Pasca A to Begin Soon
by PNG Business News - July 15, 2021
Photo Credit: Twinza Oil Limited
Following negotiations last week between the State and developer Twinza Oil Ltd, Pasca A in the Gulf is likely to get underway shortly.
Petrol Minister Kerenga Kua characterized the agreement between the State Negotiating Team (SNT) and Twinza as "by far the greatest" in terms of developing the country's petroleum resources.
“We delivered an agreement within the petroleum space, which is a new precedent from the existing projects,” he said.
The project is located 95 kilometres south of Gulf and is 100 meters below ground.
The reserves totalled 0.4 billion cubic feet, according to Kua.
“This project throughout its life will give us a total benefits package of 55 per cent, calculated on what financial modellers and economists called as nominal cash flow basis,” he said.
“The project’s lifespan will be about 12 years.”
The 55 per cent was calculated using a US$50 (K171.47) per barrel oil price, according to Kua.
According to the Oil and Gas Act, 55 per cent is made up of a 2% royalty (1998).
Because the resource is offshore, there is no identifiable landowner.
The Gulf provincial government will get the benefits.
“One thing about the 2 per cent royalty is that, unlike existing projects, it’s the net after other deductions, that landowners are given the remaining or nothing at all in a year,” Kua said.
“This won’t happen in this project.
“This 2 per cent will be from the gross production, not net of deductions.”
Other benefits include:
- 5% production levy from gross revenue;
- 2% development levy on gross revenue;
- 15% additional profit tax at 15 per cent accumulated rate;
- 5%LPG for domestic market obligation; and,
- 30% corporate tax.
The project's front end engineering design (Feed) should commence in the third quarter of this year, according to Twinza national manager Roppe Uyassi.
“Final investment decision (FID) should be made in the fourth quarter of 2022 with the first production planned for the third quarter of 2025,” he said.
Mauludu, Shirley. The National (14 July 2021). “Pasca A starting soon after talks”.
PNG Business News - May 07, 2021
Pasca A Project now Expected to Start in 2025
The Pasca A offshore oil and gas project in Gulf faces further delay to its start-up which is now expected in 2025, says developer Twinza Oil Ltd. The project will continue to be postponed until a deal is signed, according to Roppe Uyassi, who added that the project's delay would likely be compounded by the project team's departure. “This is really unfortunate for PNG, following the lengthy delays we have already seen from resource projects in PNG such as Papua LNG and Wafi-Golpu,” Uyassi said. Only prior to signing the deal last month, the government made it clear that it wanted a 6% export tax before it could sign it. According to the developer, it was 4% more than what had been settled upon previously. While the window for negotiations was still open, Petroleum Minister Kerenga Kua said it was critical to secure the best offer for the region. Oil and gas discovery and production, according to Uyassi, is a "highly dangerous but potentially lucrative market." “There needs to be a balance that recognises the risk taken by private investors and the development goals and aspirations of PNG, and the best deal would be one that maximises revenues to PNG,” he said. “This could be in the form of payments to local businesses and employees, or taxes and royalties to the Government to fund the country’s development priorities in health, education, security, infrastructure etc. “Importantly, it must also provide an incentive for private investors from all over the world to provide their money to develop the Pasca A Project on the promise of profits that will reward them for taking the risk to invest in Papua New Guinea. “We firmly believe that the deal agreed to between the State and Twinza strikes the right balance and provides a win-win outcome for both parties, delivering the highest State take of any resource development in PNG, be it on a discounted or nominal project value going to the State. “We understand that the outcomes of over 65 per cent discounted and 52 per cent nominal State take were even verified and benchmarked independently by Deloitte after being consulted by the State. “The agreed terms also included domestic market obligation (DMO) for the supply of gas being provided from the first year of production for the first time in PNG’s history, plus an increased percentage of domestic market gas supply to 10 per cent of production.” According to Uyassi, the Pasca Project would need at least K5 billion in additional funding in the coming years. “Even the State nominee carrying the State’s 22.5 per cent equity on the project going forward would require project financing to move this project forward into production, meaning that whatever terms we agree with the State must also be viable for the State nominee to raise financing. “The worst-case scenario would see Twinza sign an unviable gas agreement deal, only for the project to fail as it can’t attract investment from financiers who are more conservative than oil and gas project proponents such as Twinza.” Twinza had already started standing down the Pasca Project team due to the continuing delays in signing the deal, according to Uyassi, as the timetable of the gas agreement's implementation remained unclear. “This will continue, however, I will point out that as a foreign investor, Twinza has invested more than K350 million in the Pasca field over the past 11 years and will remain committed to PNG long-term,” he said. “The Pasca Project is ready to move into the Feed phase of project development soon after a successful gas agreement signing.” According to Uyassi, the project has been on hold since 2020, pending the start of the Feed process. “We remain hopeful that the development of PNG’s first offshore oil and gas field will commence soon,” he said. “We are committed to Papua New Guinea and remain hopeful this is something PNG will have to address for the long-term good of the industry and the many local businesses that depend on the industry.”
