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What will be the Government's decision on P'nyang Gas?

By: Thomas Eme

The Marape-Steven Government's decision on P'nyang Gas will reflect either its seriousness to Take Back PNG or its ultimate submission to the "resource curse" just like the previous governments.

On previous posts on Facebook I have been talking about the importance of developing P'nyang Gas as a standalone LNG Project in Western Province of PNG, mostly from a geological perspective. There are many good economic and other reasons why P'nyang should be a standalone project. The two important reasons that can make all the perceived benefits possible are as follows.

(1) Last Remaining Gas Field for LNG Development

P'nyang is the last remaining gas field in the mature Papuan Basin to underpin a standalone LNG Project. The 4.3 TCF from P'nyang is sufficient to underpin a third LNG project (to be called the Western LNG Project) to be located in Western Province. The stranded gas fields in Western and Gulf Provinces can then be tied into the Western LNG Project. This standalone LNG Project can be developed for the very first time in the history of this country on our Government's terms and conditions. No more Mexican Standoffs. No more accusations of success fees when our State Negotiating Team (SNT) does not accept the terms sheet of the MNCs. Basically it should be a model petroleum project where our Government negotiates for and receives the full benefits for the Landowners, Provincial Government and the State.

(2) Resource Nationalization

At some point in time PNG has to nationalise its petroleum (oil and gas) resources. When a nation's petroleum resources are nationalized, the state or national oil and gas company automatically becomes the custodian of these resources and owns an equity in subsequent development of these petroleum resources as a Joint Venture Partner (JVP). Almost all petroleum producing countries in the world have a national petroleum company. In PNG we have Kumul Petroleum Holdings Limited (KPHL) and National Gas Corporation (NGC). P'nyang is the project where these two companies can take ownership and develop it with suitable foreign joint venture partners. There should not be any excuses about lack of financial capital or technical expertise. PNG is not on the learning curve anymore. Petronas and other national petroleum companies have done it. Kumul Petroleum or NGC can do the same for PNG.

If P'nyang is sold off to the Multi National Corporation’s (MNC’s) there will not be any other gas field or project for our Government and national petroleum companies to exercise our resource nationalisation. P'nyang Gas is available to us (PNG) at the right time. Such an opportunity will not be available to us in the next 20 to 50 years. It has taken the Papuan Basin and the petroleum industry in PNG 100 years (1908 to now) to mature the Papuan Basin.

The highlights of the work during this time in the Papuan Basin are the development of the Hides gas to Porgera Gold Mine, Kutubu Petroleum project, PNG LNG Project, Papua LNG Project and Pasca Gas Project (the latter two are about to commence). P'nyang is the last strategic gas field remaining in the Papuan Basin. Who gets it will control all the discoveries and developments in Western Province and the Gulf Province west of Kikori due to their investment in infrastructure. Discoveries east of Kikori will be tied to the infrastructure of the Papua LNG Project. The offshore LNG Projects (for example Pasca, Pandora, Uramu etc.) can be standalone or tied into the PNG/Papua LNG Project after the current known reserves are further increased through amalgamation or further discoveries.

If our Government is serious to Take Back PNG, we can do it with P'nyang Gas. It is no easy task but the opportunity is here for us. If not we can take the easy way out and give P'nyang Gas away to be developed by a multinational corporation (MNC) and in the process give away all our stranded gas fields in Western and Gulf Provinces as well as any future discoveries (either big or small) west of Kikori. As we have witnessed from the PNG LNG Project and now about to happen with the Papua LNG Project (from the "rushed" way the Papua LNG Project Agreement was signed), our previous Governments have succumbed to what is called the "resource curse."

The “resource curse,” is a syndrome described by economists and political scientists. The curse referred to evidence that when poor countries became suddenly rich in oil or minerals, they could often expect to go backward rather than forward. This is happening in Hela and Southern Highlands Provinces right now. In 1993, the British economist Richard M. Auty published "Sustaining Development in Mineral Economies: The Resource Curse Thesis." His work drew on earlier economic analysis about the “Dutch disease,” which referred to the distortions that took place within the Netherlands’s economy after a major natural gas discovery.

Essentially, the resource curse described a condition within governments similar to what happens to many individuals after they win the lottery. When nations became enthralled by the short-term riches offered by a finite national resource, capital and talent often migrated away from more productive and self-sustaining economic sectors such as agriculture. In 1997, the American political economist Terry Lynn Karl applied these insights to oil development in poorer countries like PNG. Her book, "The Paradox of Plenty: Oil Booms and Petro-States", used the example of Venezuela to show that weak governments made rich by oil were prone to corruption and underinvestment in agriculture.

This has happened in PNG since the first oil flowed from Kutubu in July 1992 (a year after I joined Chevron) and continues to happen now even after the first LNG export from PNG LNG Project in 2014. These countries also sometimes attracted violence among internal factions competing for control of the engorged national bank vault. We can see that happening right now with our successive governments.

We can take control of our petroleum resources now through resource nationalisation and develop it through our own NPCs like KPHL and/or NGC. Then invest the proceeds into the renewable sector, especially Agriculture. This process requires serious dedication, commitment and hard work which will be driven by our Government. We finally have a Prime Minister who is serious about nationalizing our resources to take back PNG.

He has the support of an equally serious and determined Petroleum Minister. To top it off the NEC has just appointed a permanent Department of Petroleum and Energy (DPE) Secretary who has witnessed the negative effects of the "resource curse" while serving many years in the department. PNG can start the process of change through resource nationalization in the petroleum industry with P'nyang Gas, the last strategic remaining gas field in the mature Papua Basin.

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