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More Oil, gas reserves in PNG yet to be tested : Sonk

Staff Reporter | 9:10 PM | |
THERE are more oil and gas reserves offshore of Papua New Guinea yet to be tested, according to Kumul Petroleum Holdings Limited managing director Wapu Sonk.
Sonk was responding to a statement by Oil Search managing director Peter Botten in The National on Monday that seven billion barrels of oil were yet to be discovered in the country.
Botten told The National that so far, only 40 per cent of the oil and gas resources had been tapped into.
“We think we’ve found about 40 per cent of the reserves in PNG and we estimate that there is a further seven billion barrels of oil equivalent yet to be found,” Botten said.
KPHL is the State’s oil and gas company mandated to protect and maximise the value of the country’s petroleum assets so that it can contribute to the wealth of the people.
Sonk said KPHL supported Oil Search’s views.
“KPHL support’s Oil Search view that the country’s oil and gas potential has not yet being fully exploited,” he said.
“We have only discovered close to 30TCF (trillion cubic feet) of gas but there is more to be found, especially offshore of PNG which has huge potential and yet to be tested.
“We need more seismic survey and exploration drilling to find the reserves.”
He said KPHL needed to help in policy-making, especially the third party access policy and promote downstream processing and strategic pipeline to ensure the country had a sustainable petroleum industry.
“All the unexplored areas will be explored if we have strong, stable but flexible policies that encourage exploration and also start diversifying the use of gas so more value-add can be realised,” Sonk said.
“Currently, we only cooling down the gas into LNG and exporting. So we need to be thinking energy security for ourselves by reserving some for power generation and then build the downstream processing, especially the petrochemical industry.” The National / PMW

Is the PNG LNG project really that good?

Staff Reporter | 8:43 PM | |
CLEARLY it’s a consider    able achievement for the PNG LNG partners, led by ExxonMobil, to have established this project ahead of time and reached this milestone in terms of production and exports, largely to the Japanese and East Asian markets. The construction phase of PNG LNG provided a major and valuable economic stimulus to the country early this decade, including many jobs for skilled professional and technical staff, but that stage is relatively short-lived and the subsequent direct economic impact  to date is limited, except in so far as:

A relatively small but highly skilled Papua New Guinea workforce is retained by the project,
the project does provide a valuable backstop and level of longer-term confidence in the prospects of the economy, so long as there’s prudent fiscal and monetary management and prior borrowing against future earnings restrained; and,
It enhances the prospects of future investment in LNG development, both with new projects, such as Papua gas from Gulf, supplementary projects, using current facilities, notably P’nyang in Western, assuming continued orderly and undisrupted production from PNGLNG in the meantime.
That there’s been no revenue to the State from the proceeds of the sales, to date, is not the project’s fault, per se, although clearly partly determined by the project development agreement and tax arrangements, but substantially by the requirement to repay financiers initially, and the slower lead in time, given the substantially lower oil and gas price since late 2014.
However, while different investment conditions could have been determined, which might have provided an earlier revenue stream to the State from the proceed of sales, that might have jeopardised the project capitalisation and prospects of agreement to proceed with project development in the first instance, particularly being the country’s first LNG project.
It might also have increased the overall project debt servicing costs by extending the repayment duration. The project has an expected 30-year lifespan, so, in the fullness of time it will provide valuable and longer-term revenue, although, as stated, this should not be exaggerated, particularly in this era of lower energy prices, based upon more extensive global supply options, including from renewables.
It will also provide the basis for guiding the government in the investment and fiscal conditions for future LNG resource utilisation, which may entail lower investment costs and better and earlier returns to the State. But it remains critical that the State does not exaggerate expected revenue, as has tended to occur in the past, from this or other extractive industries, and does not heavily pre-commit, particularly entailing diversion of budget expenditure on projects which are overpriced or with limited economic and social return.
The current and recent budget figures demonstrate the critical need to diversify the economy and for the government not to impose unrealistic expectations of returns from the extractive industries.
The other sectors, notably agriculture and some associated value-adding, services, but potentially tourism (if many prior conditions are satisfied), which provide not only the formal and informal sector employment and household incomes, but also a much greater level of steady revenue.
The diminutive revenue figures from company taxes from the extractive industries in recent years, notably 2016 (which was a relative strong year for gold prices and included improved oil and gas prices), provide a clear message, with around K3 billion of revenue coming from personal taxation, around K2 billion from company taxes from other industries, (but both of these have been declining with the overall economic downturn), well over K1 billion from GST, and somewhat less from other duties, but a paltry K80 million from the extractives.
Yes, this figure does rise and fall, although revenue in relation to production has tended to decline as successive generations of projects have rolled out, but having the Sovereign Wealth Fund in place to smooth future variation in sector revenue is critical (and overdue), and ensuring greater effort on safeguarding and encouraging the investment and development of the other economic activities will be critical to absorb the growing workforce and provide a more reliable and growing revenue stream, as needed by government to fund the core functions  of the State.
These core functions entail basic infrastructure, health, education, law and order and other utilities and services, plus regulatory functions (environmental standards, competitions etc), but do not including  speculative commercial ventures, which are a diversion, at least until basic services and core social indicators have reached a far more satisfactory and internally comparable level.
The future prospects for LNG and the extractive industries also depends upon efficient administration of the State’s responsibilities with respect to these industries, with respect to transparent revenue administration and licensing, but also prompt payment of royalties and other obligations to the landowners, under benefit sharing agreements and to the sub-national administrations to perform their duties.
The Government’s commitment to the EITI (extractive Industry Transparency International) process has been valuable, but has exposed the weaknesses in much of the State’s capacity in performing its core functions with respect to resource management and oversight.
The information obtained from this process requires adequate and collaborative effort to rectify identified weaknesses, particularly with the Department of Petroleum and Energy, including in record management.
It is also critical that landowners and the wider public are familiar with the details of resource contracting, financing and revenue streams, despite the complexity, and therefore in a stronger position to require accountability both by the State and all resource companies.

