As reported last week, the PNG Government has revived the National Petroleum Company of Papua New Guinea (NPCP) to hold the nation’s interests in the PNG LNG Project.  In this exclusive interview, Business Advantage PNG speaks with the NPCP’s new Chairman Frank Kramer about what lies ahead.

National Petroleum Company Chairman, Frank Kramer

Business Advantage PNG (BAPNG): What is the National Petroleum Company’s (NPCP’s) role? What will it do—and not do?

Frank Kramer: The NPCP’s relatively short history to date has been a bit of a rocky road. It was initially set up some years ago, and then it was disbanded [in 2011], so in its short history there’s been some inconsistency in the Government’s thinking about it: should we have a National Petroleum Company or not?

I understand the Government’s thinking now is quite definitive: it has made a long-term commitment. So, the NPCP has been chartered with the responsibility of carrying all the State’s interests in the hydrocarbon space, covering upstream, midstream and downstream activities.

It’s a big challenge, but we’ve got a good board. The NPCP needs to be allowed to operate autonomously and independently, with highly transparent processes and good governance. It really needs to operate in a manner consistent with its competitors or its international partners, because it’s going to be benchmarked against those companies. The whole company needs to be private enterprise driven.

If the Government supports that concept, as it does today, I think the NPCP can take root and grow into a national oil company—as other countries’ national oil companies have grown with spectacular success in recent years.

BAPNG: Is there a model that you’re particularly looking to emulate from overseas?

FK: In the last 20 years, there has really been a transition in who holds and controls the world’s hydrocarbon resources. Whereby the international oil companies (IOCs) used to control supplies, state-owned National Oil Companies (NOCs) now control about 80–90% of the world’s hydrocarbon resource.

The Minister for Public Enterprises Ben Micah has made mention directly of a company like Petronas, the Malaysian example. It’s a great success story; it operates in 35 countries. But there are other companies, like Brazil’s Petrobras or the Nigerian National Petroleum Company.

If we can be only partly as successful as some of those success stories, I think NPCP can take a very proud position on the global stage in the oil and gas business.

BAPNG: To whom or what does the Board of NPCP report? Are you under the Independent Public Business Corporation (IPBC) or are you entirely independent?

FK: There will be a clear separation between NPCP and IPBC, but like all good publicly-listed oil and gas companies, the ultimate entities you answer to are your shareholders. In this instance, that means the seven million people of Papua New Guinea, who are represented by the National Executive Council (NEC). The structure is not yet finally fixed, but it’s intended that NPCP will report directly to the NEC through the Minister for Public Enterprise and State Investment, Ben Micah.

We’ll definitely not be a passive manager of the State’s oil and gas assets – we will be aggressive.

I understand that the whole structure of what used to be the Independent Public Business Corporation is being looked at and re-branded. There will be three entities, one of which will be the NPCP. There will also be a minerals company, which will be a sister company to the NPCP, and then a third will house the state-owned utilities such as Telikom PNG and PNG Power. The ultimate structure will be quite novel.  It won’t resemble anything like what we see today.  The NPCP is intended to have its own Act of Parliament and possibly even further legislated changes to ensure that it is independent and to ensure its longevity.

BAPNG: As far as the actual functions of the organisation are concerned, will the NPCP be a passive investment manager or an aggressive and proactive resource development company?

FK: I think it’s more likely to be the latter.  In the first instance, we’ll really be building an organisation, but once we’ve got that critical mass, we’ll definitely not be a passive manager of the State’s oil and gas assets – we will be aggressive.  Looking at the NOC models elsewhere, I think there will be a role for NPCP beyond the normal social responsibilities that you see some of the oil and gas companies currently undertake.

In the first instance, my commercial sense says we shouldn’t get into exploration activities, because we have the ability under the existing Oil and Gas Act to take at least a 22.5% stake in any hydrocarbons project in PNG that reaches Petroleum Development Licence stage. But I’m sure, once we’ve gotten our assets developed beyond a certain level, we will be looking at all areas of the hydrocarbon space.

BAPNG: Will you be limited to activities within Papua New Guinea, or will you have a brief to go elsewhere as well if you want?

FK: Our mandate is absolutely a global one. We will initially secure our position in the domestic market but, as soon as we have that critical mass, our mandate absolutely encourages us to look at the international market as well.

BAPNG:  How much is an organisation like the National Petroleum Company going to be a potential competitor to the Exxons and the Oil Searchs of this world, and how much a potential partner? Are the two roles compatible?

FK: The two roles will co-exist going forth, the roles will be quite different with the different people at different times.  But there is no doubt, at times we will compete with some of the international oil and gas companies—a bit like Oil Search, probably, in the sense that while they are an international oil and gas company, they have a very large percentage of their portfolio that is PNG-domiciled. So we would have some relationships that are partner-type relationship, and then there will be circumstances where we’ll be competing with some of the big boys from overseas.

I don’t see that as an issue. Every NOC in the world plays a dual role at different times and in different circumstances.

BAPNG: What’s the NPCP’s action plan from here?

FK: We’d like to have the legislative and regulatory structures that support NPCP in place as soon as possible, but obviously we need to work with the authorities in that regard.  There is a further constraint, in that existing government agreements will have an impact on the core assets that we will be dealing with, in particular the PNG LNG project. Some very complex agreements were structured to support the financing for that project—those need to be allowed to run their course and expire. The maturity date is early 2014. So, between now and then, we want to get NPCP fully manned, our systems and procedures all in place, and then and start embarking on the programmes we want to aggressively participate in.

BAPNG:  On a personal note, you’re a business man whose PNG career goes back many years. You could take the option of taking things a little bit easier these days. Why have you taken on this major challenge at this stage of your career?

FK: Firstly, because I’m Papua New Guinean. My career has actually grown up with the country. I started my professional career about the same time that PNG obtained its independence. I’ve had a good innings, I’ve been very happy with my professional successes; my company, Kramer Ausenco, has been involved in some outstanding projects both here in PNG and the region. I see this as a challenge into which I can direct all my 37-plus years of experience.

The autonomy that the Government’s indicated it’s prepared to provide has made it very attractive. It’s attractive to a Board of the calibre we have. If you design something properly, it will attract good people, and we want to continue with that trend, not only at board level down, but right through management. I want to attract the best Papua New Guineans into this company and then proudly contribute towards the development of the oil and gas business in PNG and the region.

In addition to his role at the NPCP, Frank Kramer is Chief Executive Officer of project management and engineering services firm, Kramer Ausenco.