Collaborations and the Next Stage of PNG’s Petroleum and Energy Sector Growth Strategy


Deputy Prime Minister, Hon Charles Abel

Ministers and Members of Parliament

Distinguished Guests and Investors

Ladies and Gentlemen

 

Let me first thank the organizers together with all our gold, silver and bronze sponsors, for inviting me to speak at this 3rd CWC Papua New Guinea Petroleum and Energy Summit.

 

Thank you for all you have done and continue to do in the Energy and Petroleum Sector – particularly in Papua New Guinea.

 

The theme of this Summit “Collaborations and the Next Stage of PNG’s Petroleum and Energy Sector Growth Strategy” is spot on in so far as the Energy Sector is concerned.

 

My presentation today will:

 

Firstly, reiterate Papua New Guinea’s commitment and efforts on aspects of international and regional energy developments.

 

Secondly, re-emphasis the importance of energy for industrialization and the need, to develop the vast energy resource potential, and opportunities for investments in Papua New Guinea.

 

Thirdly, update progress on the draft NEA bill and my ministerial directions on collaboration by stakeholders to help expedite establishment of NEA and other energy initiatives.

 

Overview of Pressing Energy Needs in PNG

 

Currently, there are 600 - 700 MW of electricity in use excluding stand alone generation.  Generation and usage of standalone systems are additional for largely resource project power needs.

 

These projects are: Porgera Mine in Enga Province, Ok Tedi Mining Limited in Tabubil and Kiunga, Western Province; Lihir Mine on Lihir Island of New Ireland Province, Ramu Nickel in Madang and Hidden Valley Mine which utilizes hydro power from the PNG Forest Products in Bulolo, Morobe Province.

 

Studies by the Columbia University in New York estimates that another 300 MW is needed to ensure sufficient power is generated to meet the 70 per cent electricity access to households by 2030 and 100 per cent by 2050 with renewable energy.

 

This requires a new demand of 300 MW for powering households in the country.

 

Emerging major projects like Wafi Golpu Mining Project (Morobe), Frieda River (Sepik) and Yandera Project (Madang) and connection to Ramu Nickel point to an additional industries’ electricity need of up to 600 - 700 MW.

 

We are therefore talking about a total 1500 MW of electricity to power households and industries in Papua New Guinea within the next ten years.

 

These needs require a holistic, coordinated, collaborative approach in the Energy Sector in Papua New Guinea to address generation, transmission, distribution and even retail of electricity.

 

As Minister responsible for Energy, I recognize and acknowledge the various stakeholders – public sector, state-owned enterprises and the private sector who must be involved. And I note also the discussions on domestic market obligations (DMO), which must also be harnessed if we are to meet and sustain the energy requirements of Papua New Guinea.

 

 

1. Developments in the Energy Sector

Since the adoption of the UN Millennium Development Goals (now superceded by the Sustainable Development Goal 7), the international community has pledged to provide electricity access to all, especially the disadvantaged and under-privileged men, women and children-of-the world as a top priority by 2050.

PNG has incorporated this into our Vision 2050 and the 20-year Strategic Development Plan.

The idea of electricity for all domestic users in PNG is not just a good idea nationally or globally. The National Energy Policy 2017-2027 captures the essence of this in its motto “Harnessing Energy for Life”. Ultimately, it is about lighting up homes, schools, health services and empowering lives for all.

It is also about harnessing PNG’s multiple energy sources – with relevant energy mixes - for industries in Papua New Guinea, which I will address later on.

The harmonisation of PNG’s energy policies with the international community has already begun to bear fruit. The World Bank including five strategic development partners are supporting PNG’s commitment to provide electricity to all PNG users.

Thanks to Prime Minister Peter O’Neill’s initiative to host APEC 2018, the PNG has secured the support of United States, Japan, Australia and New Zealand to jointly provide USD$1.7 billion for the National Electrification Roll-Out Plan (NEROP), the mechanism for meeting the country’s electricity access targets.

With recent endorsement of the K30 million Rural Electrification Program, the O’Neill Government is confident that the commitment in electricity for all households is on track for Papua New Guinea.

However I am also concerned about the additional 300 MW required for NEROP. PNG needs strategic investors to help bridge this shortfall.

I am also concerned that there are only two main grids in Papua New Guinea: The Port Moresby grid and the Ramu grid are literally divided by the Owen Stanley Range. On top of that, we have many isolated islands that require standalone systems for their own power generation, transmission, distribution and retail arrangements.

This is where the importance of other energy sources – solar, wind, biogas, biomass, geothermal, clean coal and ocean current – and investments required to realise them is very much  needed.

There is already a lot of research and studies conducted in these sources of energy to deliver power to these remote locations. PNG welcomes investments to take them to development stages.

This naturally brings me to the industry energy needs of Papua New Guinea to drive the economy.

 

2.     Energy Needs for Industry in PNG

Energy is the great enabler of industrialisation of any country. And Papua New Guinea, I am pleased to say, has vast energy resource potential that dwarfs the 1500 MW required in total at the present time.

But immediately, there is electricity need of 600 plus MW for industries.

In this vein, I am pleased that Prime Minister O’Neill has highlighted that NEC endorsed Domestic Market Obligations policy is in place, which will no doubt greatly enhance domestic utilisation.