PNG Business News - June 01, 2021
Pasca A First Shipment Expected in 2025
According to Petroleum Minister Kerenga Kua, the first cargo of the liquefied petroleum gas (LPG) from the US$1.6 billion (K5.5 billion) Pasca A project in the Gulf is expected to start in 2025. It will be the country's first offshore extractive resource project with infrastructure, located 95 kilometres offshore in seas 93 meters deep in the Gulf of Papua. Pasca A, according to Kua, is a modest gas condensate project in terms of reserves. The offshore production facilities, on the other hand, have the ability to combine tiny pockets of stranded gas deposits in the Gulf of Papua. “The project will evolve in a two-phased development plan. “In Phase One, rich liquids will be stripped and produced, namely liquid petroleum gas (LPG) and condensate while gas is re-injected. “In Phase Two, gas will be produced.” Phase One is estimated to take two years to complete and generate between 32 and 38 million barrels of LPG and condensates. In the third year of the project's manufacturing life, Phase Two will commence. During the project's ten-year lifespan, an estimated 330 to 400 billion cubic feet of gas (BCF) would be generated. Twinza Oil (PNG) Ltd, the operator, is concentrating on commercializing its "found but underdeveloped assets." Twinza Oil Ltd has a business relationship with Baker Hughes General Electric (BIIGE), which offers vendor finance for the company's drilling projects. Kua said in a statement that negotiations on the project began during the application stage for a petroleum development license in 2018. In 2020, the Cabinet established the State Negotiating Team (SNT) for the Pasca A project to negotiate a fair agreement for the state. “Last September, the Pasca A SNT and Twinza Oil Ltd initiated the term sheet for a Gas Agreement,” Kua said. “However, there were some misunderstandings on the financial analysis method used and the domicile status of the company. “These have been resolved through the SNT negotiations and offline discussions with Twinza. “In negotiating resource projects deals for the country, the State has taken an approach to tax from production rather than profits. “The Pasca A SNT has so far negotiated the production levy from the base case of 2 per cent (equal to Papua LNG Gas Agreement) from the Loloata initialled term sheet of last September, up to 4 per cent in April. “At a 5 per cent production levy that State would have reached 55 per cent state take on nominal cash flow analysis, which is what we want to achieve.”
PNG Business News - April 22, 2021
Government Increases Its Demand for Pasca A Deal
According to project operator Twinza Oil Ltd, the government has raised its demand for the Pasca A Gas agreement once again, ahead of the scheduled signing. According to a statement from Twinza, the government told the firm last Friday that signing the agreement now demanded a 6% production levy. It read: “This is 4 per cent higher than the production levy that was agreed as part of the comprehensive terms (agreed terms) for Pasca A, negotiated by the state negotiating team and announced by the Prime Minister James Marape last Sept 24. “The additional levy requested would make the Pasca A project un-financeable for any investor. “The agreed terms would have delivered the highest State take from any resource development in PNG and were widely regarded as meeting all of the demands of the State, including early revenues, full royalty and development levy entitlement and a domestic market obligation of 5 to 10 per cent while satisfying the requirements of project financiers.” it said that the State had also attempted to amend the negotiated terms through a letter from Petroleum Minister Kerenga Kua on February 4. “The Government’s demand to raise the fiscal take to (between) 55 and 60 per cent nominal share, which is 75 to 85 per cent of the actual project value, would make Pasca A unviable for investors and financiers alike,” it said. “Notwithstanding the changing State positions, Twinza remains committed to PNG and progressing the Pasca A Project on the agreed terms.” Twinza gave an extra concession to the negotiated terms, raising the production levy to 4%, with a further rise to 6% at higher oil prices, in an attempt to close the deal. “This will provide 65 to 70 per cent of project value to the State or 52 to 54 per cent of nominal take,” it said. “The State take has been independently verified by Deloitte in a comprehensive report commissioned by the Department of Petroleum and delivered to the minister this month.” Twinza has kept its project team for Feed (front-end engineering and design) – readiness in the hope that the gas deal will be concluded by the end of 2020 after the negotiated terms were confirmed by Marape in September. The Pasca A gas agreement reached this month would have required the project to enter the Feed process right away, with a final investment decision expected in 2022 and first production in 2025. “Given the continued delays, Twinza will now stand down the Pasca Project team until there is clarity on terms and execution of the gas agreement.” Chairman and chief executive Ian Munro said: “Twinza was awarded the Pasca license nearly 10 years ago as a foreign direct investor. Since then, the firm has invested over K350 million in cultivating a field that was discovered more than 50 years ago but overlooked by other industry players. “It is disappointing that at the closing stages of a drawn-out 10-month gas agreement process, the State is now seeking to again revise terms to ones that are demonstrably unacceptable to any investor. “Consequently, while Twinza remains committed to progressing the Pasca A project on a fair and equitable basis, the company will streamline its costs while awaiting a gas agreement signing on acceptable terms. “We remain focused on developing PNG’s first offshore oil and gas field and opening up the Gulf of Papua to much-needed investment as soon as circumstances allow.”
