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Discord in Papua New Guinea (PNG)? Not really.
We wrote a piece on Monday arguing that InterOil is well positioned to profit from the booming Asian LNG market. However, later that Monday evening (Tuesday morning in PNG), a newspaper article appeared that seemed to suggest there is some discord between InterOil and some PNG officials. Here are some relevant parts:
Govt warns InterOil Ltd
THE Government has warned that InterOil Limited, the developer of Papua New Guinea's second liquefied natural gas project that it was not carrying out the project as agreed to in the Project Agreement. Minister for Petroleum and Energy William Duma yesterday issued the warning to InterOil Limited and its associate company, Liquid Niugini Gas Limited, the developer of the LNG project in the Gulf Province. In a press release, Minister said: "LNGL (Liquid Niugini Gas Limited) was not proceeding with the project which was agreed to between the State and the LNGL in the Project Agreement on 23 December 2009. "LNGL continues to misunderstand fundamentally the nature of the contractual obligations that it has under the Project Agreement, and is moving closer to repudiatory breach of the Project Agreement by proceeding with the Gulf Project. "At this point, the State will have no option but to accept that breach and seriously consider terminating the Project Agreement."
Mr. Duma said. He is to meet with the InterOil officials in the next few days to iron out the matter. [PNG Post-Courier]
This sounds serious, so we feel it's necessary to provide a few explanatory remarks:
- Yes, Mr. Duma does have something of a point. The agreement InterOil and the PNG Government signed in December 2009 contains a plan for monetizing InterOil's Elk/Antelope that has been subsequently changed somewhat.
- InterOil's original plan was to build a large, traditional LNG plant next to its refinery at Napa Napa.
- This plan shifted when Henry Aldorf came aboard (previously working at Marathon (MRO), where he was responsible for building Marathon's LNG plant in Equatorial Guinea in record time.)
- The new plan involves a modular (expandable) LNG plant (with partner Energy World Corporation, EWC) and a floating LNG plant (FLNG) build by Samsung (SSNLF.PK) and Flex (The FLNG company from Norway), both in a different location (the Gulf province).
- The new plan is at least a year and a half in existence and involves many advantages (faster monetization, no re-injection of condensates necessary, much shorter pipeline, sharing of infrastructure, cheaper LNG plants largely pre-built under controlled circumstances (Samsung wharfs and the like) rather than on site with complex logistics, skill shortages, etc.
- Contacts between InterOil and the government are ongoing (the InterOil project is one of the largest prospective tax revenue generating project for PNG), so it is simply unfathomable that the government is unaware of the strategy change.
Indeed. Read also the following older (February 2011) newspaper article from PNG (for the whole article, click the link at the end):
Second LNG PNG Gets Thumbs Up
By Mohammad BashirPapua New Guinea's second LNG project which is expected to bigger and expected to produce 11 to 15 million tones got a step closer yesterday witnessed by Prime Minister sir Michael Somare, Treasurer and Finance Minister Peter O'Neill, Petroleum and Energy Minister William Duma, Gulf Governor Havilla Kavo and Police Minister Mark Maipaka and industry executives.
Pacific LNG Operations Ltd witnessed Liquid Niugini Gas Ltd, its Joint-Venture liquefied natural gas project company with InterOil sign a Project Funding and Construction Agreement (PFCA) and a Shareholders Agreement with Energy World Corporation Ltd. [AX: EWC] to construct a three million tonne per annum (mtpa) land-based LNG plant in the Gulf Province of Papua New Guinea (PNG), which is developed in two places, 2mtpa and 1mtpa expansion following immediately thereafter.
