In this exclusive interview, Wapu Sonk, Managing Director of Kumul Petroleum Holdings, looks ahead to the next decade of Papua New Guinea’s petroleum and gas sector. He tells Business Advantage PNG that PNG is well placed to thrive in the global LNG market.

Twinza Oil jack-up rig  Credit: Twinza Oil

Business Advantage PNG: The vision for Kumul Petroleum is for it to take on a central role in developing Papua New Guinea’s petroleum resources. Are all the pieces of legislation now in place for this to happen?

Wapu Sonk: The legislative amendments to the existing Oil and Gas Act have been done but the main event, which was really to fundamentally change the fiscal regime in the country – which will then put Kumul Petroleum in control of all the licenses in the country – has not yet happened. This is the Organic Law for Mining and Petroleum.

It went to the Parliament, it was on the agenda, but was then pulled back. It has not gone through its first reading yet. It will set out the parameters for how all the mining and petroleum activities will operate, the role of Kumul Petroleum, the role of Kumul Minerals and the role of government entities. Organic Law is sort of the umbrella act. It is still to go to its first reading; we’re expecting that will be in the April or the sitting [of Parliament] after.

Kumul Petroleum’ Holdings’ Wapu Sonk.

BAPNG: What are you hearing from your international contacts about where the international gas market is going? What appetite is there for investing?

Sonk: I think the market has been recovering, post COVID-19 impact. There’s still a demand gap in the late 2020s that we are targeting and there is still room for [PNG projects] given that other projects, like Mozambique, are facing challenges. It creates an opportunity for PNG to step back in and take a position in the marketing queue.

BAPNG: A big challenge for state-owned entities is that the government is in quite dire need of finances itself. How much capital are you allowed to keep and how much do you have to pass on to government?

Sonk: That really depends from year to year. We do an annual operating plan, and, depending on the assumptions that we put in on the oil and LNG prices, assumed Capex and Opex Programmes and overheads, we assign a dividend plan that would satisfy the government and also satisfy our needs. The KPHL Act itself that governs the company’s operations says that we can reserve capital for the next five years.

‘That new legislation will have a sunset clause of some sort to encourage companies that are sitting on licenses now to move into development and get those licenses committed.’

BAPNG: On the ExxonMobil-led P’nyang gas project that is now to be negotiated separately from Papua LNG: will that be subject to the new oil and gas laws or to the old legislation?

Sonk: That new legislation will have a sunset clause of some sort to encourage companies that are sitting on licenses now to move into development and get those licenses committed. We need to give enough time for companies to adjust their business plans. If the licenses have expired and you haven’t done anything within that period, well, then the government takes it back and gives it to Kumul Petroleum.

BAPNG: What is happening with the Twinza project in the Gulf of Papua?

Sonk: There’s some minor issues that Twinza needs to resolve before we get back into negotiation, but that’s also likely to get closed out. With the improvement in the oil price, it’s looking positive. I think the undersea, offshore potential in the Gulf, all the way down to Central Province, hasn’t been explored yet – and it has huge potential. All the big players in the industry are swimming around it, let’s put it that way. There has been huge interest.

BAPNG: You have a project that you are working on at the moment in Morobe Province …

Sonk: The project that we have just announced is a floating regasification storage facility, which will store LNG in Lae and distribute from there. Either as gas or LNG. It is really targeted at producing clean, reliable energy for projects – mining projects especially. Our project only works if Wafi-Golpu and Newcrest can come on board.

BAPNG: And you don’t need PNG Power to be your middleman, you can go direct to the customer?

Sonk: We will go direct, yes. The mining companies will demand that, too, because they want to control it. It’s an indemnity [against risk]. The entire mining operation (air circulation, air conditioning, the pumps, etc) depends on the electricity. They need absolute certainty.