Pnglng opportunities jan'14

Enterprise Developments Energy for the World. Opportunity for Papua New Guinea.

Focusing on Landowners of Eneji Bilong Wol. Luksave Bilong Papua Niugini.

Petroleum Project Areas

PART I

Developing Business Enterprises For Landowners Of Petroleum Project Areas

January 2014

PNGLNG-­‐Project Scoping Report

• Business planning • Business growth • Integrated training

• Web-­‐based platform • Market linkages • Buyer connections

SUSTAINABLE BUSINESSES

TRADE PLATFORM

VALUE-­‐ ADDING

MARKET DATA • Regional markets • Global markets • Better enterprise planning

• Regional focus • Community hubs • Local employment

Special focus on PNG enterprise developments

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PNGLNG-­‐Project Scoping Report

Table of Contents PNG LNG SUMMARY

1

PNG LNG OPPORTUNITIES STATE MOA OPPORTUNITIES

1 1

PNG LNG AGREEMENT STRUCTURE

2

REGIONAL DEVELOPMENT CONTEXT AGREEMENTS FRAMEWORK

2 3

PROJECT BENEFITS MODEL

4

BENEFITS FRAMEWORK CURRENT BENEFITS STATUS

4 8

COMMUNITY SUPPORT STRUCTURE

15

PNG LNG MODEL

15

iii

PNGLNG-­‐Project Scoping Report

PNG LNG Summary PNG LNG Opportunities

The project is now in production phase characterized by reduced (slightly) direct economic opportunities (employment services and procurements), however these will still continue to be available through Esso Highlands Ltd (EHL) ‘National Content Plan.’ There will still be economic opportunities available through the project over the 30-­‐year Production Phase, with an estimated spend with Representative Landowner Companies (Rep Lancos) and other PNG businesses generally of approximately K200 million per year for goods and services.

Beyond this there are other active programs like the EHL Strategic Community Investments (Community Development Support Program) with annual funding support estimated around K14 million (US$5M) per year during the Production Phase. This program provides support for community-­‐driven health, education and infrastructure projects. This extends to government funded infrastructure projects through the Tax Credit Scheme (schools; health facilities; staff housing; roads; communications; and water supplies).

Strategies EHL provides opportunities through the Enterprise Centre (IBBM) for its National Content Plan, which will require the generation of alternative options as channels to securing business planning support to existing or new Rep Lancos and other PNG local businesses. Options for securing this market will include direct networking and approaches through existing Rep Lancos, through Provincial and Local Level (PG, LLG) decision makers or affected communities. For community-­‐driven project opportunities this will need to be secured through NGO’s in the first instance, which will require business networking and direct approaches. There are options open to for-­‐profit enterprises, which represent the most likely channel for securing (enterprise planning) projects for this program component, through direct networking with PGs/LLGs/affected communities (to determine which for-­‐profits).

PNGLNG Project (funded) Opportunities: Program 2014 2015 2016 National K200m K200m K200m Content Plan Strategic K14k K14k K14k Community Investments

State MOA Opportunities

The project benefits sharing arrangements under the MOA (including seed capital, tax credit schemes, infrastructure development grants and high impact infrastructure projects), represent the largest channel for LNG related projects (health, roads, bridges, schools, other economic development). There are substantial funded project opportunities in the 2014 National Budget appropriations, making this channel the prime source for securing enterprise development (business planning support) opportunities.

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PNGLNG-­‐Project Scoping Report

State MOA Project (funded) Opportunities: Program 2014 2015 2016 Infrastructure K120m K120m K120m development grants -­‐(IDG) High Impact K50m

Infrastructure projects Economic K50m

corridor concept projects Tax Credit K130m

Scheme

These MOA projects are implemented through the Mineral Resources Development Company Ltd (MRDC-­‐SOE), specifically their Project Management Unit (PMU) located in Moro, Kikori and Hides.

Strategies The MRDC represents the most direct channel to network and secure project tender/application access and through this agency and to determine upcoming project opportunities (State funded). Relationships through the PMU needs to be prioritized in order to secure entrance to project tendering/application access. This channel will remain challenging for accessing direct tender opportunities through the highly volatile PNG State Tenders processes. At the State agency levels care needs to be taken in securing direct project access (undue influence risk) and therefore this channel will remain challenging.

