PM MARAPE REASSURES PNG OF A BETTER DEAL FROM P’NYANG GAS PROJECT
by PNG Business News - October 14, 2021
Photo credit: Richard Dellman - EMTV
Prime Minister Hon. James Marape has reassured Papua New Guinea of a better deal from the P’nyang Gas Project in Western than previous projects.
He gave this reassurance in Parliament (Tuesday Oct 12) when answering a series of questions from North Fly MP Hon.James Donald in relation to P’nyang, as well as execution of the Heads of Agreement (HOA) on P’nyang Gas Agreement along with an Equity Purchase HOA with ExxonMobil in the USA last month.
PM Marape said he, and Petroleum Minister Hon. Kerenga Kua, would give a detailed answer to all 13 questions posed by Donald later.
“The Heads of Agreement we signed in Houston was to set out a framework to guide us into a proper Gas Agreement with ExxonMobil as developer,” he explained.
PM Marape said when he became Prime Minister in May 2019, his first statement was that P’nyang would not be part of Papua LNG, as the previous O’Neill government had wanted.
He assured Donald that his people of North Fly, Western and PNG would get a better deal from P’nyang as the world moved towards cleaner energy.
“The State will get 63 per cent of total project economic benefits from P’nyang,” PM Marape said.
“PNG LNG sits at 49 per cent, Papua LNG sits at 51 per cent.
“I want to give a big thank to (Gulf) Governor Haiveta for leading the team as my special envoy.
“This (negotiation with ExxonMobil) was a National Government function, and as we move towards the Gas Agreement, there will be a time to call in the province and landowners.
“This will be a public exercise as we did with PNG LNG.”
PM Marape said his Government’s wanting to take back more for PNG included P’nyang, Porgera, forestry and other resources.
He thanked ExxonMobil for understanding the dynamics at play, including allowing for the Stae to acquire an additional 10 per cent equity.
PM Marape also noted the planned Oil Search-Santos merger, and said that in the event they offloaded part of their stake in P’nyang or PNG LNG, national interest – through Kumul Petroleum - would take precedence
The Gas Agreement HOA captures key fiscal, regulatory and licencing terms. The Equity HOA provides for the State to acquire at cost 10 per cent additional equity from ExxonMobil in the P’nyang Project.
The overall deal reflects a win-win for both sides. In addition to all the legal entitlements, the State’s take is at 63 per cent in this deal compared to 49 per cent in PNG LNG and and 51 per cent in Papua. This is made possible by increased production levy of 3 per cent and the State equity (including the commercial purchase) being 32.5 per cent compared to just 19.6 per cent in the PNG LNG and 22.5 per cent in Papua.
The deal makes P’nyang an investment grade bankable project, meeting the project partners’ investment thresholds and gives it the best chance of going into construction.
Article courtesy of Department of Prime Minister & National Executive Council
PNG Business News - June 01, 2021
Government Intends to Move on with P'nyang Gas Project
Photo credit: Santos The National Government is set to concluding all project discussions for the $US11 billion P'nyang gas project by the third quarter of 2021. This, according to Petroleum Minister Kerenga Kua, will provide project partners enough time to obtain Sales and Purchase Agreements (SPA) and achieve a Final Investment Decision (FID) by 2023, when the new LNG project opportunity window to absorb a large amount of LNG from within the area is still available. According to Kua, the project's development may serve as a catalyst for the development of marginal and stranded gas resources and prospects in the Western Papua Basin, which is located in the Western and Gulf provinces. He claimed that the P'nyang deposit, when coupled with the remainder of the stranded gas in the Western Papuan Basin, could provide up to 16 TCF of gas and 200 million barrels of condensate. “Since we have a good traction on Papua LNG project with Total E&P fully committing to it, the Government will now re-appoint a new State Negotiating Team to start reengaging with ExxonMobil,” Kua said. According to him, the initial intention is to build a third LNG train alongside the two Papua LNG trains, each having a capacity and specification of 2.7 MTA of LNG production. “However, the P’nyang gas development will have a huge impact on the monetization of other smaller stranded gas fields in the Western and Gulf provinces and can be aggregated as a stand-alone, used as a backfill for the PNG LNG project together with Juha and Muruk in the Northwest fold-belt as a utilised project, or deliver alongside Papua LNG as initially planned with reference to the set re-negotiation closing date,” Kua said. “The benefits of spreading the construction period for both Papua and P’nyang projects over an 8 years’ period shall be massive for the country.” According to the Field Development Plan and the Open Book Economic Model provided by ExxonMobil, the spread will be over a decade of continuous intense industrial activity before to and after construction, with total Capital Expenditure Investment for P'nyang alone estimated at $US11 billion. “P’nyang Gas Agreement is one of my KPIs as the responsible Minister, and once the new SNT and ExxonMobil agrees on the key fiscal and non-fiscal term sheets, then the Petroleum Advisory Board will be able to convene and make the final recommendation to the Minister off Petroleum either to grant or refuse the application for the Grant of Petroleum Development Licence,” Kua said. Reference: Post-Courier (21 May 2021). “Government To Advance P’Nyang Gas Project.”