Solomon Islands landowners discuss concerns on reopening gold mine

Staff Reporter | 2:36 PM |
Landowners on Guadalcanal in Solomon Islands have been consulted about the proposed reopening of the Gold Ridge gold mine.

The mine was closed in 2014 after massive floods and its ownership was then transferred from the Australian owner St Barbara to a local land-owning company Guadalcanal Community Investments Ltd.

Guadalcanal Community Investments Ltd is now working with Chinese-owned Australian property developer AXF Group which plans to have the mine operational by the end of 2018.

Bringing the gold mine back to life is also a major policy objective of the government which says it wants to do it right.

Members of landowning communities discussed a range of issues with government officials and company representatives relating to royalties, security, environmental impact, revenue sharing and the relocation of people.

They were assured by both the government and the company that their concerns would be taken onboard and addressed to ensure a smooth reopening.

300th PNG LNG shipment leaves

Staff Reporter | 2:28 PM | |
THE 300th cargo of liquefied natural gas from the PNG LNG project has left our shores – almost three years to the date of the first shipment.
A spokesperson for the operator ExxonMobil PNG Ltd confirmed that 300 cargoes from the US$19billion (K59.9billion) project had now left our shores. The first shipment left on May 25, 2014.
According to ExxonMobil, the operations last year produced 7.9 million tonnes of LNG – an increase of 14 per cent from the original design specification of 6.9 million tonnes per annum (mta).
Over the next 30 years, it is estimated that the project will produce more than 11 trillion cubic feet of LNG. The estimated value of each LNG shipment was said to be between US$48million (K151.4million) and US$50million (K157.7million).
Kumul Petroleum Holdings Limited manages 16.6 per cent equity in the project for the State and the people.
KPHL managing director Wapu Sonk had told The National that the question of how much revenue we earned per shipment was not easy to answer because every shipment was different.
He said there were various variables mainly because the LNG sales contracts were different with different buyers.
“Some are delivery ex-ship (DES), some are free on board (FOB) and they fetch different prices,” he said.
“The volumes we sell on the spot market also fetches different prices depending on what the world price market is on the day of the trade.
“What has been fixed for PNG LNG project is the price formula which is used to calculate the LNG price with our long-term buyers.
“Each long-term buyer also fixed the volume they want to receive as DES and FOB. The variable in the formula is oil price.
“So at the end of the day, the biggest impact on revenue we generate is determined by movement of oil price as our long-term LNG sales contracts have been fixed to a formula that is linked to oil price which is usually known as the JCC-linked LNG price.”
JCC is the Japanese customs-cleared crude, a commonly used index for long-term LNG contracts. The National

PNG's Simberi Gold Mine operation results good

Staff Reporter | 2:24 PM | ||
ST Barbara’s Simberi operation in New Ireland, Papua New Guinea  has recorded positive results in the first quarter of 2017, according to managing director and chief executive officer Bob Vassie.
He said the March quarter was great for Simberi, with a record high gold production of 30,430 ounces.
Other results included:


  • Record low all-in sustaining cost of A$1,025 (K2,383) per ounce;
  • plant recovery improved from 83 per cent in the December quarter to 85 per cent in the March quarter due to ongoing improvement in ore and waste mining identification and selection, improved quality ore, as well as a number of incremental operational improvements in the processing plant;
  • forecast gold production for financial year 2017 at Simberi has increased to between 105,000 and 110,000 ounces (previously 95,000 and 105,000 ounces) at a lower AISC of between A$1,285 (K2,989) and A$1,330 (K3,094) per ounce (previously A$1,330 (K3,094) and A$1,490 (K3,466) per ounce);
  • exploration continued on Simberi and Tatau Island during the March quarter. Trenching, mapping and drilling continued at Southwest Tatau targeting the Mt Tiro, Mt Siro and Seraror prospects; and,
  • The St Barbara group (through its wholly-owned PNG subsidiary Nord Australex Nominees PNG Ltd) entered into an Option and Farm-in Agreement with Newcrest PNG Exploration Limited (a wholly-owned subsidiary of Newcrest Mining Limited) in November 2016 for copper-gold porphyry exploration on nearby Tatau and Big Tabar Islands.

Vassie said the St Barbara group was now debt-free, with the final US$20 million (K62.89million) principal of US notes repaid in March.

Global Oil prices stabalise

Staff Reporter | 2:20 PM |
GLOBAL oil prices have stabilised at $US45 (K141.95) a barrel and is not expected to decline any further, according to the Bank of PNG governor Loi Bakani.
Bakani told The National that this had resulted from an agreement between major global oil supplierson exporting.
“The international price for oil has stabilised around US$45 to US$46 – around that area – and everybody is excepting it at that level with no increase like in the past and decline as well,” Bakani said.
“This is where everybody in the international suppliers of oil in the market and those that demand oil have agreed pretty much in balancing that.
“The impact this has on oil exporting and importing countries is very big and that has resulted in the stability in the global oil price. It is unlikely that it will drop any further.”
CNBC had reported that oil prices collapsed last Thursday to their lowest since late November, as investor worried about the world’s stubbornly persistent glut of crude erased most of the gains which followed last year’s Opec’s output cut.

Oil spill threatens livelihood in PNG

Staff Reporter | 1:53 PM | |
VILLAGERS at Pari in Port Moresby are appealing to authorities to contain and clear an oil spill quickly because it may impact their lives and food source, local newspaper the National reports
Villager elder Richard Kewana told The National that they still remembered the effect of an earlier oil spill on their fishing ground and water source.
Puma Energy country manager Jim Collings told The National last week that the spill from a subsea hose at the Kanudi terminal had been contained.
Kewana said village fishermen who returned on Wednesday morning had warned the villagers about the spill.
“When we look out to sea, the spill had already reached our village,” he said.
Fisherman Kenneth Andrew, a diver, told The National that they noticed the spill when they were out fishing at night.
“We saw that the water had started to become murky which made it hard for us to see the fish or where we were going. So we did not catch anything,” he said.
Andrew said when they came out, they were covered in thick black oil which looked like tar.
“You see oil floating on the sea surface when its high tide. When it is low tide, the oil is stuck on the stilts and the shore,” he said.
Kewana said specialists who went to the village to assess the spill told them that they might not fish for a month or two.
“Our people depend entirely on the sea for food and daily income and if that happens, imagine how the people will suffer,” he said.
“We are also engaged in a project of growing new coral in our area and we are afraid this might affect the project too.” The National

Temotu member questions mining as Solomons development option

Staff Reporter | 1:47 PM | |
A member of the Temotu provincial assembly in Solomon Islands says mining is a poor option for the remote province. There is strong opposition in the local community to the activities of Australian company Pacific Bauxite Ltd which last year won a license to prospect for bauxite at Nende.

However the Temotu provincial executive under new premier David Maina recently awarded the company a business license, promising it would foster economic development.

An assembly backbencher, Simon Barclay, said the new executive lacked a policy to properly manage mining.

"And you know, when you're talking about such development, mining is one of the developments that I think would be the last thing to think about here. The landmass here is too small to do such operations," said Simon Barclay.

Mr Barclay said adequate community consultation was not conducted before Pacific Bauxite Ltd was awarded the license.....Radio New Zealand