Beyond these constraints the most effective strategies will remain with networking through Rep Lancos and affected community structures to secure project opportunities.

PNG LNG Agreement Structure Regional Development Context

Broadly there are four (4) provincial government (PG) regions and associated Local Level Government (LLG) authorities included in the Petroleum Development License (PDL) areas:

1. Southern Highlands Province 2. Gulf Province 3. Western Province 4. Central Province

Within each PG region there are around 117 impacted communities arranged into eight groups:

1) Hides

2

PAPUA NEW GUINEA LNG Project

2.2

Project Impact Area

Community Support Strategy Page 5 of 45

PNGLNG-­‐Project Scoping Report

For the purposes of the CSS, the Project Impact Area (PIA) has been defined in terms of the following ‘Primary’ and’ Secondary’ areas: 2) Moran 3) Kutubu Primary: o Communities identified in the EIS as likely to be immediately and directly 4) Gobe and/or indirectly impacted by the Project; and 5) Kikori o Project ‘Land Owners’ as defined in the Oil & Gas Act, 1998.

6) Juha 7) Komo; and Secondary:

8) Konebada -­‐oLNG Areas Plant Site and communities located beyond ‘Primary’ impact area but

nonetheless potentially affected by the Project; and The project development as been arranged ccording to located a series beyond of PDL’s: o Areas,hcommunities and ainstitutions ‘Primary’ impact area

that will directly or indirectly support the Project. i. PDL 1 (Hides 1) 2.2.1 Primary PIA ii. PDL 2 – (Kutubu project) The EIS3(2009) identified 117 communities that were likely to be impacted by the Project. iii. PDL /4 – (Gobe Project) The EIA grouped these communities into eight clusters: Hides 4: Moran; Kutubu; Gobe; iv. PDL 5 – (Moran Project) Kikori; Komo; and LNG Plant Site (Figure 3). These catchments for the most part v. PDL Juha; 6 -­‐ Komo project contain culturally homogeneous groups, or groups which are co-resident within local vi. PDL 7-­‐ Hides 4 APDL47 communities. Further details are presented in Appendix 1. vii. PDL8-­‐ Angore The Oil and Gas Act 1998 (O&GA) defines a ‘Project area landowner’ as those persons with

land rights within Petroleum Development Licenses or within the 5 km buffer zone inside or

around dedicated Project facilities such as plant sites and pipelines. The majority of the

Project area landowners fall within the area occupied by the 117 communities identified in EIS5. the PDL groupings:

Figure 3: Project Catchment areas (Primary PIA)

Agreements Framework The Hides catchment here includes parts of PRL11 Angore and Benaria. The catchment name has been retained for easier reference to, and subsequent comparison with, the 2005 PNG Gas SIA catchments.

5 Note that they PIA is effectively defined by the aggregation of these community boundaries.

4

The project benefits are structured according to two broad agreements:

PGGP-EH-SPENV-000018-029 November 2010 • PNG LNG Umbrella Benefits Sharing Agreement (UBSA) -­‐ Independent State of PNG, Rev 2 representatives of Project area landowners, and four provincial and ten local level governments executed the PNG LNG Umbrella Benefits Sharing Agreement (UBSA) in

3

PNGLNG-­‐Project Scoping Report

•

May 2009. The UBSA was negotiated at a development forum, required under the Oil and Gas Act as a precondition of award of licenses for development of the Project.

These agreements have an annexure that outlines different infrastructure projects that the Government will build for the affected project area landowners.

Memorandum of Agreement (MOA) for the project is a commitment from the Government to build infrastructure project in the affected petroleum areas. The MOA projects are an agreement between the landowners, the State, PGs and LLGs, as opposed to those project submissions outside of the MOA list.

Some further definitions on the operation of MOA projects:

•

is a commitment from the Government to build infrastructure project in the affected petroleum area,

•

is not a commitment by the Government to write cheques to landowner associations, companies and even individuals,

• •

have already been agreed to between the landowners, the State, PGs and LLGs for each agreement, the State is not obligated to build any project outside of what is agreed in the existing MOAs,

•

those project submissions outside of the agreed list might be considered for funding through the normal budget process or through other government programs such the economic corridor concept.

