China surpasses Japan as the 2nd largest world economy

Hock's Viewpoint - By Choong Khuat Hock
China's growth and challenges

CHINA surpassed Japan as the second largest economy in the world in the fourth quarter of 2009.
Although Japan’s gross domestic product (GDP) for 2009 at US$5 trillion was higher than that of China at US$4.9 trillion, from the fourth quarter, China produced more goods and services (i.e. enjoyed higher GDP) than did Japan.
It still has some way to go before catching up with the United States, which had a GDP of US$14.5 trillion in 2009.
If China can grow 4% faster than the US annually, it is likely to surpass the US economy in 25-30 years. This could be sooner if the undervalued renminbi is revalued upwards.
Advantages
On a purchasing power parity (PPP) basis, which assumes similar cost for identical products and services in different countries, China overtook Japan in 2001 (see chart) and could overtake the US by 2020.
As per the International Monetary Fund, China’s GDP per capita in 2009 at only US$3,566 was still significantly lower than that of Japan (US$39,573) and the US (US$46,443).
Growing from a low base was the easy part; the challenge is to sustain growth when China becomes a middle income nation.
China has a few advantages that will help it sustain growth. First, it has a strong pro-growth government that can implement its plans.

In the past, such plans like the Great Leap Forward and the Cultural Revolution were socio-economic disasters but under the collective leadership structure, policies are more measured.
A strong government has enabled China to quickly modernise its infrastructure (unlike India) and enhance its strong position in certain sectors like renewable energy, steel and manufactured exports.
Second, China has a very large domestic market that enables domestic producers to achieve economies of scale and attract foreign direct investments and technology into the country.
Third, China has made good strides in education and research and development. According to Unesco, China’s share of global researchers rose to 20.1% from only 14% in 2002 (see table on the previous page).
Challenges
China also faces immense challenges. There is, firstly, an over-reliance on investments and exports to boost the economy while private consumption as a percentage of GDP remains low.
In the longer term, China will require a basic social net that will encourage Chinese to save less for future medical and other bills.
China’s strong one-party rule may be suitable for leading a country from a low to middle income nation but to make the leap to a high income nation requires a focus on innovation and a liberal environment that retains and attracts talent (like the US).
Taiwan and South Korea have made the transition from autocratic governments to democratic governments.
The challenge is for China to maintain stability and yet sufficiently relax its grip on its people to allow this transition.
Another challenge lies in how an emerging China interacts with the US and the Western world. Both sides will have to resolve tensions from differing world views and competition for natural resources and markets.
In the longer term, China faces a demographic time bomb due to its one child policy. China’s rapidly aging population is expected to peak at 1.45 billion in 2030 according to a UN study.
By then, China could suffer from what Japan is suffering now, a stagnant economy and a declining population that represents a strain on its healthcare and social welfare system.
China was the world’s richest nation until 1850, a position that was toppled by an inept government in the last days of the Manchu dynasty and unfair treaties imposed after the Opium War in 1842, aimed at reducing British trade deficit with China by selling opium to the Chinese in exchange for Chinese goods.
Barring major military conflicts (unlikely in the nuclear age) and major policy blunders, China is likely to resume its position as the world’s richest nation, a position it held for almost 2,000 years since the days of the Han Dynasty (206 BC–AD 220) which rivalled the Roman Empire.
The nature of the world will change as an emerging China interacts with a declining but still powerful West.
Western liberal democratic traditions focused on individual rights will square off with Eastern collectivist paradigm putting society above the individual.
Inter-Asian trade and relations will strengthen China’s influence in Asia and position the renminbi as the de facto trading currency for the Asian bloc.
Failure of China and the West in accommodating each other could lead to trade war and even a new cold war, an outcome that can be avoided if more moderate voices that value an open diverse world can prevail over xenophobic ultra-nationalistic/religious voices.
In this new global reality, Malaysia will find it increasingly difficult to compete in manufacturing. Malaysia has to fight tooth and nail to retain and attract talent and boost services (like tourism). This means crafting an attractive liberal environment for its citizens and foreign talent.
·Choong Khuat Hock is head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd.

IT firm MCR now here

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By SHEILA LASIBORI
AN Australian information technology (IT) provider believes that the PNG liquefied natural gas project will increase income for many people who would now have better access to IT.And the nature of the LNG project will increase requirements for better network and more reliable systems, according to Harry Vakili, executive chairman of Australian IT company MCR.The corporate and Government IT needs will be the main focus of MCR, which will be based at Boroko in the coming weeks.“That is exactly what we are here for … better network and more reliable systems,” Mr Vakili said these shortly before the company launched its PNG office in Port Moresby last Friday alongside its executive partner Sun Microsystems Australia.Mr Vakili said MCR had an initial two-year plan and in the first three months, they would have about seven staff and in 12 months, aim to have about 15.“In two years time, we plan to have a daily centre here which could have about 100 to 150 people,” he said.Mr Vakili said there were two practices that MCR would focus on in line with the large projects being implemented in PNG.First was speed of the (IT) network, security of the flow of information around the network and quality.The second was reliable and mission critical business solutions.

Petromin leader in minerals devt: PM

PETROMIN (PNG) Holdings Ltd is emerging as a leader in developing its mineral tenements through green field exploration, Prime Minister Sir Michael Somare said yesterday.In an address to the Petromin board of directors, Sir Michael said he was pleased to learn that Petromin board and management have allocated about K6 million this year to explore the company”s mineral tenements within the vicinity of the Tolukuma gold mine in Central province, and regional tenements.“For a newly-established company, Petromin has done extremely well and can be seen as a leader in developing its tenements … than most of the junior mining companies that have been in the business for a much longer period.”Sir Michael said Petromin’s determined approach in upgrading the total resource potential of Tolukuma mine through an extensive exploration programme was proving successful for the company.“This exercise is paying off as the total resource has been upgraded by an independent Australianbased company to about 700,000oz.“This has the potential to extend the mine life to about five years.”Sir Michael spoke particularly on Petromin’s investment strategy.“I am pleased to note that the board and management have put in place an investment strategy which provides the pathway for a planned process of investment.“I am advised that the strategy was based on the State’s back-in-right as well as other investment opportunities that Petromin in its own right as an industry participant can invest in,” he said.

NBPOL posts lower profit

NEW Britain Palm Oil Ltd, a large-scale integrated industrial producer of sustainable palm oil in Papua New Guinea, has announced its unaudited preliminary results for the year ended Dec 31, 2009.The company posted a lower profit before tax of US$85.3 million (K234 million), down from the US$106.3 million (K291.63 million) earned in 2008. The amount however excluded the effect of revaluing biological assets.It disclosed that its revenue during the year in review dropped to US$323.8 million (K888.34 million) from US$352.2 million (K966.26 million) the previous year, due to lower prices for palm oil in 2009, particularly in the first half of the year as against the figure in 2008.Earnings per share of ordinary shareholders, were US$0.418, down from the US$0.518 declared in 2008.Dividends paid during the year in review totaled US$0.28 per share including an interim dividend for 2009 of US$0.14 per share.

Rural areas could be bird’s nests goldmine

LIMBANG: Rural areas could be a bird’s nests goldmine through the state government’s efforts to promote swiftlet rearing outside urban centres.Assistant Minister of Tourism and Heritage Datuk Talib Zulpilip said the industry has a bright future due to the lucrative returns and larger areas in villages to set up swiftlet nesting homes.
“The swiftlet industry has shifted out of town now and there is growing potential to expand this promising industry in villages and rural areas,” he said when officiating at the Sarawak Economic Development Corporation (SEDC) course on swiftlet rearing yesterday.
Among those present were Deputy Limbang Resident (Social Development) Stephen Kalong and Limbang District Council chairman Sufian Mohat.
Talib, who is also SEDC chairman, said Sarawak’s bird’s nests quality has long been renowned throughout the country and internationally, including in China, as experts recognize its special characteristics.
This presents many opportunities for those interested to diversify their economic activities, he said.
The huge demand for bird’s nests and vast agricultural land in the state, particularly outside urban centres, is a golden opportunity for Bumiputeras, he added.
Talib explained that although the start-up capital expenditure may vary between RM40,000 and RM50,000, the handsome returns made the investment worthwhile.
“A kilogramme, depending on the grade, can fetch between RM4,500 and RM6,500 locally, while the highest price is between RM12,000 and RM24,000,” he said.
He said more studies need to be carried out to further develop the industry.
Meanwhile, Bukit Kota assemblyman Dr Abdul Rahman Ismail, in his speech, called for greater local involvement in higher value economic programmes to enable locals to raise their household incomes.
This should be the trend of communities in Limbang district as the government through SEDC, he said, could assist through a host of economic development programmes.
“When the people’s income and economic standards rise, it will have a knock-on effect on the country’s economic growth,” he pointed out.
He said this is the rationale behind the government’s optimism in encouraging the people to be positive-minded and determined to succeed in various fields.
“The society generally is highly determined to take on various fields that promise good returns, including the lucrative swiftlets rearing industry,” he added.
Swiftlet rearing is taking off in stages in Lawas District.
Two hundred participants from Limbang, Lawas and Ba Kelalan attended the one-day course.

