BY CLEMENT KAUPA
On Thursday June 6, soon after Oil Search (OSL) chief executive Peter Botten addressed the 244th Sydney Mining Club forum over luncheon in Australia, a mother and her two sons- a child and an infant, drowned in tragic circumstances after a boat they were travelling in with their relatives capsized in rough waters at the mouth of a river in the remote South Fly district of Western province in PNG.
The late mother and her two sons are survived by the father, a Port Moresby-based police officer and three older siblings, according to a report from the provincial police commander.
The whole family was travelling in the ill-fated boat that capsized at the mouth of Karu River on their way to the village of Sepe on the West Kiwai coast, tragically again, escorting the body of a deceased police officer from Port Moresby for burial there.
The report of the tragedy was carried in this newspaper last week Thursday, and prompted this article to expose the sad reality on the ground in this remote part of the country.
The geographically vast (99,300km²) Western province borders with Indonesia on the west and is the closet to Australia in the south on the PNG-Australia maritime border but that is where proximity ends with the neighbours, and disparity begins for the province.
Not that it has anything, implied or otherwise, to do with neither the eminent Mr Botten, nor the in-country operations of the company he leads- Oil Search Limited (OSL), or even the Australian government and people.
On the contrary, these two seemingly unrelated incidents that played out hours apart on Thursday June 6, in Australia, and in PNG, denote an urgency to rethink business relationships on both sides of the Torres Strait, and further abroad.
But more importantly- it exposes fundamental flaws in the draw down and utilization of benefits and tax credit schemes for resource owners and the host provinces employed under the various mining and petroleum resources extraction project agreements in force.
It also calls into question the expenditure of the billions of kina to date in mining, and later, petroleum dividends paid directly to consecutive national governments since the days of the giant Bougainville Copper Mine (1971-89), and who and what criteria is employed to decide where and who to award tax credit scheme funded projects to.
The big question is- where did it all go when resource host provinces continue to lack the most basic physical and transport infrastructures, social services are at deplorable levels, and there are no perceptible economies of any scale, anywhere.
The Western province is a case in point.
Though abundantly rich in marine resources, wildlife and local food with vast potential for commercial agriculture and livestock farming, it is landlocked from the rest of PNG with no road access to the outside to date.
Western is only accessible by air or the more risky open sea crossing that takes days over treacherous conditions to reach the closest landing across the Gulf of Papua being Kerema.
From there, it is a very long and bumpy ride on the Hiritano highway by truck to the country’s national capital city of Port Moresby.
The provincial capital is Daru but the largest town in the province is Tabubil. Other major settlements are Kiunga, Ningerum, Olsobip and Balimo.
In the 2011 census (approved), 201,351 inhabitants of Western province were registered, residing in 31,322 households. Of these, 79,349 people were recorded in Middle Fly district, 62,850 in North Fly district and 59,152 in South Fly district. The average household size across the province was 6.4.
North Fly has five LLGs and the district capital is Kiunga. Middle has five LLGs as well and the district capital is Balimo. South Fly has four LLGs and the capital is Kiunga.
The major economic activity in the province is constituted by the Ok Tedi Mine, predisposed to shutdown in 2030.
The mine was initially established by BHP in the 1980s and was the subject of considerable litigation by landowners both in respect of environmental degradation and disputes over royalties.
BHP eventually threw in the towel in 2002 with a noble gesture when it transferred its 52 percent equity stake to PNG Sustainable Development Program (PNGSDP), a development fund that operates for the benefit of the Western people and Papua New Guinea. As at 2017, it had grown its long term fund to $1.4billion and continues its community obligations.
The mine is currently operated by Ok Tedi Mining Limited (OTML). It is a 100 percent Papua New Guinea (PNG) owned entity with 67 percent direct shareholding by the Government and 33 percent interest held by the people of Western Province.
Since 1984, OTML reportedly contributed on average 7.4 percent of PNG’s annual gross domestic product (GDP) and directly employees upward of 2000 nationals, including another 1000-plus indirectly in support and spinoff business activities, the bulk to locals, and with local entities.
Last year it contributed 3.1percent of PNG’S GDP of K466million and posted a profit after tax of K100 million dividend paid to the Government. Due to denominating its transactions in Australian dollars, OTML is also a major foreign currency contributor into the domestic currency market.
In the social sector, OTML reported to have injected K17million into the Ok Tedi Development Foundation (OTDF) programs and made a total contribution of K1.713 million to the province and PNG economy.
OTML also contributed K 22.4million to the tax credit scheme infrastructure projects and procured 70 percent of the total value of goods and 40 percent of service contracts from national businesses.
In reality, the infrastructure and social developments on the ground in the province is marginal and impractical, considering its vastness and continued isolation from the rest of the country.
And it’s entirely mine-supported economic base faces a bleak future after 2025, or even earlier if OTML is forced to advance its pre-concluded shutdown procedure.
In that event, it is not too difficult to foresee all foreign and national businesses closing shop and exiting promptly followed closely by government officials, health workers, teachers and police officers abandoning the province.
This will then leave the National Government holding onto a province saddled with environmental issues and obsolete internal infrastructures and public facilities due to its inaccessibility and absent workforce.
To the east, the Western borders with the Gulf province, the host of the soon to be developed massive A$13billion (K43b) Papua LNG project, but another provincial disparity case in point.
Though connected by the Hiritano highway to the National Capital District and Port Moresby’s thriving economic, commercial and technological hubs, Gulf suffers no lesser a fate than its maritime neighbor.
The province is located on the southern coast and the provincial capital is Kerema town.
The province covers an area of 34,472 km² that is dominated by mountains, lowland river deltas, and grassland flood plains.
