Wapu Sonk, Managing Director of Kumul Petroleum, says that Papua New Guinea’s oil and gas sector is looking ‘much stronger’ with the Papua LNG project set to have its final investment decision in 2023. But, he told the 2021 Business Advantage PNG Investment Conference, that proposed changes to the country’s oil and gas law have been delayed.

Kumul Petroleum’s Wapu Sonk.

Sonk says that the PNG government has ‘basically cleared the path’ for the Papua LNG project to happen. ‘The Fiscal Stability Agreement, the Gas Agreements – everything is basically locked in and the ball is in the developer’s court,’ he says.

Total, Sonk adds, is ‘now remobilising back into the country’ although the process is slow due to COVID restrictions.

‘Pre-FEED (Front End Engineering Design) work has been going on. Commercial negotiations are also starting, especially for the facilities,’ which will be use because the two trains for Papua LNG will be built alongside the PNG LNG site.’

Sonk says work on the FEED is expected to commence in the third quarter of 2022. ‘When financing is in place and FEED has been done, then we are ready for the FID (Final Investment Decision), which is likely to be in 2023. There will be another four years of construction. So by the end of 2027, or early 2028, [there] will be the first gas.’

‘We are revising [the Organic Law]] based on some of the lessons learned from the Porgera negotiations and the lessons learned on the oil projects.’

Kumul Petroleum Holdings Limited (KPHL) is involved in the early stages of marketing the gas, working with Total in a joint marketing company based in Singapore. Kumul has had early access to technical and commercial data, which allows the company to be an active participant early on.

Sonk said KPHL will be able to finance the project from its own capital. ‘We won’t have to go to the Treasury or government [to get] project financing.’ He acknowledged, however, that getting project financing is likely to be more difficult in the wake of the pandemic.

Organic Law

The proposed Organic Law on Papua New Guinea’s Ownership and Development of Hydrocarbons and Minerals and the Commercialisation of State Businesses 2020 (Organic Law) has been delayed until after the elections. It would have given KPHL and Kumul Minerals control over licences and an ability to deal directly with investors.

‘The Organic Law on oil and gas and minerals was on the agenda this year, but that has been withdrawn. We are revising [it] based on some of the lessons learned from the Porgera negotiations and the lessons learned on the oil projects,’ Sonk says.

He says people need to ‘get comfortable with the fiscal regime’, which includes production sharing. He insists, however, that the proposed arrangements are not something new.

‘It has been done in Indonesia, Malaysia, in so many different countries. Almost 95 per cent of oil and gas [agreements are done] through this kind of regime. It is tried and tested.’

This year KPHL has received four licences covering the Kimu, Barikewa and Uramu gas fields and the Pandora gas field in the Gulf Province.

Negotiations

P’nyang project site. Credit: Santos

Negotiations with Twinza Oil over the Pasca A gas project in the Gulf of Papua have hit a ‘hump’, says Sonk. ‘We were meant to lock ourselves in and go through and finalise the gas agreement, but unfortunately there have been “media negotiations”, if you like. It’s still waiting for both sides to get together. So it’s at the end, if you like: the gas agreement signing stage. It will [then] go to financing and FEED and FID and all the different steps we have to go before a development actually happens.’

The P’nyang negotiations have restarted after collapsing in early 2020. ‘We have regrouped again to renegotiate with Exxon,’ he says. The development concept has changed. We are working through the economic model before we engage proper in the negotiations.’

Sonk said KPHL has completed the design for an LNG distribution hub out of Lae that could potentially provide power to Newcrest’s Lihir gold mine and the proposed Wafi-Golpu copper-gold mine. ‘The NiuPower project has been running for two years now. So we do have experience in building gas fired power stations.’

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