EON Cap Q4 net profit down 6% on higher expenses

By EDY SARIF
edy@thestar.com.my
KUALA LUMPUR: EON Capital Bhd has posted a lower net profit of RM61.59mil for the fourth quarter ended Dec 31 (FY09), down 6.3% compared with RM65.7mil in the previous corresponding period on higher operating and taxation expenses.
In a statement to Bursa Malaysia yesterday, the group said revenue declined to RM599.07mil from RM690.96mil in the previous corresponding period while earnings per share were 8.88 sen against 9.48 sen in the same period last year.
The group has proposed first and final tax-exempt dividend of 10 sen per share amounting to RM69.32mil for the financial year ended Dec 31, 2009 compared with 5.77 sen per share dividend in 2008.
Meanwhile, at a press conference on EON Bank’s results yesterday, group chief executive officer Michael Lor said the group had posted a higher net profit of RM341.1mil for the year ended Dec 31 (FY09).
“This was due to strong loans and deposits growth driven by our transformation programme (investment in infrastructure, systems and marketing position), bringing the group’s net profit higher to more than 155% compared with RM133.7mil in 2008,” he said.
An analyst contacted by StarBizWeek said the group’s FY09’s performance was within her expectation but the bank’s loan and deposit growth were stronger than expected.
Revenue for FY09 declined to RM2.39bil from RM2.58bil in 2008 while earnings per share were 49.2 sen compared with 19.3 sen in 2008.
Lor said the group’s market share for domestic loans and advances rose to 4.2% as at end-Nov 2009 from 4.1% at end-2008. Total credit card receivables rose to RM1.45bil, an increase of nearly RM253.2mil or 21.2%.
He said the group was confident of achieving its target of 14% loans growth in 2010 as undrawn loan commitments had increased by RM2.1bil or 16.1% during the year to RM15bil compared with RM12.9 bil in 2008.
Its net loans, advances and financing expanded by RM2.4bil last year, driven mainly by growth in housing loans, other term loans/finance, hire purchase receivables and credit cards as well as commercial lending to small and medium-scale enterprises.
Lor said the group’s lending was mainly in the consumer and SME sectors, which accounted for 59.8% and 20.4% respectively of the total loans outstanding as at end 2009.
The group’s core capital ratio (CCR) improved to 11.2% in 2009 from 9.2% last year, while the risk-weighted capital ratio (RWCR) improved to 14.4% from 12.6% last year, representing further improvement from the group’s prior quarter CCR of 10.93% and RWCR of 13.46%.

EON Cap remains shrouded in uncertainty

By YVONNE TAN
KUALA LUMPUR: If the situation at EON Capital Bhd (EON Cap) seemed hazy before its EGM on Monday, the fog thickened when the shareholders’ meeting was adjourned to March 15 due to some technical issues.
The adjournment will no doubt buy the shareholders extra time for interested parties aside from Hong Leong Bank Bhd (HLB) to make their offers for the financial group’s assets and liabilities.
“The latest newsflow will likely give rise to hope that EON Cap will be able to find another buyer among the domestic banking groups, which might provide a higher offer,” AmResearch told clients in a note following the adjournment of the EGM yesterday.
“There are other interested parties,” a source said.
Three names – RHB Bank Bhd, Alliance Financial Group Bhd (AFG) and Affin Bank Bhd – have been bandied around as potential suitors.
However, informed sources indicated that talks with any parties were only verbal with no firm offer on the table yet.
AmResearch said that from its checks with AFG last week, the company had said it was not interested in bidding for EON Cap. As for Affin, “we believe that indications are that a bid would be premature at this stage,” it said.
Earlier, property group Mulpha International Bhd failed to obtain Bank Negara approval to commence talks for a stake in EON Cap. It is also reported that a second application from construction outfit Teratai Sanjung (M) Bhd was also unsuccessful, presumably because the two non-financial firms do not fit in with the central bank’s plan to consolidate the banking industry in the country.
Mulpha is believed to have written to Bank Negara seeking an explanation for the rejection of its proposal to negotiate the purchase of a stake in EON Cap.
To recap, shortly after the EON Cap board rejected a RM4.92bil takeover offer from HLB for its assets and liabilites and decided not to table the offer to shareholders, director Rin Kei Mei, who owns 15.5% in EON Cap, called for an EGM to reconstitute the board, presumably to put through to shareholders any fresh takeover offer from HLB.
HLB’s cash offer was deemed by the board as “undervalued”, given that the financial group had undergone a three-year transformation programme which had positioned it for “strong and sustained future growth as an independent company”, EON Cap had said.
Rin is said to be a willing seller of his stake, given a low entry cost while EON Cap’s single largest shareholder, Primus Pacific Partners (HK) Ltd, is largely perceived as the reluctant seller as it had purchased the shares at RM9.55 each in February 2008 and would have lost some US$100mil had the HLB deal gone through.
Primus has a 20.2% stake in EON Cap. Tan Sri Tiong Hiew King has 17.1%, Khazanah Nasional Bhd, 10% and the Employees Provident Fund 12%.
Apart from Primus, all were said to be interested in HLB’s offer.
The adjournment of the EGM will especially provide some breathing space for Primus, which needs Bank Negara approval to commence talks with any potential party, observers say.
Primus believed that it should be able to sell its stake at a price higher than HLB’s offer of RM7.10 per share as growth in EON Cap was starting to take off, they said.
The country’s seventh largest lender, EON Cap’s net profit for its financial year ended Dec 31 (FY09) jumped 155% to RM341.1mil from FY08, driven by an 8% growth in loans.
However, it reported a lower net profit of RM61.59mil for the fourth quarter ended Dec 31, down 6.3% compared with RM65.7mil in the previous corresponding period on higher operating and taxation expenses.
The financial group has said it is targeting a 15% growth in loans this year, backed by its aggressive three-year business strategy.
One of the technical issues that led to the adjournment of Monday’s meeting, which lasted just under 20 minutes, was that chairman Tan Sri Syed Anwar Jamalullail was chosen as proxy for shareholders who collectively own some 6% interest in the banking group.
Section 149 of the Companies Act states that to qualify as a proxy, one needs to be a member (shareholder) of the company, an approved advocate solicitor or approved company auditor.
As Syed Anwar was not any of these, he could not carry out the proxy votes.
However, in a late filing with with Bursa Malaysia yesterday, EON Cap said Syed Anwar had purchased 1,000 shares in the company at RM6.94 each on Monday.
Earlier,there was also some concern over the words “with immediate effect” used in the EGM notice with regard to the proposed appointment of new directors.
“The appointments, if approved at the EGM scheduled for Feb 22 at Hotel Equatorial KL, will be of immediate effect,” the notice had said.
Rightfully, under local laws, appointments of financial institution directors would first have to be approved by Bank Negara.
A new notice for the next meeting to be held on March 15 will be appended to read the proposed directors will be appointed upon “approval of the regulator”, instead of “with immediate effect”.
The notice for the fresh EGM is expected today.

Nasfund profit

MORE than 300,000 working Papua New Guineans, members of superannuation fund, Nasfund, will see their savings increase by 15% starting today.Nasfund joint chief executive officer Ian Tarutia announced the good news yesterday when declaring a net profit (after tax) of K205.617 million for 2009.This simply means that if you have K10,000 in your savings, you can expected a windfall of K1,500.“In fact, it is happening now as our systems are down to allow crediting into members’ accounts,” Mr Tarutia said.As of midday yesterday, Nasfund shut down its normal daily operations to allow crediting to take place for its 126,812 active and 186,222 non-active members, including Eda Super contributors.Normal operations will resume today.In total, Nasfund is crediting K213.5 million to the members’ accounts on the back of the fund’s excellent gains in the equity portfolio.While the 15% interest rate is good news for members, Nasfund has cautioned members not to expect another double-digit return this year. Last year, members received 8% after the record 37% in 2007, 10% in 2006 and 29% in 2005.Mr Tarutia said Nasfund was cautious with this year “on the back of what is happening in the international economy”.“The international environment remains uncertain at this point and there is potential for a double dip recession,” he said, adding indications were that this year’s rate might be slightly higher than the predicated 9.5% inflation rate.He said the 15% rate came about as a result of last year’s financial results.These included: a net profit (after tax) of K205.617 million; net asset value of K1.7 billion; and in the other highlights the fund grew by 21% (compared to 19% in 2008) with the number of active employers that the fund has is 1,784 representing a growth of 7.5% over last year; 123 employers’ net going into the fund; and active membership base as of Dec 31 was 126,812 members.Mr Tarutia said Nasfund staff, management and the board were pleased with the results, adding the Management Expenditure Ratio (MER) was 1.12% down 0.13% from 1.25% in 2008.“MER measures the efficiency of the fund basically what we spent in administering the fund and the total asset value.“This compares to 1.25% in 2008, so as we are growing and becoming more efficient in the use of assets in administering the organisation,” Mr Tarutia said.In withdrawals, the fund paid out K125.584 million to 55,846 members through unemployment, housing advancement, partial withdrawals, retirement and redundancy, among others.“The contributions (inflows) from employers by way of member and employer contribution contributed to K232.7 million,” he said.The gains in equity portfolios were in New Britain Palm Oil Ltd, Lihir Gold Ltd and Oil Search Ltd, as well as gains on the currency rate contributing K127 million.Mr Tarutia said the unlisted portfolio contributed K14 million to the portfolio and the overall net gain despite a decrease in Bank South Pacific and Credit Corporation which contributed K68.5 million, flows came from dividends from interest payments on loans and from profit income.“And all that combined to the K205 million that the fund recorded,” he said.The audited annual report will be published and the members’ statements will be issued starting next week.

