The Managing Director of state-owned Kumul Petroleum Holdings, Wapu Sonk, believes a ‘step change’ is needed in the electrification of Papua New Guinea. He agrees that some gas production should be reserved for domestic production.

Kumul Petroleum’s Wapu Sonk Credit: WBG

Speaking in London, Sonk said that new initiatives will be required if the PNG government is to meet its target of 70 per cent of households electrified by 2030.

‘Today we still have less than 50 per cent of PNG households with access to electricity. It is clear that we are not going to get anywhere near the critical point, the target.

‘It simply is not working and we need some step change so that we can close that gap.

‘While the oil and gas industry is not really responsible for building power lines, wires and posts, we believe that reserving some of the gas production for use domestically will allow clean energy power to be generated to meet this demand.’

Inflection point

Sonk argued that electrification is ‘critical’ for the development of an industrial base and ‘sustainable development’ in PNG.

He said it will not only contribute to direct and indirect employment, it can also help the country ‘to diversify from extractive industries which is so critical for sustainability.’

Sonk said the 70 per cent figure is an ‘inflection point’. He pointed to the United Nations’ Human Development Index (HDI), a composite of health, education and income measures.

‘It is quite clear that household electrification and HDI are related,’ he said.

‘Third party access policy allows for access to pipelines on reasonable commercial terms.’

‘[When] we look at what happens if we reach 70 per cent electrification, the HDI increases from 0.5 to 0.7.’

Policy

Sonk said KPH strongly supports the National Government’s policy initiatives, especially in the areas of third-party access and national content.

‘Third party access policy allows for access to pipelines on reasonable commercial terms for the transportation of gas,’ he said, adding that it will support the Domestic Market Obligation, or DMO.

‘[It will] provide a way to develop some of the stranded gas fields in PNG and encourage exploration.

Sonk said the DMO also extends to not only pipelines but also facilities for processing and storage of gas.

‘That is an important policy. It encourages industrial and business development by providing guidelines for the national provision of goods, services and labour as part of the development and on going production of the new fields.

‘We will also build and operate gas-fired power stations.’

‘Importantly, it also provides for training and skills development.’

Wholesale distribution

Sonk says Kumul Petroleum also plans to provide the wholesale distribution of gas by pipeline to industry, which is part of the company’s mandate.

‘We will also build and operate gas-fired power stations so we can feed directly into the grid to supply electricity to the nation.’

‘We are halfway to the construction of a 58 MW plant, which is a 50/50 partnership with Oil Search.

‘We are also talking to the Mineral Resources Development Company for the next power plant next door to the current one which will be a 45 MW plant.’

‘KPH will retain its equity levels in the projects in which it is involved.’

Sonk said the company is consulting with Oil Search about domestic gas distribution in-country.

‘We believe the time is coming for the new development of LNG in PNG.

‘We will promote the small-scale distribution of gas to industrial users, invest in gas-fired power stations and other infrastructure to provide cheap and clean energy for electricity and for domestic distribution of LNG in PNG.’

Sonk did acknowledge, however, that KPH is limited in its capacity to achieve this both financially and technically.

Equity

KPH hold the PNG State’s stake in the ExxonMobil-led PNG LNG project and is the State’s nominee for the pending Total-led Papua LNG project.

Sonk claimed that KPH would retain its equity levels in the projects in which it is involved.

‘We are an instrument to retain in future projects our equity and resist any offers to sell down or allow easy entry into the project.

‘At the lower (oil) prices—say US$50 and below—the only significant revenue to the state has come from the equity distribution, with almost nothing from tax.’