The agreement follow Pacific LNG Operations Ltd, September 2010 announcement of the formation of the partnership with EWC.The PFCA and Shareholder Agreements with EWC are conditional reaching FID no later than 31 December 2011. However, as previously disclosed the current joint venture project schedule is for FID to occur simultaneously for the LNG plant and CSP by June 30, 2011 and combined plant start up approximately 30 months after FID. This now adds blessing to the already arranged agreement between Gulf Provincial Government and Energy International to have a Petroleum Park established at Orokolo bay in Ihu District Gulf Province. [LNG Watch]
So the same Mr. William Duma who is now, in his capacity as Energy Minister, 'warning' InterOil was actually present at the celebrations marking the agreement with a partner (EWC), executing a new strategy which is not (entirely) reflected in the 2009 agreement between InterOil and PNG. (There is another report confirming the above here).
So it's not that he wasn't aware of the change in strategy but the problem is that it's not entirely reflected in the 2009 agreement document. However, if reality on the ground doesn't (entirely) reflect the 2009 agreement, then the easy option is to change the agreement.
Since InterOil and partners are close to final investment decisions (FIDs), expected before the end of this year, it is clear that abandoning the new plan and going back to the old is not a realistic option. It is in the interest of nobody, least of all the PNG government, as it will lead to (significant) delays, which would also delay a tax revenue bounty for years.
There might be some unresolved issues between the parties but as the (first) newspaper article above states, InterOil and government officials are going to meet in the next few days to sort things out. We have seen this kind of stuff quite a number of times so we don't lose any sleep over it, (so far, neither has the market, IOC shares are actually up since this came out).
InterOil shares are cheap, valued at below 50 dollar cents per Mcf (thousand cubic feet of gas). Basically, there is 8.59T of gas in their main field, Elk/Antelope, with prices well above $10 per Mcf in Asia. This alone represents $80-$120B in value (not even including the condensates or other fields). With total project cost budgeted at $3.6B (and most of that paid out of gas revenues with 14.5% earmarked to the plant builders), there really is ample margin for error here.
You might also have noticed (in the second newspaper article above) the presence of Peter O'Neill at that ceremonial signing of the agreement with EWC. As it happens, O'Neill is now PM, and he is very supportive of InterOil's LNG project. From Wednesday's PNG Industry News (for whole article, click the link):
PRIME Minister Peter O'Neill has increased his commitment to supporting the Gulf LNG project in Papua New Guinea after Petroleum Minister William Duma threatened to terminate the government's LNG agreement with the InterOil-led consortium.
The Gulf LNG project is targeting 5 million tonnes per annum in 2014 with 3 million tonnes per annum from an onshore modular LNG plant and the rest from a floating LNG facility, while a slated expansion aims to ramp up the total Gulf operations to 8Mtpa through 2015 and 2016.
These plans to commercialise the Elk-Antelope discoveries in the Gulf province are somewhat different from the project's earlier Liquid Niugini Gas incarnation which aimed to build a 6-9Mpta LNG plant adjacent to InterOil's oil refinery at Napa Napa.
In a statement reported by the Post-Courier newspaper this week, Duma attacked InterOil's joint venture partner Liquid Niugini Gas Limited for moving close to breaching the Liquid Niugini Gas agreement struck with the government in late 2009.
"At this point, the state will have no option but to accept that breach and seriously consider terminating the project agreement," Duma reportedly said.
InterOil is yet to make a statement responding to these claims – but O'Neill has already made a swift response.
The new prime minister recently stated that his government will not tolerate "any interference" designed to delay the progress of the Gulf LNG project.
With a final investment decision expected by year-end, O'Neill said all government assistance would be provided to InterOil and its partners to reach this milestone.
He believes this project is as important to the country as the ExxonMobil-led PNG LNG project.
Consequently, O'Neill intends to appoint a senior member of his staff to liaise directly with both joint ventures to ensure that neither project is hindered by "political and bureaucratic nepotism".
Last, but certainly not least, you might also want to consider a PNG newspaper article from The National on Monday (for the whole article click the link):
PM assures security for investors
PRIME MINISTER Peter O'Neill has assured foreign investors, especially in the mining and petroleum sector, that government will not create insecurity, political risk or threaten foreign investment with expropriation. "Let me reassure you that the goal posts have not been shifted and relocated because the playing field remains the same and shall be maintained that way for the foreseeable future," he said during a business luncheon." [The National]
We conclude by saying that for all sorts of reasons, politicians everywhere say stuff, (PNG is no exception, needless to say). It's better to focus what they actually do.