PNG Business News - August 26, 2021
Kua: P’nyang Ready for Negotiations
Exxonmobil PNG and the government have joined forces to ensure that the P'nyang gas project in Western Province is ready for negotiations in the coming weeks. The project's letter of intent was signed, paving the way for it to get off the ground. The P'nyang project has been on the table since 2019 when the State began looking into the possibility of signing a gas deal with ExxonMobil and its joint venture partners as project developers. According to Minister of Petroleum Kerenga Kua, these negotiations were concluded in January of last year, allowing both the State and ExxonMobil to take a breather and rethink their respective strategies. “We are grateful that Exxon is now prepared to invite us to recommence our discussions one more time. “This time we intent on making sure that we cross the line bring all good faith and sincerity to the negotiations to enable us to reach some terms and conditions that are satisfactory to both sides so that the project can happen for all our mutual benefit,” Minister Kua said. He explained that negotiating a project agreement is difficult since developers have their own internal standards and the state has its own expectations. “I can only be hopeful and encourage Exxon to attempt to understand where we are coming from to help us to realise some of the revenue returns back to the country. “This process will start very shortly. We are hoping that around 9th or 10th of September the parties can convene in one room and try to stress out terms and conditions to potentially develop this project,” he said. Peter Larden, managing director of ExxonMobil PNG, praised the Papua New Guinea government for taking this critical step ahead in the development of the P'nyang project. He stated that the initiative will benefit all stakeholders directly and will encourage continuing investment and growth in the nation, as well as increasing capacity and ensuring the social and economic well-being of Papua New Guineans. “The intent to develop the P’nyang field helps demonstrates the encouraging growth opportunities for our operations here in Papua New Guinea and together with our joint venture partners, we look forward to working closely with the government and the landowners to progress the P’nyang field development proposal and secure the license as needed to develop this resource,” Larden said. “I thank the PNG Government for its support and I look forward to progressing our discussions.” Reference: Yafoi, Melisha. Post-Courier (23 August 2021). “Kua: P’nyang On The Table For More Talks”.
PNG Business News - September 09, 2021
‘Re-engagement on P’nyang, very positive for PNG’ - Smaré
President of the Papua New Guinea Chamber of Mines and Petroleum, Anthony Smaré, has applauded the Marape-Basil government, Petroleum Minister Kerenga Kua, ExxonMobil PNG, and their joint venture partners for agreeing to reengage in negotiations on the P’nyang project in Western Province. Mr. Smaré said “In light of the extremely challenging economic conditions in PNG, the P’nyang and Papua LNG projects, are projects that are desperately needed to be kick-started to kick-start the country’s stagnant economy creating jobs, bringing in foreign exchange and providing opportunities for PNG businesses, particularly SMEs in the impacted areas”. “I congratulate the Prime Minister, Minister Kua, the SNT and Exxon Mobil and its partners for restarting these negotiations, and strongly encourage them to secure a win-win outcome that sees the progress of the P’nyang project in the near term, and in turn helping PNG and our people.” In making the announcement of re-engaging in negotiations on P’nyang, on August 20###sup/sup###, Petroleum Minister Kerenga Kua highlighted the economic importance of these two projects alone. “The benefits of phasing the construction of both Papua and P’nyang projects over an eight-year period shall be a substantial boost to the economy and the country. “This tremendous investment would extend our gas pipeline infrastructure into the country’s Western Province and have a meaningful and lasting economic impact for Papua New Guinea and its people,” Minister Kua said. He also announced that there would be a series of workshops regarding the development of the P’nyang Gas Fields, and if these continued unhindered, an expected signing of a P’nyang Heads of Agreement could be expected by end of this month, with a Gas Agreement to follow. “While there continues to be misinformation on the true impact of resource projects in the country, the government remains fully aware that projects which remain in the pipeline, will not be able to effect much financial benefit, until they are negotiated and commissioned. “This announcement by government of re-engaging with ExxonMobil PNG and its joint venture partners on the P’nyang project, is an extremely positive step in the right direction,” Mr. Smaré said. Article Courtesy of the PNG Chamber of Mines and Petroleum
PNG Business News - October 26, 2021
Australia buys Digicel, PNG’s mobile monopoly
Photo credit: Devpolicy by Stephen Howes Yesterday, Telstra announced that it was buying Digicel Pacific. Telstra itself is only paying $270 million, and the Australian government $1.33 billion. Yet, Telstra is obtaining 100% ownership. The deal is certainly an attractive one for Telstra. But does it make sense for Australia, and for the Pacific? Digicel has had a transformational impact in the Pacific, but now has too much market power. As the Telstra release explains, it holds the dominant position in all the Pacific countries in which it operates, except for Fiji, where it is in second place. In Papua New Guinea, which I know best, and which is by far Digicel's biggest market, the company has a 92% share of the mobile phone market. That makes Digicel effectively a monopoly in PNG. And that is why it is so profitable: like any monopolist, it exploits its market power. Australian and PNG researchers have been tracking mobile internet prices in PNG since Australia gifted it a new underwater cable . Their conclusion is that since the completion of that cable in December 2019 to today there has been no decrease in mobile internet prices. The reason is simple: the lack of retail competition. Michelle