Duban on energy, oil sector

PAPUA New Guinea’s petroleum and energy sectors are developing with more new projects being looked at and developed. Assistant News Editor GYNNIE KERO spoke with Petroleum and Energy Minister Nixon Duban on the industry’s progress in the past four years and what needs to be done to strengthen the Department of Petroleum and Energy in developing the country’s petroleum and energy sector.

KERO: Has there been any recent NEC decisions on the Department of Petroleum and Energy?
DUBAN: We made a decision long time ago in relation to the DPE becoming an authority. Last year, when we passed the 2017 budget, we allocated almost K2 million for the transformation of the department to an authority. That’s the outstanding issue for the department and we have a lot of support from the industry who agreed to assist the department. That process has not really taken any prominence because of the recent changes to the department – we have got a new acting secretary. This year would be a good year for that transformation to be completed. The decision to transform the department into authority is an outstanding matter.
KERO: How best can the DPE be strengthened to address industry needs given its capacity issues?
DUBAN:  There are a lot of issues. We do not have enough personnel for the purpose of licence oversight. We are not monitoring enough on the drilling programmes that have already been agreed to in those licences and conditions. We need to also look at how we can promote the petroleum advisory board in managing applications by current license operators in the event of seeking variations or to file applications or also attending to new applications. That has to be really looked at in terms of strengthening the process. The department hasn’t really operated efficiently also because of allocation issue. It is not one of the best in terms of office allocation. We need to also build a new department building. We are hoping we can have that kind of opportunity this year or immediately before the end of 2018. There is a lot of interests coming in to use the tax credit scheme which was proposed from time to time. But we need a clear controlling mechanism within the department to outline specific objects of the department in 2017 and beyond. What I also anticipate is that because the department is suffering a lot of capacity issues, it would be important that after the general election, the new Government would have to set a policy objective for the department. Because this Government is winding down, whatever new proposals that are going to be put forward cannot materialise until we know who is in control of the Government. That is why I will restrict my focus on what we may have been outstanding in the last four years. The Energy Division of the department, I don’t see them developing a major focus for the country in terms of energy mapping. They need to do a due diligence on the country’s prospects and expose the potential so we can find developers to convert those potential energy source into power or other means of supporting our energy turbines. That process I think from time to time, the energy wing has tried to seek partnership with World Bank. The bank was supportive to do mapping for the country’s general energy sources. So far, there is an energy policy that came out. My resentments were equally shared by the Chamber of Mines and Petroleum. We have asked for that policy to be looked at, and I’m yet to receive a final copy of the final energy policy. Without that, we cannot propose anything outside of the energy policy. All in all, the energy wing are not able to articulate clearly where and how we will address energy issues in the country until we have the policy in place. Also for the petroleum side, we’ve got a temperate agreement that we want NEC to approve. The State’s negotiating team is working on that agreement. We are also looking at developing national content plan which will be used for future projects, domestic market obligations which are critical for downstream processing, those are matters that need further enhancements in detailing how they would work when you have an industry that is suffering from oil prices. At the same time, we are also faced with issues of landowner benefits identification process, we have been hampered by court battles which restrained the department from carrying out clan vetting programme. Courts made a decision to look at ADR (alternative dispute resolution) as the formidable way forward. DPE has now got huge problem because we have made in certain parts of the country especially the plant site and the pipeline. We have made determination already through the minister. I have actually done the determination in terms of certifying and verifying landowners for various parts of the plant site and pipeline segments. With upstream, there are issues still outstanding. Meaning that the same process we applied for the license areas we cannot apply up there because of court ruling. So those orders still stand. I have done P’nyang already and few others.
KERO: Can you give an update on benefit payments for landowners of the PNG LNG project?