The State through the National Executive Council (NEC-­‐2011) has allocated management and implementation of all MOA infrastructure projects, to the Mineral Resources Development Company Limited (MRDC). Specifically the MRDC is the chief implementation agency (SOE) for the outstanding MOA infrastructure projects to affected landowner communities, through their Project Management Unit (PMU). The PMU main offices for operations are located at Moro with branches in Kikori and Hides.

Project Benefits Model Benefits Framework

Landowners in the affected areas share in the project through direct and in-­‐direct benefits:

4

5.1.3

Description of Project Royalties, Taxes and direct Financial Benefits

5.1.3.1 Benefits

PNGLNG-­‐Project Scoping Report

Landowners are recipients of both direct and indirect benefits and are described in Table 10:

Table 10: Landowner Direct and Indirect Benefits Direct

Cash components of royalties & equity dividends; and The longer-term benefit from the future generations trust portions of royalty & equity dividend payments.

Indirect

Social infrastructure construction or maintenance funded by tax credits or development levies and infrastructure or services provided from application of the community investment trust portions of royalty & equity dividend payments; and

PAPUA NEW GUINEA The LNG Project

Community Support Strategy

Project area communities would also benefit from National Government Page 25 of 45 payments of seed capital and major infrastructure funding.

5.1.3.2 Calculation of Royalties, Equity Dividends and Development Levies The project benefits sharing structure comprises the PNGLNG UBSA and the PGGP-EH-SPENV-000018-029 2010 A detailed description how royalties, equity dividendsThe and development levies are State government (MOA) of infrastructure project commitments.

MOA benefits are November Rev 2 calculated is provided in the 2009 Environmental Impact Statement (EIS) Social Impact the largest components of the benefits distribution process and are the direct responsibility Assessment (SIA) Appendix 26. A brief overview regarding the calculation of these benefits of State, Provincial and Local Government (seed capital, project grants, development levies, is provided in Table 11: Etc.): Table 11: Benefit Calculations

Royalties

Royalties equal 2% of the well head value of petroleum produced, will be payable from First LNG. In line with the OGA 40% of landowners’ royalties is paid as cash and of the remainder, 30% to a community investment trust and 30% to a future generations trust.

Development Levies

Development levies equal 2% of the well head value of petroleum produced.

Will be payable from First LNG and paid to impacted provincial & local-level governments.

Equity Dividends

Equity dividends will be paid to Project shareholders once the activity is profitable, in proportion to their respective shareholding percentages. Where equity shareholding is not free then receipt of dividends by recipients is dependent on financing conditions. In line with the OGA, 40% of landowners’ equity dividends are paid as cash and of the remainder, 30% is paid to a community investment trust and 30% to a future generations trust.

Tax Credits

Seed Capital

State Infrastructure Commitments

Under current legislation petroleum resource joint venture partners can spend up to 0.75% of their assessable income on Government approved infrastructure construction and maintenance. Under the PNG LNG Gas Agreement the State enacted legislation that will enable an additional 1.25% of the Company’s assessable income on what is referred to as ‘Approved Infrastructure Expenditure’, which in turn is defined as upgrades to existing, and construction of new, public roads and bridges. Some of the specific infrastructure is noted in the Gas Agreement.

In the umbrella BSA the State committed to allocate a total of K120 million to the Project area landowner companies in accordance with guidelines to be set by the National Executive Council. Payment would be 20% on announcement of Early Works and the remaining 80% at the time of LNG Financial Close, with a sharing between PDL landowners and Pipeline/Plant site landowner in a 72/28 ratio.

In the umbrella BSA the State committed to the expenditure of a total of K1.2 billion, over a ten-year period starting in 2010, on infrastructure construction and maintenance.

5.1.3.3 Benefits Distribution Representative Landowner Companies (Rep Lancos) established under the Umbrella At the umbrella BSA Forum the apportionment of the various statutory benefits arising as a result of the Project was discussed at length between representatives of impacted communities, provincial & local-level governments and the State, in particular sharing between beneficiaries in PDL and pipeline & processing facility (plant) areas.