Place your Ad Here!
PNG Business News - August 12, 2022
Going Green: FAO-led EU-STREIT PNG Programme provides green-powered facility to local agricultural authorities to effectively service rural farmers
EU Funded UN Joint STREIT Programme in Papua New Guinea establishes a renewable energy-powered facility to support local government authorities in East Sepik Province, in delivering effective services to rural farmers and entrepreneurs. With generous support of the European Union, the FAO-led EU STREIT Programme officially opened a new 3 cluster office building on 10 August 2022, to host the Programme along with the East Sepik provincial divisions of Agriculture and Livestock, Cocoa Board and the National Agriculture Quarantine & Inspection Authority. The new-look office building is powered by 189 solar panels, which significantly reduce greenhouse gas emissions and reduces the collective dependence on fossil fuel. The solar panels supply the building with 90 KW of energy, relieving the resident agencies and authorities from relying on fossil-generated electricity for their needs, including lighting, ICT, water pumping, and temperature control. This zero-carbon-emission facility has the capacity to accommodate around 90 experts, technicians and extension service officers. Equipped with 120 batteries, the building can support staff’s operation for 36 hours in case of experiencing high cloud cover. The building, currently co-resided by the Programme and provincial agricultural bodies, will be transferred over to the East Sepik Provincial Administration at the end of the Programme and will continue to provide a sustainable base for sustainable support to agriculture-related services in the Province. Officiating the opening ceremony, His Excellency Ambassador Jernej Videtič, Head of the European Union Delegation to PNG, in his address, said: “I am happy to be here and to see that things are moving in the right direction to bring sustainable benefits to the people of East Sepik” Ambassador Videtič further highlighted that “with resources from the citizens of Europe to fund the EU-STREIT Programme in providing training, tools and support, the quantity and quality of cocoa, vanilla and fisheries products will increase. The objective is also to protect these quality products in international markets under the EU-STREIT introduced initiative of Geographical Indication.” The East Sepik Acting Deputy Provincial Administrator, Mr James Baloiloi, in his speech expressed his appreciation to the EU for funding the EU-STREIT Programme and the interventions that the Programme is doing in East Sepik and Sandaun provinces. “The STREIT Programme has gone ahead to introduce a culture of agribusiness that now enables the people of this Province and the people of Sandaun Province to have cash income that can sustain their livelihoods.” Mr Baloiloi added, “this infrastructure and building supports us and facilitates the service delivery to our people in this Province as well as Sandaun Province.” Thanking the EU for its generous funding support, Dr Xuebing Sun, the EU-STREIT Programme Coordinator, said: “the Programme has generated substantial impacts at beneficiary, local institutions and enabling business environment levels. This would not be possible with good partnership, increased ownerships and leaderships of the governments and implementing partners.” “This co-residing and close co-operation among UN agencies and their national partners in this integrated space reflect the partnership approach taken by the Programme to sustainably develop agri-enterprise activities in the region,” added Dr Xuebing Sun, adding “the new climate-friendly facility, which is fully powered by solar energy, also provides a space to welcome, advise and serve the farmers, including interested women and youth, who play very important roles along agri-food value chains”. “This kind of ‘green investment’ enables a shift to a more green economy for local institutions and infrastructure to meet cocoa, vanilla and fishery value chains stakeholders” advised Anthony Bennett, the FAO Lead Technical Officer of the EU-STREIT PNG Programme. United Nations’ implementing partners supporting the FAO-led EU-STREIT PNG present in the office include the International Labour Organization (ILO), International Telecommunication Union (ITU), United Nations Capital Development Fund (UNCDF) and United Nations Development Programme (UNDP). The EU-STREIT PNG is being implemented as a UN Joint Programme (FAO as leading agency, and ILO, ITU, UNCDF and UNDP as implementing partners), is the largest grant-funded Programme of the European Union in the Country and the Pacific region. It focuses on increasing sustainable and inclusive economic development of rural areas through increasing the economic returns and opportunities from cocoa, vanilla and fishery value chains and strengthening and improving the efficiency of value chain enablers, including the business environment and supporting sustainable, climate-proof transport and energy infrastructure development.
