Tuesday, June 30, 2009

Prime Minister Somare steps in to fix LNG mess


PRIME Minister Michael Somare has taken personal charge of advancing PNG’s second liquefied natural gas project development to project agreement status within days.

The Grand Chief has become the Mr Fix-it for poor showing by his ministerial and public service minions.

He has directed officials to furnish to him a professionally and PNG-produced project development agreement for Liquid Niugini liquefied natural gas project by Wednesday morning, (01 July 2009).

According to staffers, a visibly fuming Prime Minister told ministers and officials after a special cabinet meeting that their deceptive schemes and conspiracies to derail one project and behave as salesmen for another project was not in the nation’s best interest. The Grand Chief made his intervention last Friday after several of his key ministers and hand-picked Waigani bureaucrats connived to undermine progress of locking in InterOil Corporation’s planned two-train liquefied natural gas development project. Sir Michael wants both the InterOil and ExxonMobil projects developed simultaneously and on the same terms offered by the State.

The Prime Minister vented his ire on ministers and officials when he was given a project agreement concocted by a United Kingdom-based law firm called Allen & Overy who were engaged by the Department of Treasury to produce the document a week ago.

The law firm is also retained by ExxonMobil. The document produced at the behest of Treasury Department officials did not carry any negotiated and agreed position both the State and InterOil Corporation negotiation teams worked on over the last two years. The document was worded to deny InterOil’s LNG development company, Liquid Niugini Gas Limited any reasonable concessions and tax breaks that were accorded to ExxonMobil’s PNG LNG project.

Yet the State solicitor was coerced into giving his legal clearance to the hurriedly produced document last Wednesday.

Petroleum Minister William Duma and Prime Minister’s Chief of Staff Paul Bengo became suspicious when they realised there were two documents doing the rounds in Waigani and not one.

That was when the Prime Minister made his intervention.

He ordered officials to give him one negotiated and agreed project agreement within five days commencing Friday afternoon and inclusive of Saturday and Sunday. Government officials spend Saturday and Sunday huddled in thought and work at a Port Moresby hotel to meet the deadline on Wednesday morning.

ExxonMobil and its partner Oil Search Limited are progressing towards building an LNG project in PNG for a total development cost of some K12 billion and InterOil is doing similarly for total development cost of some K10 billion.

Most of ExxonMobil’s LNG facility feedstock is located in PNG’s Southern Highlands Province.

InterOil Corporation’s LNG plant will rely on the company’s own Elk-Antelope world-class natural gas and crude oil reservoirs in the Upper Purari River area of PNG’s Gulf of Papua region. ExxonMobil has offered PNG 19.4 percent stake in its project while InterOil has offered PNG 32.5 percent in the upstream, midstream and downstream of its project development. State-owned Petromin Limited is already operating as InterOil Corporation’s partner in InterOil’s upstream exploration program at Elk-Antelope and is positioned to be a significant player in the Liquid Niugini Gas LNG project development. The InterOil project has also allowed for a domestic market obligation of some 40 million cubic metres of gas per annum to be used for PNG’s domestic consumption which the ExxonMobil project does not provide. InterOil will use the project to assist the host province’s long-denied economic development.

  • Susuve Laumaea is an award-winning veteran PNG newspaper journalist. He writes a popular weekly Public Affairs column in Port Moresby-based weekly newspaper, Sunday Chronicle.

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