Time to look beyond royalties


AS the country’s status in the regional energy market becomes increasingly prominent, resource landowners must now move away from being passive recipients of royalties.
It would be illogical for the custodians of a commodity earning premium returns to remain in their state of dependency on the State and project developers.
They must instead become active participants in the various stages of project development and value chain in the production and sale of the resource.
For this to happen they need assistance from the Government and other key stakeholders.
What we have seen so far is that landowner participation has been related to fringe or allied business activities.
The inaugural Petroleum and Energy Summit in Port Moresby in 2017 was told that demand for liquefied natural gas (LNG) could double by 2030.
This is great news for the country as by then there would be a second LNG supplier and national gas incomes would increase manifold.
Mineral Resources Development Company managing director Augustine Mano also said at another event that landowners must participate in large energy developments such as LNG.
He argued that participation of landowners has to be more radical than a passive two per cent participating interest that they have got used to.
MRDC has now shifted its focus from managing landowner benefits to active participation by owning and or managing one or more elements of the value chain in especially energy sector projects.
Apart from the power sector MRDC was then aiming for full and direct ownership of gas supply and taking the ownership of LNG shipping.
This change is needed so landowners become partners in project development and ownership rather than problems or impediments project developers must cautiously deal with for project sustainability.
Landowners need to be considered as able partners and treated with dignity and respect, it was argued then.
Opportunities and empowerment are the key to this partnership rather than narrow commercial interests and the doubt of the past.
The country is increasingly becoming a key player in the energy sector and it is crucial that it has a master plan which clearly outlines parameters for downstream processing, access to resources, ownership of oil and gas supply and power generation and supply.
An effective domestic market obligation (DMO) and state-ownership of value chain from gas supply to generation are essential elements of the gas master plan.
Through its project-specific subsidiaries, MRDC then held 2 per cent participating interest in the Gobe and Moran oil projects respectively, 6.75 per cent in Kutubu and 2.80 per cent in the PNG LNG project.
Its mining interests included 33 per cent equity in Ok Tedi mine, 2.5 per cent in Ramu nickel and cobalt mine and 5 per cent in Porgera gold mine.
The combined value of these interests constitute quite a sum by any PNG landowner group’s reckoning.
Converted to cash or otherwise, these interests can easily be used as bargaining chips for landowners to actively participate in any future venture in the extractive industry sector.
And the benefits of landowner participation in projects of such a scale are immense not only for the affected communities but the country will also benefit through increased levels of employment and revenues.
Landowners, on their part should also rise to the occasion and take up the challenge and not remain passive recipients of project royalties any longer.
They own the resources and given adequate financial and technical backing they should also be investors themselves.
Landowner companies can become a little more aggressive to actively participate as investors, managers or owners of companies involved in the extractive industry sector rather than only collecting royalties.