Kerenga Kua provides update on the petroleum sector

As the Minister responsible for Petroleum in the Marape-Steven Government, I am pleased to update the people of Papua New Guinea on the progress that we have made as a government since taking office recently in May 2019 and what we would like to achieve during the remainder of this parliamentary term.

Petroleum is an important economic portfolio that comes with enormous responsibilities. And I can assure all stakeholders; our development partners, especially the people of Papua New Guinea, that I do not take the responsibility of holding this significant office lightly.

I intend to do as much as I can in the short period of just over two years to improve on the gains we are making as a country.

The industry we regulate is complex and made up of multi-dimensional facets that incorporate and integrate in detail aspects of engineering, economics, legal, policy, financing, marketing and sales.

It starts from initial oil and gas exploration to Drilling and Completion; it includes Production Facilities upstream to Transmission Pipelines, Compression Facilities and Processing Facilities Midstream, to Storage, Shipping and Petrochemicals at the Downstream end.

So the Field Development Plan for Petroleum Projects are scaled at Mega size requiring huge capital investment and employment of more than 10,000 employees at one time.

There are specific milestones and gating systems that are to be achieved to reach full completion and delivery of such mega projects from concept selection to Front End Engineering and Design (FEED), Engineering Procurement and Construction (EPC), commissioning and start-up to production and finally decommissioning.

It will not be the first for the country but regulating it will require commitment and sacrifice from my ministry and the Department of Petroleum.

Recently we were able to sit with our development partner, TOTAL E&P and obtain additional concessions on the Papua Gas Agreement that was signed by the previous O’Neill led government.

I am pleased that the first stage of the project has now resumed and from the understanding reached by all parties my department can also continue to introduce the legislative amendments needed to arrive at the next stage in taking the Papua LNG project forward.

It is easy to spend money but it is much harder to make money, so finally after years of excessive and extravagant spending by the previous government, we have a slightly smaller but significant sized project, the 13 billion US dollar Papua LNG project, to take us forward and eventually regrow our economy.

But for the moment the Marape Steven government has inherited a debt-ridden nation that seriously needs to, on the one hand cap its spending while on the other, encourage economic recovery.

I am pleased we at Petroleum are making it our duty to encourage economic recovery as well as taking seriously our responsibility of looking after the interests of important stakeholders, in our oil and gas areas.

There are many outstanding and unresolved issues that have not been addressed over the years.

So, my team in both the ministry and department will have to work extremely hard to tackle some of these issues before 2022.

And obviously managing expectations will not be easy. An important aspect of encouraging economic growth is ensuring there is local participation in projects.

It is therefore commendable that Total E&P as the project developer has agreed to work with the Department of Petroleum to develop a detailed NATIONAL CONTENT Plan with measurable outcomes on spending in-country.

We have also taken participation further and TOTAL has again agreed to negotiate at a point in time when debts are fully serviced the co-ownership in the pipeline.

In the interim they have also agreed to build third party access points in the Pipeline. This means we can effectively in the future look at other oil and gas developments that can use the same pipeline on mutually negotiated and acceptable terms including effective and robust tariff system.

It shall be another first for the country. Suffice to say, the review exercise on the PAPUA Gas Agreement has demonstrated that the current concession based licensing system has failed Papua New Guinea in both the mining and petroleum industries.

The NEC has now instructed both the Ministers for Mining and Petroleum to re-write the laws forthwith to move into a system based on contracts. It is envisaged that a Production Sharing Contracts (PSC) will relieve the State of expensive loans and create early free cash flows in all future mining and petroleum projects.

Henceforth, it is easier to shift from concessionary system to contractual system such as Production Sharing Agreement (PSA) , one of such PSC system.

This regime shifting will remove the borrowing for equity financing from the equation to delivering cash on sales for the State.

Another win in the short space of time that I have been minister for Petroleum is that I recently signed the ministerial determination that allows the Pasca gas field developer, Twinza, to proceed with their investment in the first ever off shore gas field development in the country.

While this project is significantly smaller, it is still a first as it has the highest combined flow rate of gas and condensate ever recorded in PNG in an off shore gas field.

Another first is that this gas field is situated almost 100 kms out to sea in the Gulf of Papua.

Consequently, after the relevant legal checks and social mapping the State Solicitor’s office has advised that there are no landowners as the site is beyond possible fishing grounds of the Gulf people.

The significance of the signing of the ministerial determination is that it now allows the development forum to proceed and benefit sharing negotiations between the Gulf Provincial Government and the National Government will now commence.

With continued compliance by this developer we anticipate the granting of the PDL (Petroleum Development License) and the signing of the Pasca Gas Agreement over the next couple of months.

The Construction phase of this development will bring much needed foreign exchange into the country as well as create employment and grow industry.

We are confident that the Developer, Twinza, can convert the Pasca gas to LPG (Liquified Petroleum Gas) for our domestic and regional market making it another first for our country.

We have just celebrated our 44th year of nationhood and I can assure PNG that moving forward the Petroleum sector will continue to be a vital player in the future of our great nation. May God Bless PNG and its people.

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