The Kikori, Turama, Purari and Vailala rivers all meet the sea known as the Papuan Gulf. The province has the second-smallest population of all the provinces of PNG with 106,898 inhabitants (2000 census).
The province shares land borders with Western Province to the west, Southern Highlands, Chimbu, and Eastern Highlands to the north, Morobe Province to the east, and Central Province to the southeast.
The province is split up into two districts- Kerma and Kikori. The former has 6 LLGs and the latter has 4. The district capitals are Kerema and Kikori respectively.
Like its neighbor, Gulf is endowed with vast marine resources, wildlife and local food, but due to the distance and cost of transport, the only notable commercial activity of any scale happening in Gulf is an informal betelnut trade with Port Moresby.
Given this scenario, Gulf is the least developed province in the whole of Papua New Guinea and continues to lag behind the other 20 provinces.
But every cloud has a silver lining, or so, the saying goes- and for Gulf and Western provinces, their clouds, coincidentally, are irrevocably interlinked in the Papua and Western LNGs respectively.
According to Horizon Oil chairman John Humphrey last year (Nov 28), Western province’s condensate rich gas resources in the Stanley, Elevala, Ketu and Ubuntu fields that lie to the south of ExxonMobil and Oil Search’s P’nyang gas field can provide the threshold volumes for the PNG LNG train 3.
Mr Humphrey had announced that the gazetted route of the gas and condensate pipelines from P’nyang to the PNG LNG facilities passes within 20 kilometres of the Ketu field. And with the PNG Government’s proposed Gas Policy that would seek to ensure third party access to such ppipelines and the gas volumes of Horizon Oil’s condensate rich gas being approximately 40 percent of that of P’nyang and the condensate volumes in excess of those at P’nyang, there is clearly encouragement at the national government level for coordinated developments.
“Subject to commercial arrangements, Horizon Oil would welcome such a development
Western LNG is a standalone greenfield development that would aggregate approximately 2.2 tcf of undeveloped gas in the foreland of the Western province for export via a 490 km onshore gas and condensate pipeline and a 1.5 to 2.0 MTPA liquefaction facility offshore Daru1.
Third party access to the proposed P’nyang pipeline is to be constructed as part of ExxonMobil’s PNG LNG expansion project in accordance with the State’s proposed Natural Gas Policy2.
With the P’nyang gas fields agreement tied in safely, Oil Search Limited is now looking to jointly operate the massive $13billion Papua LNG with ExxonMobil Corp, Total and Kumul Petroleum, pending the Government’s final nod.
Meantime OSL chief executive Mr Peter Botten had assured the forum of Aussie miners and enthusiasts on June 6 that OSL’s considerable oil and gas investment portfolio and its future prospects in PNG’s buoying liquefied natural gas sector are safe and promising, allaying initial fears of a ‘hostile’ new prime minister and government up north.
OSL’s continued success in PNG has been attributed to its value-driven operations, balanced business regime and social imperatives.
“We face the same challenges as any (oil and gas) producer, that (being) of safety and economically getting oil and gas out of the ground and to market,” Mr Botten said.
“But we face different challenges in maintaining operational stability that requires us to take on a role in social development and nation building.”
As such, Botten reportedly told the forum he did not expect to make any significant new concessions to the Papua LNG gas deal signed in April, while issuing a cautionary note that any undue delay or action would only upset the project schedule and can have serious consequences, including potentially setting back the project by years.
And if what the man who led decisively at the helm of the regional oil and gas giant in PNG in the past two and a half decades, said is anything to go by, any immediate fear of a dramatic policy shift and ensuing legal reform or reforms in the respective mining and petroleum extractive sectors of PNG in favour of resource owners and the nation, remains elusive.
Or at the outset- at least not until 2025, as indicated by Papua New Guinea Prime Minister James Marape in his maiden address to the nation a fortnight back, and reiterated this week by new Petroleum Minister and MP for Sinasina-Yongomugl Kerenga Kua.
According to Minister Kua, a review is necessary but it is essentially a “stock-take” on procedural and legal compliance into every aspect of the massive loan structure and ensuing agreement.
Prime Minister Marape continues to be vocal on the interests of resource owners and the Nation as his Government’s top priority, but is making notable concessions for existing resource developers, including OSL, in the interest of continuity of investor confidence and good governance practices.
“We are tired of being rent collectors,” Mr Marape had said, adding that sometime down the road in 2022 or 2025 with good advice, “we will be making regime shift and change in the resource laws and most importantly it will be friendly to the investors”.
“But more so importantly, friendlier to the interests of the eight million people of our country and the benefits they truly deserve.”
That is the bottom-line; Prime Minister Marape had inadvertently set the tone and balance for a convergent approach by resources developers and the government towards the nation’s substantial development needs and priorities.
As for the Gulf province, a comprehensive 15 year development plan to establish a massive special economic zone at Ihu rides on the successful acquisition of the Papua LNG by OSL.
The plan is expected to drive extensive development needs of the province and provide the appropriate infrastructure requirements for the Papua LNG.
The Ihu SEZ will be centered in the Kikori district and will include a free trade zone, a petroleum park, an industrial zone, a technology park, a forestry park, a marine park, a deep sea port and airport, a township with hotels and resorts, and a government and administration area, according to project director Peter KenGemar, as reported in the Business Advantage Papua New Guinea.
For Western, Ok Tedi, PNGSDP, Ok Tedi Development Foundation (OTDF), the State and the new developer for the province’s anticipated LNG prospect, need to be conversant and convergent in the development of the geographically challenging province and open it up by road to the rest of PNG and the world at the soonest possible.
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