The
Prime Minister Sir Michael Somare today congratulated Esso Highlands Limited
for successfully concluding financial arrangements that enables the US$15
billion PNG LNG Project to proceed to “full execution”.
The
conclusion of sales and purchase agreements with four Asian LNG customers and
the completion of financing arrangements represent a major milestone in the government’s
ongoing efforts to build a vibrant economy.
Sir
Michael said: “My government needs to work in partnership with ExxonMobil and
build public sector capacity and better service delivery so that tight project
schedules can be met so that we may receive dividends and company taxes sooner
in our efforts to meet our development aspirations.
“Government projections suggest that company
tax proceeds from this project will average around K5 billion to K7 billion
annually during the 30-year life of the project.
“Before
we get to the stage when LNG exports will commence much work needs to be done
in various parts of the country to successfully build and commission this vast
project.”
ExxonMobil
and its co-venturers have reaffirmed that under the Benefits Sharing Agreement
the landowners, Provincial Governments and Local Level Governments in the
project footprint area will receive K15 billion to K20 billion during the
30-year project life from royalties, the development levy and equity dividends.
Sir
Michael said: “As Papua New Guineans we should take some pride in the formula
we use to spread benefits from a large project like this throughout our nation.
“The
BSA formula, which we understand is a unique mechanism worldwide, ensures
landowners receive a fair share of returns within a context where benefits can
flow through every corner of this nation through the National Budget.”
As
operator of the PNG LNG Project, ExxonMobil has advised the PNG government that
this LNG project financing agreement represents the biggest loan funding ever
provided for any oil or gas project worldwide.
Sir
Michael said: “This is indeed a big honour for our nation. I call on all
stakeholders to join hands in ensuring smooth progress during project construction
to enable the LNG export operation to be commissioned by the end of 2013.
“As
the third largest equity owner with a 19.6% stake, the National Government
anticipates that dividends will start being earned soon after LNG sales
commence in 2014. Company taxes will commence about four years later in 2018.
“In
negotiating the PNG Gas Agreement with ExxonMobil, this Government did not
provide any tax concessions and it has reintroduced the Additional Profits Tax,
which had been abandoned in early 2003.
“We
have had positive economic growth every year since then and I am especially
thankful that the PNG LNG Project will push this nation’s economic performance
to an even higher level.
“The
challenge for my government is to convert the benefits of this Project to
meaningful development that would improve the lives and living conditions of
every Papua New Guinean.
“The
co-venturers in this project will spend US$15 billion during construction. This
has to be managed in an effective and efficient manner to avoid cost blow outs
that will negatively impact on profitable operations and potential returns to
the National Government.”
The
National Government’s 19.6% equity stake includes 16.6% held by the Independent
Public Business Corporation, as the State Nominee. An additional 2.8% is held
on behalf of landowners by the Mineral Resources Development Company and 0.2%
by Petromin PNG Holdings Limited.
The
overall US$15 billion cost of developing the PNG LNG Project, which excludes
shipping costs, will enable PNG to export 6.6 million tonnes of LNG annually to
customers in China, Japan and Taiwan.
This
would involve the processing of more than 9 billion cubic feet of natural gas from
gas fields in Southern Highlands and Western
Province Central Province ,
just outside Port Moresby
M T SOMARE GCL GCMG CH CF KStJ
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