The big bad Australian buai boom
So PNG, what is a fair deal?

Oil Search fires back at PNG

James Marape
James Marape -“To date my families, tribes, provinces and country are yet to fully see those promised windfalls"

JAMES THORNHILL
| Bloomberg | Extracts

NEW YORK - Exxon Mobil Corp’s partner on a Papua New Guinea gas project that’s threatened by failed talks with the government has hit back at PNG’s position, saying its terms were uneconomical.

Oil Search, in its first comment since the talks broke down on Friday, said that the government’s demands meant the project would not gain a sufficient return on investment.

The impasse casts doubt on a broader $13 billion plan to double the country’s exports after prime minister James Marape, who came to power on a promise to increase the nation’s share of resources wealth, said that Exxon’s proposed terms were ‘out-of-the-money’ for PNG.

The country’s take from the project would have been “significantly less” than deals done elsewhere in the region, including Malaysia, where Exxon has a big operation, Marape said.

According to Oil Search, the size of the resource, cost of development and the unique challenges of operating in PNG made comparisons with other arrangements in the region “misleading”.

“For Oil Search, the project returns under the State’s proposed terms were approximately the same as our cost of capital, on an unrisked basis,” managing director Peter Botten said in a statement to the Australian Stock Exchange.

Oil Search said it would “seek to advance the Papua LNG project in a timely way,” but added that several engineering and commercial changes would need to be made following the P’nyang delay.

Marape doubled down on his criticism of Exxon in a Facebook post, saying the company was “not sincere” in dealing with the government on P’nyang.

Referring back to the original Exxon-led PNG LNG project, which started in 2014, Marape said that “to date my families, my tribes and my provinces and country are yet to fully see those promised windfalls yet the state continues to foot the social cost of this project.”

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

David Kitchnoge

Oil cartels are no saints. They deserve their share of criticism.

But Papua New Guineans must not lose sight of the real issue.

The issue is not in how much we extract out of our resources. It is in how we spend what we get - however big or small that may be.

Don't be naive. Money in itself is not the end. It is a means to an end.

The end game for us is improved societal conditions. Quality of life and key social indicators in PNG rank somewhere at the bottom of the scale.

We must go after Oil Search for the UBS loan debacle. Beyond that, leave them and their lot like Exxon and Total alone.

They'll make commercial decisions that will lead their snouts to the trough, whether that be in PNG or elsewhere.

As for us, go after our politicians and the public service machinery. Fix that and then money will actually mean something to us. Otherwise, yumi pasim maus na go silip.

PS, I'm responding to some of the commentaries and not necessarily the main article itself.

Bernard Corden

In 1992-3, the cost of work related injury and disease in Australia exceeded $20 billion and it was
uniformly distributed between employers (40%), employees (30%) and the community (30%). The
allocation of cost to specific agents is quite complex and extremely dependent on the outcome severity.
It significantly increases for individuals, their dependents and the community if the consequences
involve traumatic fatalities or serious injuries.

More recent estimates put the cost at $62 billion per year with a staggering redistribution amongst
employers (5%), employees (77%) and the community (18%). This variation, despite a steady decrease
in fatalities and serious injuries, is partly attributed to significant increases in average weekly earnings.

However, descriptive statistics often conceal more than they reveal and correlation does not imply
causation. Additional exogenous factors, which include rampant neoliberalism with its laissez faire
doctrine, the gig economy and an unabashed deification of profit may be significant weapons in
Abaddon’s arsenal. It creates a culture of cruelty and complacency and social protection via welfare
degenerates into warfare.

Bernard Corden

It is typically six feet or 1.8 metres, the nominal depth of a grave or matmat. However, despite prescriptive requirements legislation normally invariably protects the writer to preserve corporate and state interests. Just ask the bereaved families following:

a) The Aberfan, Hillsborough or Piper Alpha disasters
b) Australia's home insulation program
c) The RAAF F-111 deseal/reseal program
d) The Rabaul Queen disaster

Then evaluate the physical suffering and financial hardship endured by asbestosis, mesothelioma, black lung or silicosis victims.

The socially autistic mercenaries merely privatise profit and socialise the loss.

Ian Ritchie

Philip, I used the term "topsoil" in my reply as a simple word to explain a measurement that I don't know.

I even explained that the term was in want of a more accurate description.

Perhaps recent legislation has clarified the depth that the landowners are deemed to legally own, but to the best of my understanding there is an ownership demarcation relating to the earth beneath our feet.

Perhaps someone more knowledgeable than I may like to contribute.

How that all interacts in this context, I have no idea (which is why I suggested that "it begs the question"), but this is not about violating rights of ownership. It is about understanding the boundaries of ownership.

The earth is a sphere, so logically, landowners from any country cannot own an indeterminate and infinite depth below them.

Philip Kai Morre

The mining and petroleum laws have to be amended and changed to benefit the landowners. Who owns the topsoil, the bottom sea of oil or the plate of gold should not be an issue.

To get to the bottom, the entry point is the topsoil. Also the geographical location and land boundaries support are important in this issue.

Laws are made to benefit people and not to violate their rights of ownership of land and sea. It's common sense.

Ian Ritchie

Many people want to have input into many projects, large and small. It's why selected negotiators are used. Without them, a project would draw to a standstill due to the myriad of personal wants and demands.

I have no doubt that some people would like to do stand alone development for the gas expansion projects currently mooted in PNG, but a simple question to them was likely not answered.

That question would be, "who is paying the development costs"?

A second question would be, "who is supplying the technical expertise"?

It also begs another question. Who owns the gas? Landowners will say it's them, but they only own the topsoil (for want a more accurate description). The PNG government says the Independent State of Papua New Guinea owns the gas.

I don't have the answers, but it would appear that what the landowners have to sell is access across their land to the wellheads.

The other point that Arthur raises about a gas "deal" being done being akin to corruption, I would disagree with. In many business deals, large and small, concessions are given.

Take the owner of a shop who wishes to lease the premises to gain a return. It is commonplace for them it offer potential tenants, a "rent holiday" to lure them into a lease agreement.

That rent holiday is not corruption. It is simply assistance for the tenant to make modifications and alterations to suit their business, to get the doors open and to get the clients walking through those doors.

Without the rental assistance, the business may fail in the first few months. With it, the business has a better chance of prospering and the landlord makes money in the long run.

No corruption, just good business in my opinion.

Arthur Williams

Oil search says; '..........the government’s demands meant the project would not gain a sufficient return on investment.'
Then pull out as you don't want to damage your investors.
Should not forget that for years P’Nyang Landowners Association, citizens of PNG said they wanted a 'Stand Alone LNG project' yet the oil company cartel and state negotiators just ignored the people.

2015/03/10 The warning has come after the state signed a Memorandum of Understanding recently with Exxon to supply gas to Port Moresby in exchange for the granting of PDL for the P’nyang gas field.'
One could be excused for believing such a proposal by Exxon is a form of bribing the state.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)