DUBAN: Because we only have one LNG project  we are dealing with, we do not want to create animosity on the part of landowners. If we are to release payments we have to be careful on the reactions that people will have when especially they are suffering also at the upstream. So the plant site, we have gone ahead and opened accounts already. We are looking for them to put together office bearers for various landowner groups and we are hoping that will trigger some more commitment from the upstream. The department is not able to challenge the decision by the Court because the department has consented to the now sanctioned ADR process and so the department is stuck. We will not be able to make any payments to the upstream until as and when the court issues are resolved. But for the pipeline and plant segments, we need to take a position. We need to asses carefully the issues sitting in front of the department and the kind of reaction we will sort of attract, both positive and negative. We don’t want to create chaos when we release monies but attract comfort in terms of landowners appreciating it. At the moment I cannot give the confidence to the department. It is too sensitive. Landowners are waiting, they are fighting, they are demanding, couple of petitions are being put out. We cannot jump to the question of when do we get paid, we have a lot of matters to resolve.
KERO: In 2014, Cabinet approved the US$300 million (K829m) development of the Stanley gas-condensate field in Western. How is it going?
DUBAN: The Stanley Gas has a lot of issues surrounding it. Firstly the initial proposal cannot eventuate.  From initial discussions that we had with operator, they are looking at supplying power to the nearby Ok Tedi (Western) and Frieda (West Sepik) mines. Unfortunately those decisions are subjected to the purchases. These miners are also independent power producers. What Repsol and Horizon have suggested to the Government was try and attract interest from OK Tedi on the pricing. The only major obstacle I see is the transmission cost of power.
KERO: What happens if a project like Stanley Gas fails to get off the ground?
DUBAN: If Stanley gas project cannot develop which also incurs certain breaches as per the license and conditions, I have expressed to operator of the Stanley Gas that there may be some issues that the Government will raise on the part of the PDL (petroleum development license). What the co-venture partners suggested is to aggregate all the scattered fields in Western and look at a strategy for pipeline for the future. And they might require the Government to also talk to ExxonMobil. The pipeline route that ExxonMobil is proposing for P’nyang it will be better for that route to run through Western and down to Daru. And the proposal by ExxonMobil is bit different because they want to tie it with Kutubu. So there’s a bit of difference. For the Western LNG project, field owners would need a pipeline to carry the gas. It’s a huge ambition on part of Government and those proposing, we have not really come out or advise the public or the operator on how we are going to do it, it is basically at the discussion and planning stage. Once that is done, a clear timeline is selected and funding for the pipeline is done then it will affect a lot of planning for other license operators within Western.  So that has now become the focus of Stanley. Stanley needs to be tied into the aggregation of other scattered fields. It alone cannot tied into Elk and Antelope, Papua LNG is far into Gulf.
Western has number of strated fields (Kimo, Ombuntu, Stanley, Barikewa) those are fields that are already assessed to have prospects but they are all scattered fields and you need to factor the pipeline route that has to be strategic to be allow the flow of gas and if you look at it again, it’s a long call away from calling a project. So as to how they tie in we will allow flexibility, we don’t want to punish oil and gas companies they are going through a lot of difficulties because of the oil prices. I want to assure those operating out of Western, they must take it from the Government that we are also sympathising towards their current challenges. And we would like them to nominate clear programmes as a result of that and licensing conditions are important for them to comply with.  I will not hesitate to issue show cause notices if I find that companies are not adhering to licensing programmes that they already agreed upon.
KERO: I understand that Australian Oil and Gas Company Twinza Oil has proposed a floating LNG, 95 kilometres away from Gulf. How is that going?
DUBAN: We are closely monitoring their (Twinza Oil) work programme. Hopefully they will report back to Department of Petroleum and Energy as to where they are. We have seen couple of their presentations at different forums. We think they have a good model. But they have to tell us when and how schedules are pushed for the project to be called.
KERO: The country’s Oil and Gas Act is somewhat too general. Is it likely that the law will be reviewed?
DUBAN: Certain legislations that we have like the Oil and Gas Act and the Konebada Petroleum Park Authority Act need some amendments be done this year. We can have some review on the oil and gas, there is nothing stopping us. But the critical issue that may come into question are the issues of equity. We need to detail the domestic market obligation, how do we obtain the percentage of the gas inside any project and also local content. Those are outstanding matters that need to be parked properly within the law. Despite law being general, it has delivered the multi-billion kina PNG LNG project. The legacy issue of the PNG LNG will be used in new proposed amendments would be after the election.