ExxonMobil now Nasfund major lessee

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By SHEILA LASIBORI
EXXONMobil has booked most of the properties being leased out by national superannuation fund, Nasfund, through its real estate business arm.Majority of these office and apartment spaces are in buildings that have been constructed at Harbour City in Konedobu, Port Moresby, according to Nasfund joint executive Ian Tarutia.While ExxonMobil, operator of the PNG liquefied natural gas (LNG) project leads the lessee tally, other players in the US$15 billion (K40 billion) project would also occupy some of the buildings in the area.Mr Tarutia said the property developments, mostly located at the Harbour City, had all been pre-listed to customers and ExxonMobil was the major customer.Construction in progress was on Harbour City’s Ravalien Haus, Sol Wara and the Investment Promotion Authority Haus.The Edge is set for construction next year.“The property development is being built to meet the players involved in the LNG project.“ExxonMobil has taken up most of our developments … the buildings, all at Harbour City, have been taken up by Exxon Mobil,” Mr Tarutia said yesterday when he revealed Nasfund’s operations for the 2009 financial year.He also said ExxonMobil currently located at Credit Corp building in town would be relocated to the yet-to-be completed building next month at Konedobu called the Factory, just off the Sir Hubert Murray stadium.“That is our participation in the LNG project … (We are) putting up buildings to house the players that are going to be involved in the LNG project, the main one being Exxon Mobil.“So in short all the buildings we have been engaged in … all the construction that we have done have in fact being pre-list … so, as soon as they are completed tenants (will) move in and we start earning rental,” he said.

OSL profit plunges

MELBOURNE: Oil Search Ltd is looking to the massive Papua New Guinea liquefied natural gas (LNG) project to generate growth, after revealing a sharp fall in calendar 2009 profit due to falling oil prices and lower sales.Oil Search said the US$15 billion (K41 billion) PNG LNG project could eventually be built up to have four trains, greatly expanding its original capabilities.“The story about Oil Search is very much around PNG LNG, not just this project, but also what we are doing in terms of medium-and-long-term growth around that project,” chief executive Peter Botten said in a teleconference yesterday.The ExxonMobil-led PNG LNG joint venture is expected to begin production in 2014, and Oil Search holds 29% stake in the project.Two gas trains were expected to be built for PNG LNG, but the company said there might be sufficient resource base to underwrite another two trains.Early plans are for a third train to be built in late 2015 or early 2016, Botten said, with a fourth train possible.“There are a range of opportunities and a range of synergies that come from PNG LNG if you are able to do a further development in that time frame,” Mr Botten said.Oil Search, Papua New Guinea’s biggest oil producer, posted a net profit of US$133.68 million (K365.37 million), down 57.3% from US$313.36 million (K858.52 million), in 2008.“The profit decline was primarily due to a 35% fall in the average realised oil price combined with 7% lower oil sales,” the company said in a statement.

Gas project slated to sign funding deal

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By SHEILA LASIBORI
INTERNATIONAL banks and export credit agencies (ECA) are set to sign a record financing agreement next month to develop the PNG liquefied natural gas (LNG) project.American-based Trade Finance magazine reported that a deal is set to close by mid March towards a US$14 billion (K40 billion) financing scheme for the development of the LNG project being spearheaded by ExxonMobil and a consortium.It reported that the expected total project cost was US$18.3 billion (K50 billion) and once developed, would double the gross domestic product of PNG.The Export-Import Bank of the US (Eximbank) last December approved the largest financing transaction in its 75-year history of US$3 billion to support US exports for the PNG LNG project.This was moments after ECAs committed US$14 billion (K38 billion) towards the project costs.Workers at over 55 US companies would provide goods and services for the project.Eximbank, the official ECA of the US, five other ECAs and 17 commercial banks would provide financing for the project.Also in December, the Australian government announced US$500 million (K1.4 billion) loan to support PNG LNG project development.Project operator Esso Highlands Ltd, a subsidiary of ExxonMobil, holds 33.2% stake in the project while the other participants include, Oil Search Ltd (29.0%) Independent Public Business Corp (PNG Government, 16.6%), Santos Ltd (13.5%), Nippon Oil Exploration (4.7%), Mineral Resources Development Co (PNG landowners, 2.8%) and Petromin PNG Holdings Ltd’s subsidiary Eda Oil (0.2%).Miles Shaw, Esso’s manager for public and government affairs, said finalisation of financing and completion of the last LNG sales and purchase agreement (SPA) with an Asian-Pacific buyer was expected to be completed in the first quarter of this year.The outstanding SPA is with China Petroleum Co (CPC) of Taiwan, for an estimated 1.3 million tonnes of LNG per annum (mta) from the total 6.6mta of LNG from the project.The previous three SPAs signed were with Japan’s Osaka Gas Co Ltd, for 1.5mta of LNG on Dec 22; with Tokyo Electric Power Co Inc (TEPCO) for 1.8mta of LNG on Dec 7; and on Dec 3 with UNIPEC Asia Co, Ltd., a subsidiary of China Petroleum & Chemical Corp (Sinopec) for 2.0mta of LNG.These agreements are long-term and effective for a 20-year period.The PNG LNG Project is an integrated development that includes gas production and processing facilities, onshore and offshore pipelines and liquefaction facility with the capacity of 6.6 million tonnes of LNG per year.Meanwhile, work on the project at various sites in Southern Highlands province is progressively restarting.“We will advise when all sites have returned to normal operations,” Mr Shaw said.

PNGPCL lays new pipeline for fuel depot

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By SHEILA LASIBORI
CIVIL work has started at a section of the Poreporena Freeway in Port Moresby to lay a 200mm in diametre pipeline belonging to PNG Ports Corp Ltd (PNGPCL).The work by Global Construction started on Wednesday which will also include repair and relocation of tank 7 fuel pipeline underground starting from PNGPCL Port Moresby terminal 5 container storage area across the freeway, to the side of PNG Law and Justice Sector office along the freeway just off PNG Defence Force Basilisk naval base.PNGPCL estimated that the excavation, pipe laying, backfilling and road finishing works will take up to two weeks.It advised that a section of the freeway lane leading towards downtown Port Moresby was the first to be temporarily closed with oncoming traffic detoured to the other half lane on the opposite site of the Freeway.Work will take two weeks to complete.

Landowners in Hides target gas spin-offs

THE people of Hides 4 have launched an umbrella company to get involved in spin-off benefits in the LNG project in the Southern Highlands province.Hides 4 was previously PRL12, until recently when it became PDL7 after an issue of the petroleum development licence.PDL7 holds about 15.3 trillion cubic feet of gas, which is about 59% of the total gas for the unified project, which will cost about US$17 billion (K46.7 billion) to develop.Clans in PDL7 are divided into six blocks.Various leaders who backed the umbrella company include Robert Hawi (block1), Jocky Tindipur (block2), Ikipe Alembo (block3), Hengepe Haluya (block4), Eric Ayule (block5), and John Honale (block6).All the blocks agreed to form the umbrella company Gigira Parepare Resources Limited (GPRL).GPRL chairman Eric Ayule said all the clans in PDL7 decided to unite behind this company so they could benefit from spin-off businesses from the project.Mr Ayule said the creation up of the umbrella company was in line with what was outlined to them by the Department of Petroleum and Exxonmobil during the umbrella and licenced-based benefit sharing forums held last year.He said the GPRL has met Investment Promotion Authority (IPA) and Internal Revenue Commission (IRC) statutory requirements, and received the approval of the ministry and department of petroleum and energy.Mr Ayule said they were promised K15 million during the benefit sharing forums as seed capital to launch the companies.He said they want the Government to release the money now to them so they can prepare for work from the developer.GPRL is preparing to submit their business plan to Esso Highlands, the subsidiary of Exxonmobil.PDL7 is crucial to the entire project.While it holds majority of the gas, the Gas Conditioning Plant will be built there.

