Papua New Guinea is set to introduce new rules for petroleum licenses, according to Kumul Petroleum Holdings Limited Managing Director, Wapu Sonk. In this exclusive interview, he tells Business Advantage PNG the state-owned oil and gas company is about to undergo a transformational change.

Kumul Petroleum’s Wapu Sonk. Credit: WBG

A major shift is planned in the way Papua New Guinea manages and exploits its petroleum resources, and state-owned petroleum company Kumul Petroleum Holdings Ltd (KPHL) will be at the centre of it, according to its Managing Director.

Wapu Sonk says that when the changes to PNG’s Oil and Gas Act are made – as early, he suggests, as the middle of 2020 – Kumul Petroleum will take play a greater role in how the country’s petroleum resources are exploited.

This will mean that, instead of always being restricted to a mandatory 22.5 per cent of equity in oil and gas projects, KPHL will be able to take up to 100 per cent.

‘The start with all explorations will be 100 per cent. It is a transformational change,’ he tells Business Advantage PNG.

Sonk says at the moment under the Act, there is no special treatment for Kumul Petroleum.

‘We are treated just like any other oil and gas company. We pay tax like any other oil and gas company. What these changes will do is allow Kumul Petroleum to realise its full potential. It will become what it was meant to be: a National Oil Company.’

‘What the government is saying is: “Don’t get into retail business. Don’t get into two kinds of power distribution business. Stay in control of licenses and work with developers that come in because they will come in on a contract basis”.’

Existing projects

Sonk says existing gas projects will continue under the current regulatory regime.

‘That is why we are keen to get Papua LNG and P’nyang going – the ones that have been already discovered.’

‘KPHL will market the oil and gas and do auctions.’

Sonk says the existing rules will also apply to Twinza Oil’s project in the Gulf of Papua and the Barikewa project, a small field close to the PNG LNG project pipeline that is being developed by Oil Search, Santos and Kumul Petroleum.

‘Then we level the playing field again and have different rules – a new fiscal system.’

He says he expects both Papua LNG and P’nyang projects – which will involve the creation of three new trains at the LNG Plant at Caution Bay near Port Moresby – to enter Front End Engineering Design (FEED) in 2020.

‘The engineers have been mobilised for all three trains: the Total teams and the ExxonMobil teams working together to take advantage of the synergies that exist.’

Correction

Map of existing LNG sources in PNG Credit: Oil Search

Sonk says the regulatory changes mean PNG is ‘basically going down the path of the Middle Eastern countries such as Qatar, or Malaysia.’ He says an equivalent model is Malaysia’s national oil company, Petroliam Nasional Berhad (PETRONAS)

‘If you like, we are making a correction so that we are where we should have been. KPHL will market the oil and gas and do auctions. It can then be given to development partners.

‘There will be no need for Treasury or any other government agency. The national oil company will do the deal for the people.’

Sonk says most of the commercial work required under the new regime is already done by Kumul Petroleum.

‘The biggest issue for us is that we have a really tough country for exploration work.’

‘There will be an add-on in terms of license management. There will be more technical staff, more compliance staff. The Department of Petroleum will remain as the policy department.’

Push back

Sonk says he expects a lot of pushback against the proposal. ‘But if you are persistent, and if you know it works elsewhere, it can work here.

‘The biggest issue for us is that we have a really tough country for exploration work. How do you deal with that in this new regime? That will be our biggest challenge.’

Under the new regime, Kumul Petroleum will do deals with different partners for different kinds of project.

‘It depends on whether it is a known area or a wildcat area: what is the risk level? It depends on how we view the exploration.’

Sonk also suggests KPHL may also play a role in the more equitable sharing of benefits from resources projects.

‘Instead of landowners always getting two per cent, they could end up getting a little bit more.’