With respect to that, the picture is actually a lot brighter. InterOil's own history on PNG is rather smooth and there are plenty of other foreign companies present. PNG, with a bounty of natural resources (metals, energy, etc.) is actually a pretty welcoming destination for foreign direct investment (FDI).
Although there are the problems you'd expect to be related to a relatively underdeveloped economy (infrastructure, skills, etc.), the PNG economy is actually booming as a result of the foreign investment.
FDI remains critical for that growth to continue; we don't expect the politicians to seriously endanger that.
source: http://seekingalpha.com/
THE Cook Islands, a group of 15 tiny islands dotted across a two million square kilometre chunk of the Pacific Ocean, are world-renowned for their picture-perfect lagoons and super-friendly locals.
But if you draw up a population chart of the Cooks it will look something like this, in descending order: coconuts, chickens, tourists, scooters, Cook Islanders and, finally, lagoons.
Not that this population hierarchy in any way detracts from the charm of the Cook Islands. It doesn't. If anything, it adds to the juxtaposition of tourist hum and island bliss that characterises the Cooks.
There are only around 13,000 Cook Islanders living on the islands. Due to open-visa arrangements with Australia and New Zealand, around 100,000 have left their picturesque homeland and are forging a living overseas. Many return in their sunset years, however, due to their Polynesian penchant for being buried on family land, preferably in the front yard.
This tourist-to-Cook Islander ratio looks set to increase. The Cook Islands government has entered a three-year deal with Air New Zealand to operate weekly direct flights between Sydney and Rarotonga, the main island, which is only about 32 kilometres in circumference.
The Australia-Cook Islands trek used to involve a stop-over in New Zealand, often in the wee hours of the morning, but the entire trip is now just five hours. And that feels far too short, if you're lucky enough to fly business class, as my travelling companions and I were.
Arguably the jewel in the stunning Cook Islands crown is the island of Aitutaki, famed for being the honeymoon destination of Getaway presenter Catrina Rowntree, the location for the American TV series Survivor, and one of the top 10 South Pacific beaches, as voted on TripAdvisor.com.
Aitutaki is a 45-minute flight from Rarotonga but seems a world away from the capital. The airstrip is no longer coral but the simple, tidy building that is the island's airport is anything but touristy.
Although accommodation choices and prices range dramatically, Aitutaki is famed as a romantic destination and some of its lodgings are downright decadent. The Pacific Resort, Aitutaki, features 13 individual beachfront bungalows, each positioned for maximum privacy and sunset views. There are also three villas and six beachfront suites.
The resort offers guests 600 metres of beachfront, an infinity pool and direct access to the lagoon, which is just 1½ metres deep in most places. The resort has been mapping the coral in its reef for guests to do self-guided tours and has produced a map titled "Aquatic Eco Trail – A self-guided snorkelling tour of our resort lagoon".
The resort's Rapae Restaurant offers formal dining in a romantic, candle-lit setting overlooking the lagoon, while its Black Rock Cafe offers casual poolside dining.
I stayed just down the road from the Pacific, in a secluded beachfront villa at Aitutaki Escape.
With its water and coral feature walls and kikau-style frond roofing, Aitutaki Escape exudes a Polynesian ambience while offering every creature comfort this scribe could imagine.
The floors are marble, the ceilings are high. There are downlights and impeccable stainless appliances in the well-appointed kitchen and a big flat-screen television with surround sound in the living area. A four-poster bed with cheesecloth curtains commands the bedroom while a connected bathroom houses a double glass-brick shower in a private courtyard, double sinks, a bidet and complimentary L'Occitane toiletries.
Out back, concertina glass doors open onto a private deck that meanders down to the lagoon and coral-sand beach, while the front boasts a private courtyard, L-shaped plunge/lap pool with rock fountain wall and statue-studded tropical garden.