InterOil ups gas reserves by 141%

INTEROIL could be sitting on more than eight trillion cubic feet of contingent recoverable gas resources at its Elk/Antelope field in the Gulf province.This was announced yesterday by an independent valuation firm, GLJ Petroleum Consultants, which also estimated initial recoverable condensate at 156.5 million barrels as of Dec 31, 2009.GLJ also announced that there was no significant oil leg, although InterOil said a week ago that it has started horizontal drilling to check for possible oil shows.The GLJ report provides a best case estimate of 8.2 trillion cubic feet (tcf) of natural gas and 156.5 million barrels of condensate (mmb).This compares to the year-end 2008 best case contingent resources estimate of 3.4 tcf of natural gas and 59.3 MMBbls. This amounts to a 141% increase from 631 million barrels of oil equivalent (MMBOE) to 1.52 billion barrels of oil equivalent (boe). All resources estimated in the GLJ Report are classified as contingent resources“These results reflect the quality of our people and our assets,” chief executive and chairman Phil Mulacek said.

Work permit violations

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By SHEILA LASIBORI
FOREIGN nationals recruited to work in PNG must ensure they follow proper procedures to legitimise their status in the country, secretary to the National Government Manasupe Zurenuoc said.The chief secretary Zurenuoc said: “The presence of illegal aliens and the employment of illegal foreigners are major security concerns.”Mr Zurenuoc made particular reference to the recent events involving Allied Gold Ltd, the 14 Fijians and PNG Immigration including Police.“The manner in which the Fijians were recruited by Allied Gold raises serious concerns pertaining to the direct violations of both Immigration and Labour laws.“I urge all foreign companies operating in the country to fully comply with the mandatory requirements of employing foreign nationals in PNG.”Mr Zurenuoc said the court found that the Fijians were illegally working in the country and were deported.The Department of Labour and Industrial Relations had raised concerns regarding foreign employees and foreign-registered companies operating in PNG.Acting secretary for Labour Department David Tibu said expatriate employees including consultants are required to hold valid work permits under the Employment of Non-citizen’s Act 2007.Mr Tibu said this after the Labour Department’s work permit inspectors visited mobile phone company bemobile last November to hold discussions on foreign employment (work permit) requirements during the “Orange Men” promotion. “bemobile has only eight work permits issued to date … we got news that the ‘Orange Men are coming’ which could mean, non-citizens, on business visa, which are prohibited for employment purposes.“We sent in our work permit inspectors who were refused entry for two days before they were allowed in and eventually they were able to sit down and discuss the foreign employment requirements,” Mr Tibu said.bemobile staff on anonymity confirmed that some of its foreign workers did not have the appropriate documents to work in PNG and so left the country last Nov 11.Mr Tibu said these “foreign” workers could return to PNG once they have sorted out their work documents appropriately.“If and when they comply with all of the requirements for foreign employment in PNG and they hold valid work permits (issued by the Department of Labour and Industrial Relations) with relevant resident employment visa (issued by PNG Immigration and Citizenship Service), then they may be allowed back into the country,” he said.The then bemobile chief executive officer Roger Blott had responded saying: “It is not bemobile policy to comment on internal matters.“However, as a good corporate citizen, bemobile takes compliance with all the laws of PNG very seriously and will not knowingly violate any of them … that obviously includes the laws regarding employment and immigration.”Mr Tibu also raised concerns on possible tax evasion by companies if they were not duly registered with Investment Promotion Authority (IPA).“I want to stress that taxation is one of the major reasons why companies inclusive of foreign registered companies must register with IPA. And unless companies register with IPA, work permits cannot be processed”.

NDB eyes unit in Tari

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By ANDREW ALPHONSE in TARI
THE National Development Bank (NDB) has revealed plans to set up a branch in Tari, Southern Highlands province, targeting the US$15 billion (K40 billion) PNG liquefied natural gas (LNG) project.This branch will be to assist local Hela people re-invest income from the project into small business enterprises and agricultural projects.NDB hopes that more Hela farmers and business people would obtain loans to start businesses from the K20 million allocated in this year’s National Budget.NDB will also consider providing other services there, such as passbook savings account and micro finance.NDB will initially start its operations in the next eight weeks at the Tari town authority building while awaiting the National Executive Council’s (NEC) approval on, and construction, of the K5 million two-storey office complex.The plan was revealed on Monday by NDB managing director Richard Maru while in the company of Tari/Pori MP and Education Minister James Marape, and other senior NDB officers when they visited Tari.They also assessed the site for the office complex and also announce the plan.Mr Maru said the NDB Board had decided to close the Mendi branch last December to set up a Tari branch.He said the Mendi office was shut down due to constant attack on its staff, properties and the continued lawlessness which greatly affected their operations.

IBBM, Esso to set up business centre

THE Institute of Banking and Business Management (IBBM) has signed a five-year agreement with Esso Highlands Ltd to set up and operate an enterprise centre.The centre will operate for the PNG liquefied natural gas (LNG) project being developed by Esso Highlands Ltd, a subsidiary of ExxonMobil Corp.The deal was signed by Esso managing director Peter Graham, IBBM directors Ross Hammond and Central Bank governor Loi Bakani.“The engagement and development of PNG businesses is an important aspect of the PNG LNG project’s National Content Plan and the Oil and Gas Act,” Mr Graham said.The centre will facilitate communication between national suppliers, contractors and subcontractors; make public business opportunities; maintain a PNG supplier database; and facilitate access to project information.A statement by IBBM said the centre would also build capacities of national companies by providing business improvement services such as gap analysis, consulting and advisory services; and organising seminars, developing business training plans and providing training.The centre would act as an independent institution and will be located within the IBBM premises at Vanama Crescent, Port Moresby.

Govt should accredit us, says Juha tribe

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By YEHIURA HRIEHWAZI
A GROUP of people claiming to be landowners from the Juha gas field have called on the Government and relevant authorities to recognise them.The Juha Pokaiya tribe composed mostly of the upper and Lower Strickland River basin numbering about 25,800 live in very isolated communities.They hardly interact with the outside world because of inaccessibility to this part of PNG that straddles the provincial boundaries of Western, Southern Highlands, Sandaun and Enga provinces.Their tribal chief Andrew Makano is in Port Moresby with some of his people to meet with Petroleum and Energy Minister William Duma and present their case for recognition.To get to Port Moresby, they had to trek for three days to the Frieda River area in Sandaun province to pan for alluvial gold nuggets which they sold to pay for their airfares to Ok Tedi’s mining township of Tabubil, and then to Port Moresby where they are housed by a relative at the Morata settlement.Speaking in Tok Pisin Mr Makano expressed concern that if they did not make their presence felt, they would be forgotten and other communities like the vocal Huli people would represent their interest and take away benefits that should rightfully belong to them.“We are not educated, we are not able to read and write. We don’t want the educated people to take over what is ours.”We are asking the government to respect us and help us by recognising our existence as landowners of the Juha gas project and treat us as equals with the other project landowners,” Mr Makano said.As an example, he said the Hides Gas Development Corp owned by Hides gas landowners of the Huli people have registered a company called Juha Joint Venture Ltd as a subsidiary company, which he said did not involve them.

Gulf to build LNG support facilities

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By SHEILA LASIBORI
THE Gulf provincial government is leading the way in developing infrastructure for business activities in the province to support the InterOil-led liquefied natural gas (LNG) project.The deep water port development at Orokolo Bay and the industrial park are the main projects, among others, being spearheaded by the provincial government led by Governor Havila Kavo.At present, the hydrographic survey and feasibility study and infrastructure development are being carried out.The project is conducted in consultation with project developer InterOil and Petromin (PNG) Holdings Ltd.According to Mark Baiai, the executive director for Gulf Provincial Economic Development Authority (GPEDA), the provincial government through its company Gulf Oil and Gas holds 20% equity interest in the deep water port project under the build, operate and transfer (BOT) scheme.The local people from both impacted and non-impacted areas will be offered shares in the company.The deal was with Hong Kong-based company Energy World Investment (EWI).The 20% equity is a free carry interest which will increase to 49% after 25 years based on commercial terms the provincial government entered into with EWI.EWI holds 80% interest, which will change to 51% at the end of the 25 years.Mr Baiai said the port’s location was strategic, being located directly south from Elk/Antelope project sites, and it is also accessible from by other provinces mostly in the highlands.“It is strategic because it can become the next economic port which will support activities up in the Highlands and also would contribute to the country’s economic development.”He said the GPEDA, together with Gulf Investment Trust Fund (GITF), developed the concept.Mr Baiai said the industrial park also included developments for the deep sea port for the discharge of gas condensate, the dissemination of LNG from Elk/Antelope.The authority also aims to support the InterOil project in providing the facilities to store and export the LNG product.

