Clean up petroleum and energy

Editorial, Normal

The National – Friday, June 17, 2011

ALL is not well within the Department of Petroleum and Energy.
Very serious concerns pertaining to the “questionable management of petroleum licences in the country” have forced industry executives to write to Prime Minister Sir Michael Somare last year.
These concerns have deepened further this year leading to existing tenement holders feeling jittery about the future of their tenements while a flurry of new licences have been given to, in the words of one industry watcher, “all and sundry”.
This particular concern has been raised as a reason for the recent decommissioning of William Duma. A  new minister is yet to be named.
The Chamber of Mines and Petroleum has written repeatedly to Sir Michael to raise its “serious concerns regarding the state of the Department of Petroleum and Energy and the questionable management of petroleum licences in the country”.
In his letter of Sept 7 last year to Sir Michael, chamber executive officer Greg Anderson said: “Since our last letter (of February that year) the situation has continued to deteriorate and significant investment is now at risk.
“The Department of Petroleum and Energy (DPE) is responsible for the management and administration of the oil and gas sector which is emerging as the most significant industry in the country.
“Apart from the PNG LNG, there are a number of other gas projects planned or proposed for gas resources in the Gulf and Western provinces as well as significant levels of exploration over much of the country.
“In its current state, the DPE will not be able to provide even basic support and administration for these developments leading to hindrances and delays.”
The correspondence goes on to state that PNG has gained a reputation in the international oil and gas industry for “inconsistent, irregular and non-transparent management and administration of petroleum licences, categorised by inordinate delays and hindrances”.
These are not easy words to put to the prime minister of a country. That it had become necessary to do so, to not mince words, to put it to the chief executive of the land as it is, is itself indicative of the dire state the industry is in.
And this is the industry that PNG has pinned its entire hopes on.
Now, we learn that the inordinate delays have continued and become worse. We hear that applications for renewal of licences, for variations to tenements, for extensions and retentions are being delayed or entire files are being lost.
Companies such as Oil Search are said to have gone seven years without any movement on their applications to the extent that they are losing hope anything will happen.
This is Papua New Guinea’s own born and bred blue chip petroleum company. If there is anything PNG ought to be proud of, it is this Oil Search. Through Oil Search the PNG flag is being flown in many parts of the world as it gains exploration licences to explore on foreign soil.
Yet, in PNG, Oil Search is being treated like a K2 company, as dirt.
This is a national shame and that shame must be borne by none other than the department where all this nonsense is going on – petroleum and energy.
Companies like ExxonMobil, the developer of PNG’s first K15 billion liquefied natural gas project, is still awaiting some applications, we gather.
Many other companies cannot commence drilling programmes because of these intermittent delays. Drilling programmes cost up to K50 million per hole. Directors will be held liable by the company if substantial outlays of this nature do not produce any results.
Most importantly, hundreds of millions of kina, that ought
to be coming to PNG through licencing fees and other expenditure, are being held up because of the inefficiency of one department.
It is time the government took a serious look at Sir Michael’s proposal put to a Sydney conference last December to make the Department of Petroleum and Energy into a statutory authority pretty much similar to Mineral Resources Authority.
Six months on, the prime minister’s commitment is yet to bear fruit.
Acting Prime Minister Sam Abal must immediately appoint a capable ministerial head for the department so that the mess in this important area can be cleaned up.
The department, upon which the future of PNG’s economic growth and prosperity has been pinned, is itself in dire need of resuscitation and carefully managed progress.