanted to have all legal documents and instruments in place, and now that we have it in our hand, we are coming out,” chairman Koivi said.

“We the Aumake Nairu Orumako Land Group now have an ILG certificate from the Department of Lands which makes us the legal landowner group. We are not closing the Gulf LNG, no, all we want is deferral of the signing so we can iron the legal issues, and so that we can find out who has represented PRL 15 all these years,” he said.

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Landowner identification in PNG: a job for government

Credit: Celine Rouzet

Peter DwyerMonica Minnegal | Devpolicy Blog | March 21, 2019

The Papua New Guinea Liquefied Natural Gas (PNG LNG) project commenced exporting gas to China, Korea and Japan in May 2014. Under agreements reached in 2009, landowners of eight petroleum licence areas, eight pipeline licence areas and a liquefaction plant site near Port Moresby were to receive royalties. By February 2019, payments had been made to people in only the last of these areas. The identification of landowners has been a major difficulty, and assigning responsibility for completing the task has been a matter of debate.

At the close of 2018, social mapping and landowner identification studies carried out by consultants to petroleum companies, clan-vetting exercises carried out by officers of the Department of Petroleum and Energy, and alternative dispute resolution processes implemented by the judiciary had failed to solve the problem. By this time too, agreements for two other LNG projects (in Western Province and Gulf Province) were under discussion. In January 2019, Petroleum Minister Fabian Pok told parliament that the government would not repeat the mistakes of the first LNG project. He wanted the companies to be responsible for identifying landowners in the new LNG project areas and he wanted this done before those projects moved to production. On January 23rd, referring to the Gulf Province LNG project, Prime Minister Peter O’Neill said that the government “had tasked the developer to do the landowner identification process” and Minister Pok reported that Total – the developer – had agreed to do this.

The small print is not yet to hand so we cannot be sure just what the government has requested or what Total has agreed to do. Here, however, we argue that ceding responsibility for landowner identification to the petroleum companies is a seriously bad idea – bad for the companies, the government and for the people of Papua New Guinea.

Under the Oil & Gas Act 1998, final determination of landowner beneficiaries for a petroleum licence area is to be made by the responsible minister and gazetted as a Ministerial Determination. Recent determinations provide a record of landowner beneficiary identification for specified licence areas or pipeline segments. Those determinations name clans (variously ‘major clans’, ‘stock clans’, ‘beneficiary clans’) but do not name individuals within those clans. With reference to differential benefit-sharing arrangements they may subdivide clans as ‘highly impacted’, ‘least impacted’ and ‘invited’.

The diagram below shows some categories of landowner beneficiaries appearing in recent determinations and in clan-vetting exercises that precede and feed into those determinations. On the diagram, the boundaries of the lands of clans A to G are shown relative to a Petroleum Development Licence (PDL) area. Clans A, B and C are classed as landowner beneficiaries on the basis of long-term residence and use. Clans D and E are ‘invitees’ initially recognised as landowner beneficiaries on the basis of boundary-sharing with A, B or C with the possibility that they are subsequently granted equivalence with those clans. Clan F is classed as a landowner beneficiary on the basis of asserted ancestral connection and an ideology of rights to land being held in perpetuity. Clan G is an ‘invitee’ recognised as a landowner beneficiary on the basis of assistance rendered to A, B and C. H is a private citizen, or group, that holds registered title to a portion of the PDL area and, on this basis, under the Act is a landowner beneficiary.

The concept of ‘landowner’ is being used here in a broad and fluid sense. It is not used in agreement with any likely academic definition, with any detectable legal rigour or in conformity with a pan-PNG ideology of tenure because, of course, there is no pan-PNG ideology of tenure. The Oil & Gas Act requires that a company applying for a PDL must submit a “full-scale social mapping study and landowner identification study of customary land owners” of that licence area. Under the Act, customary landowners are persons whose relationship with the land has to do with “rights of proprietary or possessory kind”. Not all clans identified as landowner beneficiaries in Ministerial Determinations satisfy this definition. And the status of others, both the included and the excluded, as members of this category will be always amenable to contention. Several possibilities are implied in the diagram.

For example, a judgement that clan C was ‘more impacted’ than A or B because all land attributed to C is within the PDL area while portions of land attributed to A and B lie outside that area, could be challenged by the latter clans on the basis of area or numbers of people affected. Similarly, members of A, B or C could well have different opinions regarding acceptance of D or E as ‘invitees’ and their possible upgrading to the status of landowner is even more problematic in being politically, rather than empirically, motivated. Inclusion of F as landowner will be dependent on assessing the validity of accounts of ancestral connections from claimants who may well have competing agendas. Finally, inclusion of G could elicit claims from other clans that assert that they too provided assistance to A, B and C. Resolving problems of these kinds cannot be achieved by an anthropological study of ‘in situ’ land ownership. These sorts of problems are ultimately resolved only by facilitated negotiation with those charged with identifying landowners, or by litigation.

No petroleum company can produce a list of clans that will conform to, or satisfy, the sorts of decisions that currently inform Ministerial Determinations. They did not do so in the past and they cannot do so in the future. If companies now assume responsibility for producing a definitive list of landowner beneficiaries, there will no longer be any ambiguity about who to blame or who to take to court when the list is considered defective. The fault will be theirs. On these counts, the desire to shift responsibility – or at least the perception of responsibility – to the petroleum companies might, in the short term, prove beneficial to the government in domains of financial management and public relations.

There is, however, another reason why responsibility for identifying landowners should remain with the government. Only Papua New Guineans – the PNG government, courts, and the landowners themselves – can determine who owns the land in Papua New Guinea. This responsibility should not be ceded to outsiders. It should not be ceded to American, Australian, Chinese or French companies. Papua New Guinea is not their country. They are guests. Only Papua New Guineans can determine what is right for Papua New Guinea. The petroleum companies should recognise and acknowledge this and step back from this area of decision-making. The government should also recognise and acknowledge this and step forward to ensure that the rights of all Papua New Guinean woman and men are guaranteed by Papua New Guineans.

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Foreign miners to hold state’s equity: O’Neill

Cedric Patjole | Loop PNG | January 30, 2019

Prime Minister Peter O’Neill says understandings have been reached with Papua LNG developer Total E&P PNG and the Wafi-Golpu Joint Venture (WGJV) to hold State’s equity until the first export from both projects.

This is to ensure the state does not borrow to purchase equity in a project.

“The initial understanding we have with the second LNG and in particular Wafi-Golpu is that our participation in equity will be carried by the developer until the first export of either the gold and copper from Wafi-Golpu or in the second LNG Project, meaning we don’t have to borrow large sums of money that we are unable to repay.

“This is our resource, the developer has to carry us to a certain extent. I’m thankful that Total and Newcrest have agreed to those understanding and we are looking forward to our Ministerial committee finalising the development agreement that will make sure the resource owners are fully participating rather than waiting for loans to be paid and of course, the benefits rolling out to them,” said O’Neill.

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