5 5.1.3.4 Royalties

Based generally on this process, selected activities will be reserved for the Representative Lancos as discussed in Section 6.5.2. If a Representative Lanco’s star rating improves, they may be considered to perform more complex activities, providing that these activities are

PNGLNG-­‐Project Scoping Report sustainable.

EHL will establish an Enterprise Centre to help Representative Lancos and

other PNG businesses that will support the Production phase to become sustainable in the long term.

Benefit Sharing Agreement (UBSA) and the License Based Benefit Sharing Agreement (LBBSA), were direct recipients through contracts for project employment and procurements 6.4.5 The List of Representative Lancos during the construction phase: The list of Representative Lancos, current at the time of writing, is provided below. EHL’s Land and Community Affairs (L&CA) group may modify the list of Representative Lancos

from time to time to reflect developments. Any change will be communicated to the EPC Contractors and other stakeholders.

Rep Lancos (PNGLNG-­‐ Construction phase) Area Hides - Angore – Komo Juha

Acronym HGDC

Representative Lanco Hides Gas Development Company Ltd

Moran

MDC

Moran Development Corporation

Kutubu

MIC KSS KTL/TWL KCL Kawaso

Maka Investment Corporation Kutubu Security Services Kutubu Transport Ltd/Transwonderland Kutubu Catering Limited Kawaso Ltd

GFE GFS

Gobe Field Engineering Gobe Freight Services

PAPUA NEW GUINEA LNG Project Gobe

Community Support Strategy Action Plan Page 7 of 25

Key project stages are as follows: KOI Kikori Oil Investment Kikori-Omati-Kopi GFS Gobeemployment, Freight Services • Commencement of construction (start-up ramp-up of procurement and supply contracts, increases in the circulation of cash in what have traditionally been Laba Laba Holdings Ltd LNG Plant communities) subsistence

Figure 12 - Current procurement List of Representative Lancos • Peak construction (employment, and supply contracts, transition from

subsistence to cash-based economies) The project development phase in now complete and nearing commencement of production PGGP-EH-BPZZZ-000013 June 2009 • aCommencement operations (small increase work-force) phase nd therefore the of benefits sharing moves from tin he skilled previous heavy emphasis on Rev. G employment procurement plans for those ep Lancos established to participate, to now • Royaltyand payments and disbursement of Requity dividends include (in addition) more emphasis on the ‘Benefits Sharing Agreements’ components Distribution of benefits streams by the Government of PNG via the Benefits Sharing (above/below): Agreement (equity dividends, development levies, infrastructure and business development

grants, etc) is staged over the life of the project (Figure 2.3 and Figure 2.4).

Figure 2.3: Landowner Benefits Architecture

6

PAPUA NEW GUINEA LNG Project

Rev G

PNGLNG-­‐Project Scoping Report Content National

Plan Page 38 of 51

Rep Lancos (PNG LNG -­‐ Construction phase)

7

Figure 15 - Location of Representative Lancos

PNGLNG-­‐Project Scoping Report

Separate to the PNG LNG Rep Lancos structure, the MRDC (SOE) manages Rep Lancos for both existing PNG mining operations (OK Tedi, Porgera) and the PNGLNG affected areas: MRDC Subsidiaries §

§

§

§

§

Mineral Resources Star Mountains Limited (MRSM) -­‐ 3.1% indirect interest in the giant Ok Tedi copper-­‐gold mine for the Ok Tedi landowners.

Mineral Resource Ok Tedi No. 2 Limited (MROT) -­‐ 3.1% indirect interest in the Ok Tedi mine for the Western Provincial Government.

Mineral Resource Enga Limited (MRE) -­‐ 2.5% interest in the world class Pogera Gold mine for the Pogera landowners and a further 2.5% for the Enga Provincial Government.

Petroleum Resources Kutubu Limited (PRK) -­‐ 6.75% interest in Petroleum Development Licence 2 (PDL 2) for the affected people in the Kutubu region of the Southern Highlands Province, the coastal people of Gulf Province whose land hosts the crude oil pipeline, and the provincial governments of the two provinces.

Petroleum Resources Gobe Limited (PRG) -­‐ 2.0% equity interest in the Gobe oil fields (PDLs 3 and 4) for the affected Kikori and Samberigi people.