There is no restaurant at Aitutaki Escape but you can still dine in with style, thanks to the Koru Cafe. A meal for two, delivered, costs $165. For $430, chef and owner Steve Armstrong will come and prepare your meal in-house. And if you fancy something really special, Steve and his partner, Trina, will prepare a six-dish banquet on-site for $540.
The Cooks are world-renowned for their seafood and Aitutaki is no exception. There are myriad choices as close as your complimentary pushbike or seemingly compulsory hire scooter can get you. Tupuna's Restaurant, which is open Monday to Saturday, has a casual, tropical setting. The floor is sandy and the tables are lit by torches, but the dining is anything but lowbrow. Specialties include local mudcrab and fresh reef crayfish. The house favourite is a dish comprising curried prawns, scallops and fish with vegetables, served with rice and a side of spicy pumpkin soup for $35.50.
Venture outside your luxury villa or waddle away from the table and you'll find there is plenty else to see and do on Aitutaki. A cruise of its famed lagoon is an absolute must and offers the chance to snorkel in waters that are home to green sea turtles, giant clams and throngs of colourful tropical fish.
Bishop Cruises' Five Islands cruise takes in Akaimi (a former WWII refuelling stop for Catalina aircraft), Moturakau, whose waters are home to turtles, Honeymoon Island, Maina, and One Foot Island.
During the lunch stopover on One Foot Island you dine on a buffet of salads and fresh barbecued marinated fish, while being serenaded by the ship's crew-cum-ukelele band. If you remember to bring your passport, you can have it stamped at the island's tiny post office.
If you haven't had enough of the lagoon by the time you make your way back to shore, give Samade on the Beach, at Ootu Beach, a whirl. A short walk from where the cruiseboats disembark, this beachfront bar and grill has the location of the universe. Its timber deck finishes about three coral-sand metres from the crystal waters of the lagoon. Sun, sand, sparkling water and $8.50 mojitos. What a way to spend an afternoon.
Aitutaki doesn't need to be all about sunbaking, stuffing yourself and seducing your loved one. There's a serious side, if you want to see it, and one way is through Aitutaki Discovery Safari Tours and its ultimate archaeological cultural tour.
This tour explores a southern Cook Islands sacred site, or marae; traces the inland trails of Kakeroa warriors; and takes in postcard-perfect views from Maungau Piraki, the highest point on the island.
For me, however, the high point of the trip isn't the lookout. It is business owner and tour guide Ngaakitai Taria's commentary and observations on Cook Islands culture.
Nga has taken it upon himself to conduct archaeological research into the island and its people. He also trains contestants for the reality TV show Survivor, and is a budding entrepreneur who grows hydroponic lettuce and tomatoes for resorts on the island.
He is passionate about the role the missionaries played in stripping Cook Islanders of their culture.
"We are discovering the things that were taken from us," he says.
Nga says that, since the arrival of missionaries in 1821, Aitutakians were forbidden to visit their marae.
"They were told they were cursed," Nga says. "Many still won't come."
Nga laments his people's laid-back lifestyle. He says the comfortable yet semi- subsistence existence of many, relying on the bounty of the earth and sea, places too much emphasis on living a good, Christian life. A hunger to do and achieve more provides the impetus for young people to abandon the islands of their birth. But when asked if he thinks Christianity is the root of all evil, he pulls up just short.
"Not exactly," he says. "But these people should be warriors."
Nga believes that much Cook Island culture has been lost or abandoned. For example, he doesn't believe Cook Islanders should kiss, or copulate face-to-face. In ancient times they believed their saliva was sacred and opted for the 'ongi', or nose greeting. This changed with the arrival of the missionaries - hence the term ''missionary position''.
Cook Islanders now kiss but much culture has been preserved in the form of dance and ritual. An island night is an essential immersement in this sweaty, throbbing, exuberant experience. On Aitutaki, Tamanu Restaurant offers a fire dance, cultural show and traditional buffet meal.