Nayahamui Rooney, Martin Davies and I last year exposed Digicel PNG’s predatory loan scheme. Digicel lends phone credit to its customers. They pay it back when they next top up. Our estimate is that Digicel made a 17% return from such loans every week, which is equivalent to an unbelievable 351200% a year. Is this really the way in which Australia want to engages in the Pacific – owning an enterprise that keeps prices high for consumers, and rips them off when they are desperate to make a call? Any monopolist is necessarily engaged in a battle between the consumer and their profits. At some point, Telstra will end up going toe-to-toe with the PNG telecom regulator, NICTA, as Digicel has done several times. It’s going to be awkward for both Telstra and the Australian government. Many will welcome the investment as a sign of Australian commitment to the Pacific. However, if we want to invest in the telecom sector in the Pacific, we should be backing alternatives to Digicel, to push prices down and improve services, not buying out the dominant player. Amalgamated Telecom Holdings based in Fiji is the Pacific’s second biggest telecom provider. It is currently planning to enter the PNG mobile market with support from the Asian Development Bank. This is the sort of investment we should be financing. That Australia has bought Digicel shows the extent to which the Pacific is now viewed through a China lens. That’s unfortunate. China is a massive economic power. Its companies will have increasing stakes in economies around the world. That is a fact we have to accept. The Australian government also needs to decide if its only goal is to counter China or if it is still seeks to promote Pacific development. When I was AusAID's Chief Economist, Digicel was the new kid on the block in the Pacific, and it was successfully challenging state-owned telcos that until then had been dominant. In 2006, in Foreign Minister Alexander Downer's flagship Pacific 2020 report, we wrote glowingly about the competition that various Pacific countries had recently started allowing in the mobile phone sector. Our analysis was right then, and remains relevant today. Yet here we are, in 2021, doing the opposite: rather than supporting greater competition in the telecom sector, subsidising the purchase of the incumbent monopolist. The decision to buy Digicel Pacific should be reversed. If it is too late for that, the Australian government should at least – in return for all its cheap and risk-reducing finance – oblige Telstra to operate Digicel for the benefit of the people of the Pacific rather than solely for its shareholders through an agreement that makes it clear that the Australian company is not only expected to return the cheap loan it has been given, but also reduce prices, and end rip-offs. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.
PNG Business News - October 26, 2021
Taureka Replaced As Managing Director
Isikeli Taureka's position as managing-director (MD) of Kumul Consolidated Holdings (KCH) was terminated by the National Executive Council (NEC) recently. Professor David Kavanamur has been appointed as interim MD until a permanent appointment is made, and Moses Maladina, the current chairman of PNG Power Ltd, has been named as acting chairman. Taureka was removed after 20 months, according to Prime Minister James Marape, due to poor performance by KCH and State-Owned Enterprises (SOEs) and missed national project deadlines. “The reforms of the SOEs were endorsed by the Government in October 2019,” he said “We see it as the most-significant reform programme to be undertaken by any Government since the corporatisation of the state utilities and the creation of the Independent Public Business Corporation (IPBC), now KCH. “Building governance and accountability must go hand in hand with successful project execution. These are viable projects that can fundamentally change the accessibility and affordability of services and benefit the welfare of our people. “Extensive unexplained delays to major projects by KCH and SOEs are not acceptable. The Government understands that SOE issues cannot be immediately resolved as they take time. “That is why the NEC provided well over a year for KCH to work with SOEs to support the development and execution of strategies. We had hoped more would have been achieved during Taureka’s tenure. We regret to take the difficult step of severing the MD’s appointment. However, the NEC felt it had to be done. “The Telikom merger and partial privatisation with majority ownership and board control to be passed onto the super funds, for example, is one major issue the Government has been pushing since 2019 when we took office. “The merger of Water PNG and Eda Ranu is another matter that has been outstanding and not yet resolved. This merger is to take on a subsidiary structure where 20 percent of Eda Ranu is to be owned by Koiari landowners and 10 per cent each by Central Province and the National Capital District. “This decision was taken in 2019 but has not been implemented to date. “As for PNG Power and its continuous performance issues, these have been ongoing and evident. “These are badly-needed reforms within the SOEs and responsive policies have been launched by the Government, yet, very little or no progress have been made. “Out of respect to Taureka as a leading Papua New Guinea son, I had reached out to him for a meeting but there was no response forthcoming. Hence, the announcement of this decision (termination),” he added. Those nominated to crucial positions, according to Marape, must grasp the larger picture and act quickly to fulfill the government's goals.“For others in key leadership roles, whether as chair, members of boards, departments or agency heads, you are not here to pass the time or warm seats. Everyone must step up. “The Prime Minister’s Department is working to take stock of work done. So, if you feel you have not met your key performance indicators, I suggest you start thinking about resigning before the NEC asks you to leave.” According to Marape, Kavanamur had previously served as the chairman of KCH and had a thorough awareness of the organization's issues as well as the government's goals. Reference: The National (22 October 2021). “Cabinet Axes Taureka”.