InterOil acquires US$4.5m drill rig

INTEROIL Corp has acquired a second drilling rig worth US$4.5 million (K12.30 million) which is currently located in New Zealand.In a statement, InterOil said it anticipated moving the rig to the country in the second quarter after completion of the transaction and refurbishment of tubular and other rotating equipment.InterOil chairman and chief executive Phil Mulacek said: “We are very satisfied with the acquisition of the second rig which is outstanding in terms of design and capabilities and is particularly well-suited for operations in the area in which our development and exploration activities are being conducted.”The 1,500hp heliportable “triple” rig with top drive was originally built by Parker Drilling.The total cash consideration for the rig and an extensive inventory of drilling and oil field service equipment is NZ$$6.5 million (K12.30 million).

LNG hub is massive: WA

PERTH: An agreement by Woodside Petroleum’s joint venture partners to the proposed site for an LNG hub has opened the way for a A$30 billion (K71 billion) project, the West Australian government said.Premier Colin Barnett describes the agreement as “a significant step” in the development of the Browse Basin liquefied natural gas field off the northwest Australian coast.Woodside Petroleum announced on Monday that its joint venture partners, BHP Billiton, BP, Chevron, Shell and Japan Australia, had agreed to develop the hub at James Price Point, 60km north of Broome.Barnett has championed the selection of James Price Point as the site for a plant to process the gas from the Woodside-led joint venture and other parties operating in the area. After lengthy negotiations, the state government, Woodside and a group representing the traditional owners of the Kimberley region, the Kimberley Land Council (KLC), agreed on the site in April last year. – AAP

US$71mil for PMIZ nears OK

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By ISAAC NICHOLAS
PAPUA New Guinea is finalising an agreement with a Chinese contractor that will see the draw-down of US$71 million (K193 million) for the construction of the Pacific Marine Industrial Zone (PMIZ) in Madang province.A PNG delegation is meeting with officials from Shenyang Economic and Technical Cooperation Co (SETCC) in the Philippines to finalise the deal between the State and the company.SETC is China’s State-owned company based in Shanghai.The PNG team is led by Commerce and Industry Minister Gabriel Kapris, officials from Treasury and Finance, National Planning, State Solicitor, Fisheries and Commerce and Industry.The team left last Saturday and is expected back this week for the execution of the contract agreement by the Governor-General at Government House in Port Moresby.Mr Kapris told The National from Philippines yesterday that the PNG officials were going through the technical issues and would finalise the contract agreement by today.“We will be coming back to Port Moresby for the Governor General to execute the agreement before we leave for China with the papers to draw-down US$71 million of the US$79 million (K214 million) from the Export-Import Bank of China.”Mr Kapris said PMIZ was an important impact project that would be sustainable for many years to come and has the full support of the project impact area people and the Madang provincial government.He said the landowners were supportive after the Government funded a team from the project area to visit similar projects undertaken in the Philippines.Mr Kapris said initial work had started with landowners being involved in spin-off contracts in building the 8km perimeter fencing of the 216ha project area.He said the PNG Government counterpart funding of K29 million had been used so far for initial ground works and a further K44 million has been budgeted for this year.

Jobs for locals at LNG project

THERE will be three main groups of jobs that will be filled up to directly support the US$15 billion (K40 billion) PNG liquefied natural gas (LNG) project.These are jobs meant for Papua New Guineans in construction, operations and maintenance and in administrative work requiring professionals (for graduate positions).A total 3,450 people would be recruited by next month.A PNG LNG project leaflet which published the type of jobs that are available to local workers said the recruitment was to have started last month.About 150 people would be recruited in operations and maintenance (O&M) and about 3,000 in construction.Initially, about 300 will be recruited starting next month.In the operations and maintenance technician trainee positions, there will be three intakes per year of up to 60 trainees (for a total of 180 to be selected for 150 jobs) over the next three years.They will train in plant operations, mechanical, electrical and instrumentation.

Kina strong against most currencies

THE kina was relatively strong last week against a basket of currencies, except the yen where it experienced some declines.Markets are now waiting on US gross domestic product (GDP) fourth quarter data which is due for release shortly.In a weekly update, the ANZ Bank said a strong US GDP data should provide some support to the greenback.Against the Australian dollar, the kina appreciated by about 1.8% as investors cut risk trades funded by the yen and US dollar.The Aussie underperformed as uncertainties about China’s efforts to restrain bank lending and Ben Bernanke’s re-appointment as US Federal Reserve chairman for a second term weighed on investors’ sentiment.The bank said the kina was relatively firm on US dollar inflows which assist import demand.On the currency front, speculations on higher interest rates in US and general investor interest apathy towards high-yielding currencies gave some boost to the greenback last Thursday.The greenback was also assisted by the news that US Fed and other major central banks would conclude emergency dollar lending operations yesterday.

OSL sees output fall

PERTH: Oil Search Ltd has flagged lower production this calendar year due to maturing oil fields after delivering 2009 output within its forecast and weaker sales revenue due to lower oil prices.In its annual production report yesterday, Oil Search said it expects a 10% fall in output this year to reflect natural field decline, which drove a 6% dip in 2009 production.Oil Search had US$1.255 billion (K3.4 billion) in cash at the end of December and was debt free, leaving it “extremely well placed for this transformational expansion”, managing director Peter Botten said.Constraints on oil output relating to more limited gas flaring was another factor expected to reduce production this year, although this would be partly offset by maintenance programmes to reduce downtime.Papua New Guinea’s largest oil and gas producer’s total output for calendar 2009 was 8.1 million barrels of oil equivalent (mmboe), within its guidance range of 8.0-8.3 mmboe and down from 8.6 mmboe in 2008.“Oil production will be pretty flat for the next few years but when the PNG LNG (liquefied natural gas) project comes on stream in 2014, Oil Search will take off like a rocket,” CMC Markets analyst David Taylor said.“It’s one for long term investors.”Oil Search, which has a stake of about 30% stake in the PNG LNG development, said last month the multi-billion dollar project would add more than 19 mmboe to its annual production.It also said the ExxonMobil-led joint venture remained on track to achieve financial close in the first quarter of this year.Mr Taylor said Oil Search’s 2009 result was unsurprising given it was impacted by oil price and currency fluctuations.Full year sales revenue was down 38% at US$475.8 million (K1.3 billion) reflecting lower output and a 35% fall in the average realised oil price during the 12 months.The average realised oil price in 2008 was US$100.10 (K270.91) per barrel, compared to US$65.39 (K176.97) per barrel last year.Mr Taylor said Oil Search’s operating costs in PNG were relatively high.The company said operating costs were expected to rise this year. – AAP

Gas project won’t fulfill PNG’s needs

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By OSEAH PHILEMON
PAPUA New Guinea’s energy demand will increase by 300% over the next five to 10 years – but none of it will be met by the upcoming gas project.The gas is slated for export to Japan to generate electricity.This shocking news was revealed to the Lae business community yesterday by PNG Power Limited (PPL) acting chief executive officer, Tony Koiri.Mr Koiri said the energy demand for PNG was forecast to increase by 50% in two years due to extensive development of commercial, residential, hospitality and industrial infrastructure in major centres.“This demand is forecast to increase by 67% between five and 10 years as a result of the LNG project and PPL is looking at developing its hydro-power systems to meet the demand.“We are now working on improving the efficiency of hydro-power plants by implementing a number of measures to meet the growing demand for electricity,” he said.Diesel generators which PPL is increasingly relying on to provide electricity to power-starved consumers is costing the organisation far too much.Mr Koiri pointed out that the energy demand forecast on the Ramu system, based on the non-mining sector demand, was expected to increase by 30% in the next five years.“If mining loads of Ramu nickel, Yanderra, Wafi Golpu were taken into account, then the energy demand based on preliminary load figures would increase by about 300% from current figures,” he said.PPL has plans to cater for this huge increase in electricity demand with the development of the 240 megawatt Ramu two hydro-electricity project, which it is estimated to cost K1.3 billion.Mr Koiri said PPL was looking for private sector partners to develop the new system.“PPL needs to immediately make significant investments in (power) generation, sub-stations and network infrastructure to not only meet the increasing demand, but also improve the reliability and quality of supply,” Mr Koiri said in his presentation.He said PPL was engaged in major capital investment programmes costing K1.017 billion to upgrade the nation’s electricity supply system from last year until 2013.It plans to spend K322 million on hydro-generation including Yonki Toe of Dam, Rouna 1 replacement, refurbishment and upgrades to Ramu 1, Paunda and Warangoi and a new hydro-power station at Ramazon in Bougainville.Another K248 million will be spent on developing the thermal power stations, including new generation for Port Moresby and new power stations for Wewak and Kimbe.Mr Koiri said K258 million would be spent on transmission, including new sub-stations in Port Moresby and the Hidden Valley gold project transmission line.Funding for these projects will come from internally generated funds and existing borrowings.Mr Koiri admitted that PPL had been unable to provide a reliable power service, resulting in it paying rebates to customers since 2005.The reliability of supply has declined over recent years in most centres and is currently below the benchmarks set by the Independent Consumer and Competition Commission (ICCC).