Dishes include rukau (green baby taro leaves, called ''local spinach'', cooked in coconut milk), varoa karo (a surprisingly sweet dish using bread that's been baked in an umu, crumbled with coconut cream), poke (a banana and chocolate jelly), pawpaw, ika mata (raw fish marinated in lime juice with coconut cream), rimu (mini sea grapes, which taste a bit like pickles), taro (white root vegetable), kumara (sweet potato) and arrowroot. The dinner and show package costs $55.
If you're looking for the real deal at a price that won't break the budget, you can also pick up cheap and delicious home-made meals, like roti and curries, at the main Aitutaki market on Arutanga Wharf. The market runs Monday to Saturday between 7 am and 2 pm and largely sells traditional foodstuffs.
IF YOU GO
Air New Zealand flies direct between Sydney and Rarotonga weekly, departing Rarotonga on Mondays and Sydney on Tuesdays. This will move to Fridays and Saturdays in October: www.airnewzealand.com.au.
Air Rarotonga flies between Rarotonga and Aitutaki: www.airraro.com.
Aitutaki Escape: www.aitutakiescape.com. Pacifc Resort: www.pacificresort.com. More information: www.cookislands.travel/au.
* **The writer was a guest of Cook Islands Tourism and Air New Zealand.
Don't miss Destinations travel magazine, in Thursday's Newcastle Herald.
source: http://www.theherald.com.au
ALEC HOGG: Graham Briggs has had a busy day. He's the chief executive of Harmony, telling investors what's going on in the company – your strategy, your exploration, your operations, and maybe you can just tell us what's going on in Papua New Guinea, Graham. There were reports that the indigenisation process is gathering momentum there. David and I discussed it the other evening. Unfortunately we ran out of time. We apologise for not bringing you on that night. It seems like a storm in a teacup to us, but what's the real story?
GRAHAM BRIGGS: I agree with your commentary the other night, Alec. You sort of hit it on the head. I think there's a lot of this sort of talk that happens with a new government – and this is effectively the opposition party. The prime minister was in office. There's a bit of rules and regulations, so the opposition basically has got control of the government. It's not an elected party – and we are heading for elections next year. So there's a lot of politics around this. The state actually owns the mineral rights, much like they do here in South Africa, and this was sort of comments by the mining minister, Byron Chan, to get more of those mineral rights in the landowners – remember there's traditional landowners in Papua New Guinea; they won about 95% of the land – into their hands because obviously they will want to partake. But if you look at the history, certainly the history of Harmony operating in Papua New Guinea since basically 2002, we've taken very much cognisance of the local landowners, of the community. We have employment numbers which show local employment. We have women in mining, which really in Papua New Guinea's history hasn't been a big issue at all. So we are actually incorporating the local landowners in a lot of what we do. I guess one could see this as a bit of electioneering, getting the future votes if you like. I don't think the individual actually necessarily has support from his cabinet.
But Papua New Guinea is very pro-mining – 80% of the exports are mining, mainly copper and gold, and certainly I don't think that Papua New Guinea and government is going to so anything to damage that relationship. This is not about nationalisation at all.
ALEC HOGG: It hit your share price. I remember the Friday evening your share price was down 5%, and we were scratching our heads and wondering why. Do you have a partner, though, in PNG? What happened to the share price of Newcrest?
GRAHAM BRIGGS: Well, I believe their share price went down $1. Then, because the gold price was going up, it went up $2. The net effect was up a little bit on the day, so it didn't affect theirs. Now they should have been affected more than us in that situation, because not only do they have 50% of the joint venture, which is Wafi Golpu and also Hidden Valley, but they also operate Lihir Mine, which they acquired last year. So they have, potentially, I don't know, somewhere between 30 and 50% of their value in Papua New Guinea, yet it didn't affect them.
ALEC HOGG: So it could just have been a South African overreaction.
GRAHAM BRIGGS: I think it was a lot of South African – and remember that Harmony is a fairly well-traded share. During the last months we've been trading roughly $50m a day in Harmony shares. So certainly the brokers are making a bit of money out of Harmony. It's a well-traded share and I guess if there was a big fellow on that day, then that's the reaction that would happen.