MRDC is a direct equity participant in the PNG LNG project with a 2.8% interest held by the company on behalf of its subsidiary companies:

The participating companies in the PNG LNG project are:

• Gas Resources Kutubu Ltd – 1.1440 % • Gas Resources Gobe Ltd – 0.0237 % • Gas Resources Moran Ltd – 0.0199 % • Gas Resources Hides 4 Ltd – 1.3519 % • Gas Resources Gigira Ltd – 0.0237 % • Gas Resources Juha Ltd – 0.1324 % • Gas Resources Angore Ltd – 0.1327 %

Current Benefits Status

The MRDC (2011) provides the following updates on implementation status for MOA infrastructure projects:

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PNGLNG-­‐Project Scoping Report

1.

The petroleum projects that have existing memoranda of agreements, memoranda of understandings or development agreements with the State, PGs and LLGs are the following projects only: i. Petroleum Development License (PDL) 2 – Kutubu project; ii. Petroleum Development License (PDL)3/4 – Gobe Project; iii. Petroleum Development License (PDL)5 – Moran Project; and iv. Petroleum Development License (PRL)1 – Hides Gas to Electricity Project

2.

All the following gas development licenses do not have any outstanding MOA projects:

iii. PDL 6 -­‐ Komo project iv. PDL 7, (Hides 4 APDL47) v. PDL 1 (PNGLNG Project-­‐Hides 1) and vi. PDL8 -­‐ Angore

Current State commitments: The State is now committed to deliver the outstanding MOA projects. The commitment is shown by the fact that money has been appropriated in the 2014 National Budget towards MOA projects -­‐ “The Government will meet its crucial obligations through the 2014 Public Investment Program by providing K120 million for the Government’s commitments under the LNG Project Umbrella Benefit Sharing Agreement and an additional K50 million for High Impact infrastructure Projects for Southern Highlands”. (Hon. Charles Abel, MP Minister for National Planning, VOLUME 3 PUBLIC INVESTMENT PROGRAM 2014 – 2018).

1. Infrastructure development grants (IDG)-­‐ An amount of K1.2 billion has been allocated equally over two five year periods, commencing in 2010 for infrastructure development and maintenance in the affected Project areas and provinces -­‐ the 2014 Public Investment Program budget allocation is K120 million (Dept. Treasury).

2. Business development grants (BDG) -­‐ The State has provided K120 million (construction phase) to assist landowner companies in business development activities under the PNG LNG Project.

3. Ministerial Commitments – The State provided PGK 30million (2013 Appropriation – VOLUME 2 Part 1-­‐A: 2014 BUDGET ESTIMATES).

4. High Impact Infrastructure projects -­‐ the 2014 Public Investment Program budget allocation is K50 million (Dept. Treasury).

5. Economic corridor concept projects – the 2014 National Budget allocation is K50.0 million (Dept. National Planning) for the Special Economic Zone -­‐ Corridor Development – (the first region of PNG to be established as a Special Economic Zone will be the Sepik Plains which is

9

PNGLNG-­‐Project Scoping Report

expected to attract foreign investment for oil palm production).

6. Tax Credit Scheme-­‐ 2014 Budget allocation K130 million (Dept. National Planning).

30

PIP Number: 03386 Project Name: Infrastructure Development Grant Executing Agency: 208 - Department of Treasury Objectives: To undertake the National Government's infrastructure commitments made in the Umbrella Benefit Sharing Agreement (UBSA) as part of the government's liaison andpublic affairs programs with the landowners and relevant stakeholders.

Status: From 2010 to 2013, a total of K480 million was appropriated with the funds released. There has been a lack of progressive reporting from the provinces.

Components: Components include Grants for infrastructure developments in the PNG LNG Project affected provinces.

Location: Project location is in the resource rich province of Southern Highlands, Gulf, Hela & Central Provinces.

Justification: This is a fixed commitment by the Government of PNG to cater for the Infrastructure projects in the affected provinces.

Capacity: The concerned National Departments and the affected Provincial Administrations have the capacity to implement the project.

Beneficiaries: The beneficiaries will be the people in Hela, Southern Highlands, Gulf and Central Provinces.