Ela Motors expects big business from LNG project

NATIONAL car dealer Ela Motors Toyota Tsusho (PNG) Ltd is venturing into the PNG liquefied natural gas (LNG) project through its staff. “In terms of investment in the LNG project, Ela Motors is investing in people … our own people. We are not investing directly in the project because that is not our core business,” David Purcell, chief executive officer of Ela Motors, said.But with the large size of the project, Ela Motors will need to expand in terms of providing service and parts backup to the vehicles that will service the project.But this did not mean Ela Motors would be immediately establishing new dealerships especially in the Highlands area but would continue to analyse and review the needs on a month to month basis.Mr Purcell said Ela Motors did not have service or parts facilities located in Hides, Mendi or Tari in the Southern Highlands province – the home of the US$15 billion(K40.6 billion) 6.3 metric tonne ExxonMobil-led LNG project.“We have been analysing this opportunity for some time now and we will take the appropriate steps to meet our customer's needs when the time is right and the business requires it,” Mr Purcell said, adding if a need arose for Ela Motors to do something different to provide the level of service that its customers needed they would find a way to do that.“We see the LNG project as being a very important part of our business. We have two main objectives. These objectives are to look after the people who have looked after and supported Ela Motors for the last 46 years which is our core traditional business as well as looking after the LNG style of the business which is so important to us that we have created a separate division to manage the LNG projects and the contractors,” he said.The Ela Motors LNG team is being led by a project manager and a coordinator as well as champions in the departments of sales, parts and service. “In that way we can give both parts of our business the attention they need. One part being our traditional core business and secondly the additional business which requires specific attention which is the LNG Project demands,” Mr Purcell said.

Property prices may rise 5% to 10%

KUALA LUMPUR: Property prices in Malaysia are forecast to increase by 5% to 10% this year against last year in line with the recovering economy.
Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia president James Wong said the market did not expect a big jump in property prices this year as the economy was not fully recovered yet.
The economic recovery will largely influence the property market performance and Malaysia’s gross domestic product (GDP) growth rate this year is forecast at 2% to 3% from the estimated contraction of 3% last year.
“Condominiums and apartments are currently selling well and landed property prices, which had held through the economic crisis last year, are expected to grow this year,” Wong said after the opening of the Malaysian Property Summit 2010 yesterday.

Citing examples, Wong said the St Mary’s serviced apartments were 80% taken up within five days of their launch, Sky Residences recorded a 70% take-up rate and the 50-unit Verticas Residensi in Bukit Ceylon achieved a 60% take-up rate during soft launch.
“This shows that condos and apartments are not short of buyers. And developers that postponed property launches last year are not expected to do so this year,” he said, adding that property prices last year were estimated to have dropped by 5%.
However, Wong raised some concerns about tenancy of condominiums and apartments.
“A lot of new developments are facing a hard time in getting tenants,” he said.
Another area of concern would be the office market that saw the supply of four billion sq ft of space last year, according to Wong.
“Thus, there is a slight concern on the take-up rate, especially for tenants that will occupy huge space of 20,000 sq ft and above as well as the effect of the new supply on rental rates,” he said.
Valuation and Property Services Department director-general Datuk Abdullah Thalith Md Thani said this would be a good year for the property sector as key economic indicators that related to the growth of the industry were expected to perform better than last year.
The expected recovery in the GDP of Malaysia’s main trading partners – the United States, Japan and Singapore – and improved prices for crude oil, crude palm oil and rubber would augur well for the country, he said.
In fact, the property market, which had slumped in the first half of last year, had improved since the second half-year, he added.

Pacific LNG eyes floating terminal to chill extracted gas

PACIFIC Liquid Niugini Gas (LNG) Operations Ltd may use a floating terminal to exploit reserves faster than a conventional plant, to help it attract equity partners.Pacific LNG and InterOil Corp are exploring floaters to chill the fuel before an onshore production unit starts operation by 2015, according to Henry Aldorf, Pacific LNG’s newly-appointed president.LNGL is the developer of the second LNG project.“The partners are offering about 30% in gas areas in PNG, in the proposed LNG plant and a share of the cleaner-burning fuel. “We must be the only project in the world offering a stake in upstream, midstream and downstream in a super low-cost project with a huge amount of gas and associated liquids,” Aldorf said in an interview in Singapore. “We are in the process of looking for industrial and strategic investors.”Exxon Mobil Corp, InterOil and Talisman Energy Inc may boost PNG to the second-largest LNG producer in the Asia-Pacific region after Australia by 2015 by producing as much as 15 million metric tonnes of the fuel, almost enough to supply Taiwan and India based on 2008 demand, Tony Regan, a Singapore-based consultant at Tri-Zen International Ltd, said.Pacific LNG, an affiliate of Clarion Finanz AG, owns 47.5% of Liquid Niugini Gas Ltd, which is building the LNG project.It also holds about 20% of Elk and Antelope gas areas along with InterOil and the PNG government.

Ausenco acquires 50% of Kramer

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By SHEILA LASIBORI
GLOBALLY-listed Australian company Ausenco Ltd has acquired 50% of national company Kramer Group to form a joint venture targeting substantial projects to be generated by the liquefied natural gas (LNG) development activities.The new company will be known as Kramer Ausenco Ltd.Kramer Ausenco (PNG) Ltd chief executive officer, Frank Kramer, said: “We decided we needed a stronger global partner to take on the bigger projects that are coming to PNG.“To get more involvement with the resource projects, not just on the edges but on the central part … that is why we formed this alliance.“We invited Ausenco to buy 50% of Kramer Group. “What we want them (Ausenco Ltd) to do now is to build a PNG capability so that more Papua New Guineans get involved with central parts of major resource development projects,” Mr Kramer said.He said he has a vision and that vision is “to involve every Papua New Guinean in the development of the nation in project, managing not just in the periphery of the resource project but in every sense the central aspect of front end engineering and design (FEED) work, procurement and construction”.Mr Kramer said the company was involved at the initial stages of the PNG LNG project at the start of the FEED.“We had key staff members working in the team … now that it is moving to end of the FEED and beginning of the EPC (engineering, procurement and construction) phase, that is the type of work where I want more involvement from Papua New Guineans,” he said.Zimi Meka, chief executive officer of Ausenco Ltd, said the partnership meant clients in PNG and the region could access a global engineering company employing about 2,500 people around the world.He said the five core business lines for Ausenco Ltd are: minerals; energy; processing and structuring (including ports and marine); environment sustainability; and programme management.“The Kramer Group is now able to access those skills and is capable to deliver quality services to clients here in PNG,” Mr Meka said.Mr Kramer said this year would be special for PNG because of greater expectations, opportunities and challenges that would stretch across key developments of industries and companies.“I think, we are in a unique position that is why we entered into this JV with Ausenco”.Apart from Brisbane and Port Moresby, Kramer Ausenco Ltd has offices in Solomon Islands, Fiji, Vanuatu, Samoa, and Tonga.Before the joint venture, Kramer Group and Ausenco had projects at Ok Tedi Mine, Tolukuma gold mine, Misima, Porgera, Hidden Valley and Harmony Gold.They also had engineering and civil works, procurement and construction jobs around the country.

Sime Property, Sunrise in JV for RM1b property project

KUALA LUMPUR: Sime Darby Property Bhd and Sunrise Bhd have formed a partnership through a 50:50 joint-venture (JV) company named Sime Darby Sunrise Development Sdn Bhd. The JV company will develop three lots of freehold commercial land measuring 20.95 acres in the 180-acre Bukit Jelutong. Its gross development value is estimated to be RM1 billion. Work is expected to begin in 2011, according to the companies on Tuesday, Jan 26.

Borneo Resources in RM40mil swiflet eco-park JV

By JACK WONG
jackwong@thestar.com.my
KUCHING: Sarawak State Economic Development Corp (SSEDC) and Peninsular Malaysia-based Borneo Resources Synergy Sdn Bhd (BRS) have agreed to jointly develop a RM40mil swiftlet eco-park in Balingian, Mukah Division within the Sarawak Corridor for Renewable Energy.
BRS, a wholly-owned subsidiary of property development and investment firm Masmeyer Holdings Sdn Bhd, has a 80% stake in the joint venture. SSEDC holds the balance 20%.
Sited in a rural setting along the Mukah-Balingian coastal highway, the project will involve the development of 40 three-storey units and 15 three-storey bungalow units.
“The project is targeted to be completed not later than 2012. Ideally, it is to be ready this year,” BRS director Choo Beng Kai said after the joint venture agreement signing ceremony. Golden Swift Resources Sdn Bhd, a swiftlet farming expert, has been engaged to provide technical expertise to the project.
SSEDC was tasked by the state government to spearhead the development of swiftlet farming on a well-planned, sustainable and eco-friendly manner.
The state authorities recently took action against hundreds of unlicensed swiftlet operators who used shophouses in town for swiftlet farming. The proposed park will provide an alternative venue for swiftlet farmers asked by the state government to shift their operations to approved sites.
Newly appointed Sarawak Assistant Tourism Minister Datuk Talib Zulpilip, who witnessed the ceremony, said the development of the proposed park was to ensure an orderly development of the lucrative swiftlet farming industry.
Talib, who was former SSEDC chairman, said SSEDC planned to develop similar swiftlet eco-parks in other parts of the state.
“We (SSEDC) are looking to bring in more joint venture partners in similar projects.” He said SSEDC-BRS would process and market the bird’s nests the joint-venture company produced. A kg of unprocessed bird’s nest now fetches about RM4,250.
Talib said Sarawak was well-known for its high quality bird’s nest, adding that this was evident as the early traders from China had come to Sarawak to buy bird’s nests.