PNG Business News - October 26, 2021
Digicel Pacific to be Acquired by Telstra
Telstra has announced that it will buy Digicel Pacific for $US1.6 billion, plus up to an additional US$250 million based on business performance over the next three years, subject to government and regulatory approvals. In its six South Pacific markets – Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu – Telstra, Australia's leading telecommunications and technology company, will continue to invest in and operate the business under the Digicel brand name. Telstra International CEO Oliver Camplin-Warner said the agreement will allow Telstra to expand on Digicel Pacific's regional leadership and increase mobile connectivity in Papua New Guinea. “Denis O’Brien and the Digicel team have built a phenomenal business that’s centred on providing exceptional customer service, the best coverage and leading digital experiences. Telstra will add to these strengths and the team’s local knowledge with our more than one hundred years’ experience connecting the vast expanses of Australia to continue delivering great experiences for Digicel’s customers across the Pacific.” “We have 19.5 million retail mobile customers in Australia and our 4G network is the largest and most reliable in country. It covers some of the remotest parts of Australia – from the coast, to the outback and the Torres Strait Islands, just off the coast of Papua New Guinea. And we’re in the process of building Australia’s largest 5G network that now stretches to more than 240 towns and 75 per cent of the population,” Camplin-Warner said. There will be no employment losses in the region as a result of the transaction, and the present Digicel Pacific team will continue to manage the company on a day-to-day basis. Denis O'Brien, the current owner of Digicel, will continue on the Board of Directors. “We will invest our know-how and capital to further expand coverage and over time bring the benefits of 5G to Papua New Guinea. But we’ll retain the same Digicel brand the people of PNG know and love today with the same team and services they have come to rely on,” Mr Camplin-Warner said. The purchase, according to Camplin-Warner, is in line with Telstra International's expansion plan, which now comprises operations in 20 countries outside of Australia and thousands of clients, including businesses, governments, and some of the world's largest technology firms. “Beyond Australia Telstra also has the most extensive subsea telecommunications cable network in the Asia Pacific. And we’re one of the biggest providers of voice and data services connecting the South Pacific to the rest of the world through our Southern Cross cable.” “Network traffic is growing faster than at any other period of time and digital technology is changing our world. We are at the centre of this, and so is Digicel Pacific. We are committed to delivering the best technology on the best network for PNG,” Mr Camplin-Warner said. The people and businesses of PNG will benefit from Telstra's experience rolling out a world-class 5G network and connecting diverse geographies, according to Colin Stone, CEO of Digicel Papua New Guinea. “Telstra’s network innovation has played a critical part in Australia being ranked first in the global Mobile Connectivity Index which assesses networks based on performance, affordability and availability. We look forward to working with Oliver and the Telstra team,” Mr Stone said. The two firms' ideals, according to Camplin-Warner, were likewise matched. “Digicel Pacific and Telstra are both committed to building a connected future so everyone can thrive and this includes supporting some of the most vulnerable in our communities.” “Digicel Pacific has taken community development to the next level through the Digicel Foundation’s investment in health, education and community-based programs. We look forward to continuing this work, just as we do today with the Telstra Foundation and its commitment to using technology to support young people and help to reduce the digital divide.” “We will also bring a commitment to addressing climate change to help drive better environmental outcomes for the people of PNG,” Mr Camplin-Warner said. Despite the fact that the transaction is funded by the Australian government, Telstra will remain the only owner and operator of the company. Reference: Loop (October 25, 2021). “Australia’s biggest telecommunications company to acquire Digicel Pacific”.