"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".


- Papua New Guinea National Goals and Directive Principles




Monday, 13 December 2010

Industry comes clean on its interest in PNG: Tax concessions, cheap labor, big reserves and pro-business government

The following exert offers an industry perspective on Papua New Guinea's gas reserves. The central reasons identified for investment in PNG's LNG projects include:

  • A pro-business government who is prepared to expediate projects, when other states show caution.
  • Cheap labor.
  • Tax concessions.
  • Big reserves.



Papua New Guinea Looks to Asia to Market its LNG


Oil and Gas News, 13 December 2010.


PAPUA NEW GUINEA (PNG) is in the midst of a massive LNG development programme which by 2014 could transform its economy, with three separate LNG projects are currently at different stages of development in the country, located at Asia's eastern extremity and widely considered one of the world's most significant remaining untapped gas provinces.

But in a region where LNG industries are already well established in Malaysia and Indonesia and where Australia is embarking on a the $40 billion Gorgon development in Western Australia and the $100 billion coal seam gas projects in Queensland, are PNG's ambitions to be the new major strategic LNG supplier to gas-hungry north Asia justified?


Karl Yalo, who advises the PNG government on LNG development matters and is also managing director of PNGEPCM Ltd, a local engineering procurement and construction (EPC) contractor which recently entered a joint venture agreement with Korea's Daehan Oil Pipeline Corporation (Dopco) to develop pipelines, storage tanks and loading terminals in PNG, said the country's high hopes for LNG are justified.

"PNG is the fastest-growing emerging LNG industry in Asia Pacific and Australasia, located in the heart of the world's largest LNG market," Yalo said during a recent visit to the Gulf to raise awareness among potential investors of PNG's opportunities.


PNG also enjoys strategic advantages over its larger neighbour to the south, said Yalo. 

"PNG is fast-tracking its LNG projects, which will come onstream before those in Australia. We are geographically closer to key Asian markets than Australia, we have a more attractive fiscal regime, lower-cost labour, and our LNG sites are not vulnerable to natural disasters such as cyclones. Our gas also has fewer impurities than Australian gas, meaning less processing and lower production costs," he explained. 

The Kopi LNG project, under construction, is being led by ExxonMobil, with the PNG government an equity partner.  

The $18 billion project - the largest private sector investment ever undertaken in PNG - is interesting in many ways, not least the way it was funded in entirety at the height of the global financial crisis.  

"The $18 billion was raised in less than six months, a phenomenal achievement. The US Export-Import (Exim) Bank committed $3 billion, the largest commitment in the bank's history, demonstrating the robust nature of the project," said Yalo.  

In addition, while traditionally PNG has sought investment for major infrastructure projects from Australia, New Zealand, Japan, China, Korea, Singapore and Malaysia, in 2009 the PNG government secured a $2 billion arrangement with Abu Dhabi's state-owned International Petroleum Investment Company (IPIC), the first ever commercial arrangement between PNG and the Arab world. 

"We expect it (the IPIC deal) to be a catalyst for closer engagement between PNG and the Arab world and is something we intend to build on as Gulf States seek to diversify their investments in resource-rich emerging markets," said Yalo. 


PNG's second major project, which will include condensate strip plant and onshore LNG processing facilities, will be built and operated by Liquid Niugini Gas Limited, and InterOil, a $3 billion capital company listed on the Toronto and New York Stock Exchanges and with petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities in PNG. Pursuant to the PNG Oil and Gas Act, the Government will take 22.5 per cent equity when the project goes into commercial production.  

A agreement for the construction of the LNG plant was signed between the PNG Government and Liquid Niugini Gas in December 2009 under which fiscal terms were secured for a 20-year period, including a 30 per cent corporate tax rate and certain other exemptions applicable to large-scale projects, giving the project added stability.   

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