EON Cap says HLB offer too low

By YVONNE TAN
Advisers indicate other parties interested in EON Cap
yvonne@thestar.com.my
PETALING JAYA: The EON Capital Bhd (EON Cap) board of directors yesterday said the RM4.92bil cash offer from Hong Leong Bank Bhd (HLB) significantly undervalues EON Cap and its financial advisers have indicated that there are other parties interested in acquiring EON Cap.
In a statement last night, the board said it had sought clarification from HLB on a range of details in its acquisition proposal, with particular focus on valuation.
“The board is evaluating this approach but on the face of it, the offer price significantly undervalues EON Cap,” chairman Tan Sri Syed Anwar Jamalullail said in the statement.
The statement said the banking group launched a three-year transformation programme in October 2007 which sharply improved the performance of the bank despite difficult economic conditions in 2009, delivering 8% growth in residential mortgage loans, 15% growth in credit card and personal loans and 14% growth in hire purchase loans in the first three quarters of 2009.
Earnings improved in terms of net income, return on assets and return on equity, it said.
“In evaluating the HLB offer, we will consider all alternatives open to us to fulfil our responsibility to shareholders,” Syed Anwar said.
Meanwhile, EON Bank group chief executive officer Michael Lor said EON Cap’s financial advisers had indicated that apart from HLB, there were other parties interested in acquiring it.
“I am not sure if they (these parties) are seeking Bank Negara’s approval at the moment to start talks with us but our financial advisers have introduced some potential parties to us.
“If there are better opportunities, the board is bound to make sure it pursues all of them,” Lor said after the underwriting ceremony for ECS ICT Bhd.
EON Bank is a subsidiary of EON Cap. Goldman Sachs and Ethos & Co are respectively EON Cap’s international and local financial advisers for its strategic review.
There is speculation RHB Capital and Alliance Financial Group Bhd may be interested parties but sources close to the companies indicate that this is unlikely at this point.
“RHB has expressed that it is not interested in EON Cap. It is more interested in building value from its current structure,” a source said yesterday.
A source at Alliance said he had no knowledge of Alliance submitting a competing bid for EON Cap at this point.
Meanwhile, saying that he “was in no position” to reveal who the parties were nor elaborate further, Lor said the board would “within the next few days” make an announcement as to what it planned to do and what decision would be taken.
In its RM4.92bil cash offer for the assets and liabilities of EON Cap last Thursday, HLB had given the EON Cap board seven days to confirm the tabling of the offer for consideration and approval by the shareholders.
Lor said the board was looking at the “best options and the best alternatives. That’s why they are taking a little bit more time in their deliberations.”
On Jan 6, Bank Negara gave the green light for HLB to start negotiations on the acquisition of EON Cap’s assets and liabilities, including equity interests.
EON Cap had also said it was seeking Bank Negara approval to start negotiations with multiple parties, with regards to this.
Research outfit AmResearch Sdn Bhd does not expect a competing bidder for EON Cap to emerge in the short term.
‘’We believe EON Cap’s shareholders will be better off taking the current all-cash offer from HLB and considering alternative investments elsewhere,’’ the house told its clients last week.
Still, other houses like TA Securities and RHB Research believe that EON Cap’s major shareholders (in particular Primus Pacific Partners (HK) Ltd) may offer some resistance due to pricing issues. Primus, which holds a fifth of EON Cap, is said to be uninterested in the all-cash offer which would crystallise its losses.
Primus had in early 2008 bought the shares at RM9.55 a share, which is more than a third above HLB’s offer price which works out to RM7.10 a share.
Analysts feel the other four non-strategic shareholders of EON Cap – Tan Sri Tiong Hiew King, Rin Kei Mei, Khazanah Nasional Bhd and the Employees Provident Fund – would eventually agree to HLB’s offer.
On the entirely cash deal, an analyst said it was easier than a share-swap deal as “a cash deal would be completely clean; not to mention more cost-effective.”
“Some of the shareholders may want to make a clean exit and a cash deal is seen as the best option,” she said.
Meanwhile, Lor said that from a management perspective, what was more important for the bank was that it continued to drive its business “as aggressively” as possible.
“Within the first two weeks or so of the year, we’ve already been involved in two initial public offerings, I think that’s a good thing,” he said, referring to Homeritz Corp Bhd and ECS.
EON Cap’s subsidiary MIMB Investment Bank is the advisor, sole underwriter and co-placement agent for the ECS IPO.

Small investors can buy into billionaire Buffett's empire at lower cost

OMAHA, Nebraska: Peter Eischeid has long had his nose pressed to the glass of billionaire Warren Buffett's investment empire, yearning to be among those with the means to buy their way in.
No more.
Thanks to a stock split approved last Wednesday, Eischeid and other small investors plan to snatch up lower-tier Berkshire Hathaway Inc. shares that will sell for just $69 and change.
That's down from about $3,500 that each Class B share commanded before.
"I avoided that conglomerate mainly because of the entry prices of the shares," said Eischeid, 34, of Salt Lake City.
"I know there are a lot of people that will definitely be intrigued by that lower share price."
There will indeed, said Andy Kilpatrick, a stockbroker and author of a two-volume tome on Buffett's life and business.
"It now makes it available to a child who cuts grass for spending money," Kilpatrick said.
"There's nobody who can't find $66. The last time Berkshire stock was at $66 was in 1971."
Buffett has built his reputation as a savvy investor who spots quality businesses selling cheaply and either buys the stock or the whole company.
Omaha-based Berkshire has investments in such companies as Coca-Cola Co. and Wells Fargo & Co., and owns more than 60 subsidiaries, including clothing, furniture and jewelry companies.
Its insurance and utility businesses typically account for more than half of its revenue.
The company's prized Class A shares, which carry more voting rights and are not being split, are America's most expensive stock at around $100,000 each.
The Class B shares, dubbed "Baby Berkshires," are splitting 50-for-1 as a way to facilitate the company's plan to buy Burlington Northern Santa Fe Corp.
Among investors drawn by the lower price is Adam Bray-Ali, a self-described small investor from Los Angeles, who bought two shares of the Class B stock for just under $3,300 each two days before the split, and planned to buy another 50 or so afterward.
But there's more at play than the stock's new affordability.
"I can go to the shareholder meeting this year," the 35-year-old Bray-Ali said.
Berkshire's annual meeting is the mecca of shareholder events, routinely drawing more than 30,000 to Omaha for the three-day affair that has an almost carnival-like atmosphere.
The event includes a shareholder reception on the eve of the meeting, various parties and a six-hour question-and-answer session with Buffett, who tosses out financial observances in terms even the most uninitiated investor can follow.
"I would say that for some young investor ... if you want to learn about investments, then the annual meeting is the place to go," Kilpatrick said.
That's a draw for University of Tennessee senior Nick Vantrease. The 21-year-old, who is president of the school's Financial Management Association, said he will consider buying Berkshire stock once he graduates in May and starts working.
He expects the split to be a key topic at Buffett's scheduled meeting with college business students next month.
"It'll be interesting to hear what he has to say about it," said Vantrease.
"It definitely makes the stock more affordable."
Terry Porter of Kansas City, Missouri, who has held Class B shares for years, believes it's not just young investors who can take advantage of the lower entry price.
"I have a lot of older people ask me what they should invest in. They don't want to be ripped off," said the 60-year-old retiree.
"I'd be the first to recommend Buffett."
Opinion is split on the effect the move will have on the stock's direction.
Plenty believe it will help the Class B price rise, especially if Berkshire's increased liquidity lands the stock in the S&P 500.
Buffett, long opposed to stock splits, said he enjoys using stock for the railroad deal "about as much as preparing for a colonoscopy."
While the man known as the Oracle of Omaha has nonetheless supported the move, some professionals don't see it as a buying opportunity.
"I'm a follower and fan of Warren Buffett, but no, I am not going to buy into Berkshire Hathaway for myself or my clients," said Mark Pearson, president and CEO of Anchor Capital Management in Minneapolis.
"I firmly believe there is greater value in other companies in the market." - AP