Sustainability: The projects implemented under the IDG will be sustained by the concerned Provincial Administrations under their recurrent budget.

10

PNGLNG-­‐Project Scoping Report

31

03386

Infrastructure Development Grant Expenditure Projections and Financing Requirements

A: Expenditure Projections and Financing Requirements 2012

PROJECT COST

(in Thousands of Kina) 2013

Actual

5 Year

2014

2015

2016

2017

2018

Total

DIRECT PROJECT COST Current Expenditure

480,000.0

Current Transfers

120,000.0 530,000.0

50,000.0 120,000.0 120,000.0 120,000.0 120,000.0

120,000.0 530,000.0

50,000.0 120,000.0 120,000.0 120,000.0 120,000.0

Personal Emoluments Goods and Other Services Sub-Total Capital Expenditure Capital Transfers Acquisition of Existing Assets

A

Capital Formation

70,000.0

70,000.0

Sub-Total

70,000.0

70,000.0

TOTAL DIRECT PROJECT COST

120,000.0 600,000.0 120,000.0 120,000.0 120,000.0 120,000.0 120,000.0

Technical Assistance Project Preparation Equipment Advisory Training B

TOTAL TECHNICAL ASSISTANCE 120,000.0 600,000.0 120,000.0 120,000.0 120,000.0 120,000.0 120,000.0

TOTAL PROJECT COST (A+B) FINANCING SOURCES IDENTIFIED FINANCING Direct Project Financing Government Contributions Loans Grants b) Self Generating Revenue a) Government Input

120,000.0 600,000.0 120,000.0 120,000.0 120,000.0 120,000.0 120,000.0

C

TOTAL DIRECT FINANCING

120,000.0 600,000.0 120,000.0 120,000.0 120,000.0 120,000.0 120,000.0

D

Technical Assistance 120,000.0 600,000.0 120,000.0 120,000.0 120,000.0 120,000.0 120,000.0

TOTAL FINANCING (C+D) FINANCING SOUGHT Direct Project Cost (A-C)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Technical Assistance (B-D)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

TOTAL FINANCING SOUGHT

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

2012

2013

2014

B: Development Budgets for this PIP Appropriation Level

Code

Description

21043

Infrastructure Development Grant

Total Project

120,000.0 120,000.0 120,000.0 360,000.0

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PNGLNG-­‐Project Scoping Report

32

PIP Number: 03387 Project Name: High Impact Projects Executing Agency: 208 - Department of Treasury Objectives: To fund high impact projects (HIP) for the Hela and Southern Highlands Provinces as part of the benefit package to the landowners of the PNG Liquefied Natural Gas (LNG) Project under the Umbrella Benefit Sharing Agreement (UBSA).

Status: There is no implementation report submitted to the Department of National Planning and Monitoring from the responsible implementing agency and stakeholders.

Components: There are nine (9) projects identified under the HIIP and they include: 1. Kikori-Kutubu-Tari-Koroba-Kopiago North Coast Road (Tax Credit Scheme) 2. Komo to Tari road sealing 3. Hela City Development (First Phase) 4. Komo Township 5. Magarima Township 6. Kutubu Township 7. Koroba Township 8. Nogoli Growth Centre 9. International Airport at Tari (first phase) Location: The projects under the HIIP will be located partly in the Gulf Province and in the Southern Highlands and Hela Provinces.

Justification: The High Impact Infrastructure Projects funding are part of the PNG LNG ProjectUBSA and are part of the National Government's undertakings. The National Government is ensuring to have the projects implemented with the funding appropriated.

Capacity: The National Government agencies, Departments of Treasury, Finance, National Planning and Monitoring, Petroleum and Energy and Works will work with the Provincial Administrations concerned to implement the projects identified.

Beneficiaries: The people of Gulf, Southern Highlands and Hela Provinces.

Sustainability: The projects implemented will be sustained by the concerned Provincial Administrations.

