Papua New Guinea awards Pandora gas field licence to Kumul Petroleum

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The awarding of the Pandora gas field licence to Papua New Guinea’s oil & gas national company potentially marks a significant change to the way petroleum licenses are granted in the country.

Minister for Petroleum Kerenga Kua [left] and Managing Director of KPHL, Wapu Sonk, during the signing.

Weeks after the gas and petroleum company Twinza Oil released a statement acknowledging it applied in November 2018 for the Petroleum Retention Licensc covering the Pandora A and B fields, the Papua New Guinea government has awarded the licence (PRL47) to the state-owned Kumul Petroleum Holdings Limited (KPHL).

Minister for Petroleum Kerenga Kua said the decision came after close consideration and upon recommendation by the Petroleum Advisory Board.

Pandora is located about 200km west of Port Moresby in the Gulf Province. It is estimated to hold 1 trillion cubic feet of dry gas and was previously operated by Canadian company Talisman Energy.

‘At the end of the day, this will create a pathway enabling the state to receive not only early revenues from the projects but also making more money out of it,’ said Minister for Petroleum Kerenga Kua in a statement.

Since his prime ministership began, James Marape has been clear in wanting to take more control of PNG’s mineral resources.

This is the fourth licence awarded to KPHL this year (the other three are PRL 48, PRL 49 and PRL 50, covering the Kimu, Barikewa and Uramu gas fields).

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Twinza’s Chairman Ian Munro told Reuters: ‘It’s a disappointing announcement. We felt that we were the natural owner and operator of that license given that we’ve successfully progressed exploration and appraisal of the Pasca project.’

Setting a precedent

Kua explained that ‘the PRL47 grant approach focuses completely on erasing the buyback scheme by the State to the developer after the license has been awarded,’ Kua said.

The scheme means that, by law, the State can buy back 22.5 per cent equity from a project’s developer. The buyback, however, costs millions if kina and means the government ends up with debt instead of profits.

‘The resource and the license in the hands of Kumul Petroleum is the same as the State keeping the resource 100 per cent, therefore saving the State billions of kina in the buyback costs,’ said Kua.

‘The second big benefit of the State under these grants is that Kumul Petroleum will now be in a position to farm out or sell portions of those licenses to other developers and make money from it.

‘Those revenues will then be contributed back into the construction costs of projects immediately minimizing the level of borrowing for Kumul Petroleum.

‘At the end of the day, this will create a pathway enabling the State to receiving not only early revenues from the projects but also making more money out of it.’

Kua described this retention license as a ‘revolutionary approach or a new scheme’ which focuses on maximising benefits and returns for PNG.

In the statement, the Petroleum Minister also clarified that this scheme doesn’t change the laws to conduct petroleum business in the country, but simple suggests a better approach for PNG to maximise returns.

After receiving the license, Wapu Sonk, Managing Director of KPHL, said in a statement: ‘Kumul Petroleum will commit itself to work with the Department of Petroleum in carrying out the licence conditions. We will also look at the best way possible to commercialise this licence so that it benefits our people who have entrusted us to hold this licence.’

It’s been reported that five developers applied for the Pandora licence.

Comments

  1. Gabriel Yer says

    It sounds like no proper fiscal modelling done here to determine benefit to state before awarding liences to KPL, or is it simply to make fast sales of liences after been awarded to a new developer to make fast money. If it has to develop it do we have capacity for financing the project. Above all was there a independent valuation done to satisfy the volume for fiscal modelling to satisfy state or KPL of its benefits.

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