Paul Oeka - August 12, 2022
CPAPNG annual meet to discuss global changes
Certified Practicing Accountants of Papua New Guinea will be hosting their 23rd annual conference with about 400 participants nationwide expected to attend the two day conference organized by CPA PNG in Lae Morobe Province from August 18 to19, 2022 CPAPNG was established in 1974 and has come a long way with a lot of achievements along the way. Over the years its membership grew from mere numbers to just below 2000 which includes 40% locals and 60% non-citizens. . The CPA PNG conference is one of CPAs three significant annual events on their calendar with this year's conference theme; Is PNG prepared for the recession?" The conference will see certain key leaders in executive management roles from both the public and private sector delivering presentations in line with the conference theme. CPA PNG's Executive Director Mr. Yuwak Tau said the theme of the conference was selected because there was a decline in the global economy and the general so when that eventuates small economies tend to be affected. He added that they have basically selected the theme that was current and appropriate so that members would find relevance during the course of the conference. “The meeting is to create intellectual and interactive discussions with seasoned business leaders to present and share their ideas and experiences to find probable outcomes within their business environment and industries in times of economic uncertainty”. Some of the topics to be presented by consultants are current significant issues such as crypto currency, transport pricing, bit coin block chain technology and stress management. This were some topics that people have heard about but have not really ventured into. Mr. Tau added that it would be quite hard to measure the benefits immediately but the participants will be able to look at insights shared during the conference that would be appropriate in the areas of employment, accounting, finance, auditing and others. The conference will create an environment where participants can also share information so That they can take points to apply in their work place and industries. In relation the Kumul petroleum Holdings had also presented a cheque of K50, 000 to support the coming event at their head office. The cheque was presented by KPHL's executive General Manager Corporate Affairs, Luke Liria and was received by CPA PNG Chairman Richard Kuna. Mr. Liria said KPHL has appreciated the effort put in by CPA PNG to ensure that its members in State owned enterprises and the private sector were given appropriate level of training and as part of KPHL's corporate social responsibility and commitment they hope that their support will continue to help the organization facilitate and make sure the accounting practices is of international standards. CPA PNG's Chairman, Richard Kuna acknowledged KPHL for their support and stated that he was looking forward to seeing KPHL being a big part of the upcoming conference.
Paul Oeka - August 12, 2022
BSP: Small to Medium Enterprises Loans reaches 60% rate.
Bank South Pacific's Financial Group Ltd Chief executive officer Mr. Robin Fleming has recently announced that the bank has granted more than K200 million as loans to small to medium enterprises under its credit scheme facility that the then Marape government had released to the bank to support Small to Medium Enterprise (SME) and local businesses during the peak of the COVID-19 pandemic. Mr. Fleming said about 1523 customer loans have been approved, that is about 60% of loan approval rates since 2019. Prior to this announcement BSP and the Department of Commerce and Industry (DCI) had agreed to increase the maximum loan under the small-to-medium enterprise (SME) credit enhancement facility to K5 million. The previous limit was K3 million when the Government first released K100 million as security to the bank under its K200 million SME allocation for BSP to rollout the loan facility last year. Fleming stated that even though they have exhausted and rolled out the bulk of the governments relief funds for SME's they will still be running the SME loan program under its credit facility scheme “At this stage, BSP has not received the funding planned for this year but that is not preventing BSP from giving loans under the facility”. “There remains significant capacity for BSP to continue to assess, approve and funds loans under the facility”. “The agreement with the Government did provide for momentum in the SME facility to be maintained while allowing for the Government budget and funding process to be adhered to”. As part of the government SME relief funding, Commercial Banks were allocated K200 million with BSP Financial Group receiving K100 million, NDB K80 million and another K20 million was allocated to the department of Commerce and Industry BSP could not comment on how the National Development Bank (NDB) is dealing with the K80 million it received, but the intent, when discussions were initiated, was that BSP would be lending to more mature SMEs and NDB to startup ventures. In addition to enabling SMEs to access lower cost of funds through the facility with BSP, the bank has also made it a responsibility to ensure that Government funding is preserved by not approving loans that have a higher risk of default.