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PNGLNG-­‐Project Scoping Report

03387

High Impact Projects Expenditure Projections and Financing Requirements

A: Expenditure Projections and Financing Requirements 2012

PROJECT COST

(in Thousands of Kina) 2013

5 Year

Actual

2014

2015

2016

2017

2018

Total

DIRECT PROJECT COST Current Expenditure

200,000.0

Current Transfers

50,000.0 153,000.0

3,000.0

50,000.0

50,000.0

50,000.0

50,000.0 153,000.0

3,000.0

50,000.0

50,000.0

50,000.0

Capital Formation

47,000.0

47,000.0

Sub-Total

47,000.0

47,000.0

50,000.0 200,000.0

50,000.0

50,000.0

50,000.0

50,000.0

50,000.0 200,000.0

50,000.0

50,000.0

50,000.0

50,000.0

Personal Emoluments Goods and Other Services Sub-Total Capital Expenditure Capital Transfers Acquisition of Existing Assets

A

TOTAL DIRECT PROJECT COST Technical Assistance Project Preparation Equipment Advisory Training

B

TOTAL TECHNICAL ASSISTANCE TOTAL PROJECT COST (A+B)

FINANCING SOURCES IDENTIFIED FINANCING Direct Project Financing Government Contributions Loans Grants b) Self Generating Revenue a) Government Input

50,000.0 200,000.0

50,000.0

50,000.0

50,000.0

50,000.0

C

TOTAL DIRECT FINANCING

50,000.0 200,000.0

50,000.0

50,000.0

50,000.0

50,000.0

D

Technical Assistance 50,000.0 200,000.0

50,000.0

50,000.0

50,000.0

50,000.0

TOTAL FINANCING (C+D) FINANCING SOUGHT Direct Project Cost (A-C)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Technical Assistance (B-D)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

TOTAL FINANCING SOUGHT

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

2012

2013

2014

50,000.0

50,000.0

50,000.0 150,000.0

B: Development Budgets for this PIP Appropriation Level Code

Description

21047

High Impact Roads Feasibility Study (UBSA)

Total Project

13

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PNGLNG-­‐Project Scoping Report

109

PIP Number: 02452 Project Name: Tax Credit Program Executing Agency: 229 - Department of National Planning and Monitoring Objectives: 1. To extend by way of capital works and maintenance of Government's infrastructure on the national development priority sectors, the beneficial impacts of mining, petroleum and primary industry developments to the population of the host province and other parts of PNG; and 2). To assist where possible in developing aplanning and implementation capacity at either the Provincial, District, Local Government or Ward levels.

Status: An ongoing program which is administered through the Department of National Planning and Monitoring. DNPM convened the first Tax Credit Scheme (TCS) Project Screening Comittee (PSC) and Project Appraisal Committee (PAC) meeting for the year on the 5th and 7th of May respectively. New Britain Palm Oil Ltd, Ok Tedi Mining Ltd, Porgera Joint Venture (PJV), Oil Search Ltd, and Hargy Oil Palm Ltd submitted proposals to the total value of K39,711,433.25. Initial approved infrastructure projects for implementation by the resource developers are progressing well and are on target despite little progress in other areas.

During the 1st and2nd Quarter, 13 Projects were approved to be implemented were by the total amount earmarked for was K18,735,535.76 and the reminder was allocated for other TaxCredit Schemes within the country.

Components: The program has six (6) main components: 1). Tranport Infrastructure; 2). District Administration Infrastructure; 3). Health Infrastructure; 4). Education Infrastructure; 5). Primary Industry Infrastructure; and 6). Other Infrastructure projects Location: The project will be implemented nationwide.

Justification: It has been recognised that the provincial and National Governments have insufficient planning, engineering or contruction capacity in isolated regions to undertake infrastructure developments and that this inability has created discontentfor landowners, the people of the provinces and the developers involved.

Capacity: The resource developers have the capacity to implement this program through various contractors involved.

Beneficiaries: The people of PNG will be the beneficiaries of this Tax Credit Scheme Programme.

Sustainability: Respective Provincial Governments through the Provincial Administrations to maintain and sustain the projects after the completion of each activity under the recurrent Budget.