I am honoured that my colleague Minister for Petroleum Hon Dr Fabian Pok has stated that My Ministry will be in charge of distributing the Gas and LPG under the DMO Policy of Government.

I already have plans for use of gas for energy needs of the country for this so I welcome this announcement by my brother Minister.

As Minister responsible – and Trustee Delegate – of Kumul Petroleum Holdings Limited and Kumul Minerals Holdings Limited, I have already decided to ensure that most – if not all of the gas and LPG under DMO policy – will be used wholly or as energy mix for upcoming mining projects and domestic LPG usage. And also to support efforts by Department of Petroleum on petrochemicals.

I am mindful of the need for an LPG processing plant for power generation, industrial development and household use. And I will also be seeking investors to pursue this on a win-win arrangement.

The Government will pursue an agreement with the industry to source gas from current as well as future emerging gas projects to ensure a secure supply to meet gas demands for LPG Plant and power generations.

This is important to reduce the current high cost of LPGs in PNG – which is unfortunately one of the highest in the world.  This is unnecessary for a country that produces gas and exports gas.

This is the reason why I want to see an LPG Plant in PNG so LPG gas is cheaply available to citizens and domestic users.

I am pleased to note that the gas to power generation initiatives by Kumul Petroleum Holdings and Oil Search, as well as Mineral Resources Development Corporation are at advanced stages.

These gas to power generation projects are based on the National Content Plan for power generation.

I would also like to see standalone power systems based in geographical locations of PNG and the naturally available energy sources. This includes readily available solar energy with PNG’s vicinity to the equator complemented by other sources like wind, geothermal, gas and others. This concept of energy mix is vital for Papua New Guinea for consistent power supply to industries utilizing standalone systems.

Now all this requires – and endorses the need for – a National Energy Policy.

I was surprised, as the Energy Minister, to discover when I assumed office that there was no Energy Policy. The closest policy in place was the Electricity Industry Policy of 2011.

That has been resolved now with the National Energy Policy 2017-2027 Harnessing Energy for Life endorsed by the NEC in February 2018.

The lack of a coherent and visionary policy on Energy has been the reason for lacks in creating a conducive environment for investment – and investment is required if we are to fulfil the need for 600 MW or more required by emerging major projects and industries as mentioned earlier.

The Energy Policy, endorsed by NEC, also directed the establishment of a National Energy Authority.

 

3. NEA Collaboration and the way forward

I have spoken about electricity for all; I have spoken about electricity for industries to expand the economy and ensure affordable goods and services including import replacements; let me now focus on the governance framework required to realise all these.

In the drafting stages of the Energy Policy, my team quickly noted fragmentations in various functions and responsibilities including regulation being housed in different government agencies. There was no specific organisation involved in promoting investments towards meeting the electricity needs of the country. And in fact, government bodies involved in electricity were part of the problem because of conflict of interests arising from their multiple functions.

This is the main reason the NEC endorsed the establishment of the National Energy Authority together with the Energy Policy. The NEA will be the fully mandated authority with a comprehensive, regulatory and investment promotion functions. Its roles with the Energy Sector includes:

a)   implementation of the energy policy to develop the vast natural, untapped energy sources. This will generate power and also more revenue for the country;

 

b)   enforcing regulations including standards, compliance and issuance of licenses; and

 

c)   promoting investments through efficient and transparent processes.

The emphasis on collaboration in this summit is timely. As Minister responsible for Energy, I have taken on board the concerns expressed directly by investors and indirectly by my colleague Ministers and Energy stakeholders in the public sector.

The process of enactment of the National Energy Authority bill is in the final stages. To expedite this process – and to address other future Energy Sector issues – I have directed my ministry to establish an Energy Sector Coordination Committee.

The Energy Sector Coordination Committee will be the bureaucratic and development partners’ forum to deal with broad issues on the Energy Sector

I understand a group of public sector agencies and development partners chaired by my new Departmental Head met late last month specifically on electricity issues.

The membership of this can be expanded to ensure all key Government and strategic development partners are involved and their mandate expanded.

I also want to announce today that I will be seeking the views of the Prime Minister and Chairman of NEC Hon Peter O’Neill to establish a Ministerial Committee on Energy.

This Ministerial Committee on Energy will be the final vetting committee for all energy matters before they are brought to NEC.

My experience over the last 18 months highlight that collaboration is vital – and this summit has affirmed the need for it.

 

Summary & Conclusion

Let me summarise and conclude: the Energy Sector in PNG is aligned to international community and social obligation to provide electricity for all domestic users;

It notes the need for investment for extra 300 MW for this and the 600 MW for industries including emerging major projects which can be offset by DMO gas and utilisation of other energy sources;

It notes that collaboration for the next stage of energy sector growth is vital for

·         good governance,

·         necessary for attracting investments,

·         important for harnessing various natural energy sources,

·         crucial for powering the expansion of industries, providing jobs,

·         generating revenue for the economy,

·         lighting up and powering homes; and ultimately expanding the economy and;

·         improving livelihoods.

In conclusion, the energy sector is poised to provide energy needs for both domestic and industrial users in a substantial way. Such a major step forward in energy development will no doubt have a significant impact in terms of economic growth and prosperity of our country.

 

Thank You.