ALEC HOGG: Well, not as well traded as it was, because David Shapiro is a shareholder. Are you still holding on to yours, David?
DAVID SHAPIRO: I'm out of gold a long time ago.
ALEC HOGG: Well, there you go. Graham, now you know the share price is really going to start running. It was interesting going through your presentation that you gave to shareholders today to see that the South African shareholding is still very high in the company, 39%, whereas one might have thought, being a gold stock, it would have been even more internationally held.
GRAHAM BRIGGS: Ja, I think we have some big core shareholders in South Africa. One of course is ARM, African Rainbow Minerals. They own nearly 15% of us. We have the PIC, which is the Public Investment Corporation – they are a big shareholder. And we've got quite a few big funds.
ALEC HOGG: Allan Gray was big. Are they still?
GRAHAM BRIGGS: Allan Gray are still there. They are still big shareholders of ours, ja. So we've got some big funds that hold shares in Harmony. I don't think it's really traded very much as a retail stock in South Africa, so it's really in the big funds.
ALEC HOGG: They would have been really delighted, no doubt, to hear your production forecast today. That's what pepped the wires up – between 11% and 19% next year from an already large base. Those are big numbers.
GRAHAM BRIGGS: Alec, we've been working hard on really transforming the whole company, spending a lot of capital in the last few years on developing these assets, and they are really on the cusp of producing more. So they are ramping up in production, and that's really what our focus has been on South Africa. So we've got some really good assts going forward in South Africa. All the older, tired, low-grade assets have really been closed down and we've been focusing on these newer assets. So it's really good news going forward.
ALEC HOGG: Was that the thrust of the message that you gave investors today?
Arthur Beren's long search for his United States family is the focus of a Sunday programme to be screened on TV1 on Sunday at 7.30pm.
His story has also inspired production company iMana CreatioNZ to stage a musical, Bridge to Paradise. The company is dedicated to promoting Pacific culture, cultural identity and heritage and raising community awareness through traditional history, drama, dance, songs and music.
The musical will be based on American servicemen from Guadalcanal who were sent to Aitutaki Island to build an airport for the Allies.
This was to stop Japanese expansion through the Pacific during World War Two.
Arthur Black Beren, an NCO in the US Army supply corp, fell in love with island girl Martha Taiono while stationed at Aitutake but returned to the United States just before his Cook Island son, namesake Arthur, was born in 1946.
Arthur – one of about 60 war babies left behind in the Cook Islands by American servicemen – is now a Kerikeri grandfather.
This year, after a lifetime of questioning and thanks to a research project led by Otago University historian Judith Bennett about Pacific wartime children, he found out that his father had remained alive until 1995.
He also discovered that he had three siblings in the United States.
Mt. Hagen women are selling PNG Highlands bilums on auction for bulk order. This is an exciting deal for any interested person who wishes to buy PNG Highlands bilums in bulk. The bilum makers in Mt. Hagen are now selling the bilums at a very cheap and lowest price ever. The lowest price is K15 and the highest is K80. This auction last for the year 2011 only. If you wanted to place a bulk order of PNG highlands bilums from Mt. Hagen, please kindly send an email to: melanesian.customs@gmail.com
*Photographic by PETER SOLO KINJAP of Tambul (Tambul-Nebilyer) Mt. Hagen, Western Highlands Province, Papua New Guinea, South West Pacific. April 2011.
WITH the support of Papua New Guinea's National Library and the Department of Education, Tapa Pacific Publishing is proud to announce the launch of the Tapa Prize for PNG Writing.
Aimed at discovering and promoting PNG writing talent, the Tapa Prize for PNG writing offers awards in three categories: Junior Writers, Young Writers and Adult Writers.
The winners in each category will receive cash prizes donated by the Harvey Family Trust and the opportunity to have their work published by Tapa Pacific Publishing.
