Wapu Sonk, Managing Director, Kumul Petroleum Holdings
LNG set to boost Papua New Guinea’s economy
In this Global Platform video, Wapu Sonk, managing director of Kumul Petroleum Holdings, talks about PNG’s advantages as a strategic location for extractive industries. With a stable government, popular support for upcoming projects and plans to invest $20bn in the sector, PNG is well placed to benefit from growing demand in the Asia-Pacific region. Sonk also discusses plans to secure three new LNG trains and opportunities to broaden the use of gas to develop other sectors of the economy.
The advantages of setting up a national oil company in a country like Papua New Guinea is very important and it’s very strategic, because the people are attached to the land. They want to feel that they own and they are part of the extraction of the wealth, and they can only do that through their national oil company. The focus now has shifted from oil to LNG (liquefied natural gas) in the 2000s and we are now looking at three more trains to be added to the two trains that exist now operated by Total, using the Elk/Antelope gas field, and an expansion train using the P’Nyang gas field by PNG LNG project partners.
The Asia-Pacific region is where most of the demand is and the other developers like Mozambique in Africa, Russia, including the US, is targeting it. PNG is strategically positioned to take advantage of that closeness to the demand and we have the experience, we have a stable fiscal regime, a stable government and support of the people for the projects that we intend to develop. We are looking at a $20bn investment in the country from a FEED start in 2020 and first gas from P’Nyang in 2028. There is going to be a spread of activities, spread over 10 years, and that is the key feature that the government likes about that. If there are going to be any changes in the fiscal regime it will go for future projects that will be developed later on. But things are changing, changing because the LNG prices are dropping. They are coming down very close to where methanol prices are. In my view, we should have a policy where five trains of LNG is enough for LNG projects in the country. For balance of the gas, we should now look at the petrochemical and power industry and try and broaden the use of the gas.
When the agreements were put together for the PNG LNG project I think everybody was focusing on LNG export and we did not know what opportunities come with it and now we are learning, and learning fast as well, so it’s really an evolving story. The government, people and everybody learning that you can do multiple things out of the gas that we are exporting.
Electricity generation is important for PNG. We started that process by getting gas from the PNG LNG project and building the Niu Power Plant 50-50 between Oil Search and Kumul Petroleum, so we are putting in cheaper and more efficient power into Port Moresby using gas. But having said that, the thinking of the policy makers have been following the up and down of oil and gas and copper and gold prices. It’s very clear – the data is there, we should put the revenue from the resource projects away into a sovereign wealth fund. It is really so that the government starts to develop policies that will diversify the economy – going to service industries, tourism and other areas other than relying too much on extractive industries.