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PNGLNG-­‐Project Scoping Report

02452

Tax Credit Program Expenditure Projections and Financing Requirements

A: Expenditure Projections and Financing Requirements 2012

PROJECT COST

(in Thousands of Kina) 2013

5 Year

Actual

2014

2015

2016

2017

2018

Total

DIRECT PROJECT COST Current Expenditure

320,000.0

Current Transfers

80,000.0 210,000.0 130,000.0

80,000.0

80,000.0 210,000.0 130,000.0

80,000.0

80,000.0 210,000.0 130,000.0

80,000.0

80,000.0 210,000.0 130,000.0

80,000.0

Personal Emoluments Goods and Other Services Sub-Total Capital Expenditure Capital Transfers Acquisition of Existing Assets Capital Formation Sub-Total A

TOTAL DIRECT PROJECT COST Technical Assistance Project Preparation Equipment Advisory Training

B

TOTAL TECHNICAL ASSISTANCE TOTAL PROJECT COST (A+B)

FINANCING SOURCES IDENTIFIED FINANCING Direct Project Financing Government Contributions Loans Grants b) Self Generating Revenue a) Government Input

80,000.0 210,000.0 130,000.0

80,000.0

C

TOTAL DIRECT FINANCING

80,000.0 210,000.0 130,000.0

80,000.0

D

Technical Assistance 80,000.0 210,000.0 130,000.0

80,000.0

TOTAL FINANCING (C+D) FINANCING SOUGHT Direct Project Cost (A-C)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Technical Assistance (B-D)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

TOTAL FINANCING SOUGHT

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

2012

2013

2014

B: Development Budgets for this PIP Appropriation Level Code

Description

20059

Tax Credit Program

Total Project

0.0 130,000.0 130,000.0 260,000.0

Community Support Structure PNG LNG Model During project construction the main forms of economic inclusion were through direct workforce employment and supplier contract opportunities through the network of Rep

15

110

PNGLNG-­‐Project Scoping Report

Lancos (listed earlier) and PNG non-­‐Lancos. Now that the project will be entering the production phase, there will be reduced supplier (procurements) and workforce employment opportunities for PNG local businesses (including Rep Lancos). However there will still be economic opportunities available through the project over the 30-­‐year Production Phase, with an estimated spend with Rep Lancos and other PNG businesses generally of approximately K200 million per year for goods and services. General opportunities reserved for Rep Lancos include -­‐ Labor, catering, camp maintenance, security, vehicles and drivers.

The Production Supplier Development program for inclusion for these opportunities: •

PNGLNG (www.pnglng.com) Supplier Database registration;

•

regular supplier forums that will cover the scope of contracts, safety, standards of business conduct, invoicing requirements;

•

knowledge transfer from international companies to PNG companies; and

•

ongoing capacity building training programs executed via the Enterprise Centre.

The project delivers its Local Business Development Program through the Enterprise Centre, which in turn is located within the premises of the PNG Institute of Banking and Business Management (IBBM) in Port Moresby. The Enterprise centre provides: a) Build capacities of PNG businesses which will engage in some form of business activity with the PNG LNG Project; b) Develop and enhance the business skills of Papua New Guineans employed by the national supplier companies; c) Facilitate access to business finance; d) Provide business mentoring services; e) Provide business advisory services; f)

Ensure efficient communication with contractors and sub-­‐contractors.

Strategic Community Investments (Community Development Support Programs) are voluntary programs (Community Investments and Tax Credit Arrangements) provided by the project to host communities, primarily in the Project Impact Area (PIA) in areas like health, education, sustainable livelihoods (Rural livelihood improvements and income generating opportunities) and environment.

The budget is an estimated K14 million (US$5M) per year during the Production Phase. The program works in collaboration through local non-­‐government organizations (NGOs) where possible or through for-­‐profit service providers where these initiatives are beyond the NGOs’ capacity or not within their mission. Both program components cover health, education and infrastructure (including government approved investments).

Tax Credit Projects and other infrastructure development funds (development levies, community investment trust monies, national government commitments) will be applied to improving basic social infrastructure in the Project Impacted Areas: schools; health facilities; staff housing; roads; communications; and water supplies. Tax credits are submitted to

16

PNGLNG-­‐Project Scoping Report

Government committees consisting of representatives of Government departments: Treasury, Planning, Finance, Works, Provincial Affairs and Department of Petroleum and Energy. Projects are considered within the context of the Medium Term Development Strategy (MTDS).

17