Google negotiating ways to keep presence in China

BEIJING: Even if its stand against censorship leads it to close its search engine in China, Google Inc. still hopes to maintain other key operations in the world's most populous Internet market.
Google is negotiating to keep its research center in China, an advertising sales team that generates most of the company's revenue in the country and a fledgling mobile phone business as the company navigates the delicate negotiations with the government.
Both sides are torn by conflicting objectives.
Google says it's no longer willing to acquiesce to the Chinese government's demands for censored search results, yet it still wants access to the country's engineering talent and steadily growing online advertising and mobile phone markets.
Chinese leaders are determined to control the flow of information, but realize they need rich and innovative companies such as Google to achieve their goal of establishing the country as a technology leader.
Even some Chinese media that rarely deviate from the party line have warned that Google's departure could slow technology development and hurt China's economy.
Analysts are split on how the current impasse will be resolved, with some resigned to Google having to pull completely out of China for the foreseeable future while others envision a face-saving compromise that preserves a toehold in the country for the company.
Robert Broadfoot, managing director of Political and Economic Risk Consultancy in Hong Kong, is among the camp that expects Communist leaders to bend their rules to keep Google in the country.
"They're hardly going to close the door on the innovator. They are very interested in what (Google is) innovating, because they may want it for themselves," said Broadfoot, who has advised companies on China since the 1970s.
Google said Jan. 12 it might close its China-based search engine, Google.cn, because it no longer intends to censor the results as it has for the past four years.
And, the company, warned, the decision could lead the company to pull out of the country completely.
The threat stemmed from computer hacking attacks on Google's computer code and efforts to break into the e-mail accounts of human rights activists.
Google said the intrusions originated from within China, but stopped short of linking them directly to the country's government.
Google Chief Executive Eric Schmidt told analysts last week that the company planned to make changes in China in "a reasonably short time" while raising hope for a compromise.
"We made a strong decision that we wish to remain in China," Schmidt said.
"We like the business opportunities there. We'd like to do that on somewhat different terms than we have."
The dispute with China prompted Google to postpone the planned release last week of its latest mobile phones for the country, a market with more than 700 million accounts.
But the company says it still hopes to sell the phones in China.
Even if Google.cn is shut down, Google wants to keep its Beijing development center and sales offices in Beijing, Shanghai and Guangzhou, according to a person familiar with its thinking.
But that won't happen if management believes its decision to stop censoring search results will jeopardize employees in China, according to this person, who asked not to be identified because of the sensitivity of the negotiations.
Google will not say how many employees it has in China, but industry analysts estimate its work force at 700.
The company, based in Mountain View, California, employs about 20,000 people worldwide.
The Chinese sales force is important to Google because most of the company's revenue in China comes from online ads sold on Google's U.S. Web site, Google.com.
The company also runs an ad network that places marketing messages on other China-based Web sites besides its own.
Analysts say keeping Chinese advertisers happy would be more difficult if Google closes its sales office in the country and tries to connect with the customers from abroad.
Alienated advertisers would be more likely to defect to alternatives still based in China, such as Baidu Inc. and Alibaba Group, which is part owned by Yahoo Inc. Google trails Baidu with about 35 percent of China's search market to its local rival's 60 percent.
If Google does close Google.cn, it could go back to trying to reach Chinese Internet users with the Chinese-language portion of Google.com.
That was Google's strategy before 2006, when it opened its censored search engine to better reach the Chinese population.
Google opted for a China-based search engine because the Chinese government used its Internet filters to restrict access to the U.S. site.
Beijing encourages Internet use for education and business but tries to block material it deems subversive or pornographic and was filtering access to Google's U.S. site.
In a sign of hardening Chinese attitudes, the Ministry of Industry and Information Technology on Monday denied government involvement in Internet attacks and defended its online surveillance as lawful.
The Communist Party newspaper People's Daily accused the U.S. government of controlling the Internet at home while urging other countries to build an "Internet freedom utopia," which it called "only an illusion of freedom."
There's still a chance that Chinese leaders may be more conciliatory behind closed doors.
Google has been more circumspect publicly since confronting China in a blunt posting on the company's Web site.
In recent years, companies have learned better how to deal with Beijing and to channel complaints about market barriers and regulations through trade groups.
That helps to conceal their identity and shield them from retaliation.
Last year, manufacturers that opposed Beijing's order to include its "Green Dam" Web-filtering software with personal computers worked through trade groups and refused to talk about it publicly.
The government withdrew its order in June in a rare last-minute reversal, though schools are required to use the filter. Wal-Mart Stores Inc., which resists efforts to form labor unions in its stores elsewhere, faced an organizing campaign by China's state-sanctioned labor group in 2006.
The company ultimately agreed to cooperate in forming unions at its dozens of China outlets.
The Google dispute could heighten disputes within the Communist Party over how to balance security and economic development, Broadfoot said.
He said the search giant's future in China might be decided by the outcome of that struggle.
"Those two factions have to conduct a very difficult dance that they really don't want the outsiders to watch," he said.
"The most important lesson out of this is it helps us understand the kind of economic player China wants to be." - AP

PNG on verge of a boom

PAPUA New Guinea has a healthy economy, and with the two liquefied natural gas (LNG) projects the country, is heading for an unprecedented boom, according to an executive of ANZ Bank.Alex Thursby, ANZ’s chief executive officer for Asia Pacific, Europe and America said that last year alone, PNG contributed 19% to the bank’s regional results.Mr Thursby was part of a high-profile ANZ delegation that travelled the region last week on their ANZ Pacific roadshow, which included a visited to Madang province.He said the group’s visit to Madang showed ANZ’s commitment to its customers’ growth.Managing director for ANZ PNG and chief executive for North West Pacific Vishnu Mohan welcomed the delegation at the Madang Resort Hotel.The group included Michael Rowland, chief executive officer (CEO) Pacific; Nancy Wong, general manager strategy and marketing APE&A; Neil Lambert, head of strategy and marketing; Wendy Lim, managing director consumer banking Asia Pacific; Alison Larson, chief of staff Asia Pacific; Jon Farquharson, head of risk; Kerrie Harris, head of human resource Pacific and Louise de Gannes, executive assistant to CEO Pacific.Mr Thursby has assured customers that Mr Mohan would visit Madang and other branches more regularly to continue this commitment to foster relations for mutual growth.He described Madang as one of PNG’s gems with shorelines that would no doubt attract foreign investment, particularly from Asia, in the tourism industry.Madang is one of PNG’s most tourism-oriented provinces.With a population of close to 400,000, the province is said to be a miniature PNG with coastal people, islanders, mountain people and river dwellers. It has many of the country’s highest peaks and active volcanoes, with a land mass totalling 29,000sqm and has four large and many smaller islands.The province is PNG’s third largest producer of cocoa and copra and the second producer of cattle.It also holds the largest Sino-Australian nickel and cobalt project worth US$1.7 billion (K4.6 billion). Madang also has Ramu Sugar and Jant/Gogol woodchip mill which are amongst PNG’s largest employers.The ANZ Bank team was also met by up to 30 guests including Madang Governor Sir Arnold Amet.

Pacific LNG seeking JV for new gas project

PACIFIC Liquid Niugini Gas Operations Ltd (PLNGOL) is seeking funds and partners to build the proposed eight million metric tonne-a-year LNG project, with the first onshore production line likely to be about 3.7 million tonnes in capacity. Front-end engineering and design (FEED) may start in the second half of this year and a final investment decision (FID) could be as early as 2011, according to Henry Aldorf, Pacific LNG’s newly-appointed president.Construction costs may have come down by as much as 40% from peak levels, and projects in PNG do not face labour problems as experienced in Australia, he said.“In terms of the outlook for the project, in our opinion, first LNG in 2015 currently looks optimistic,” Frank Harris, global head of LNG at the Edinburgh-based Wood Mackenzie Consultants Ltd, said.“We expect that additional clarity on the size of the resource and the entry of an established LNG player into the project will be required in order for it to reach final investment decision,” he said.The Liquid Niugini project has a free-on-board break-even price of about US$2.25 (K6.08) per million British thermal units, by far one of the lowest for a proposed venture, Aldorf said.That compares with US$7.49 (K20.24) per million Btu for a rival PNG LNG project by ExxonMobil, including upstream, pipelines and the plant, according to Wood Mackenzie.The consultant doesn’t have an estimate for the Liquid Niugini project. Equatorial Guinea LNG comes in at US$1.71 (K4.62).Condensates, a light oil found in gas, and crude oil, will further boost profitability of Liquid Niugini, Aldorf said.InterOil may have discovered as much as 228 million barrels of a light oil to kick start a LNG plant in PNG in the Elk and Antelope field, Phil Mulacek, chief executive officer of the Whitehorse, Yukon Territory-based explorer, said.Plans to extract condensates prior to the construction of LNG trains may also prompt development of a floating facility, which is faster to deploy, Aldorf said. Australia and PNG are building a slew of LNG plants to tap the demand in Asia-Pacific for the cleaner-burning fuel to reduce carbon emissions. – Bloomberg

LNG project lures public servants

Source:
By ZACHERY PER
AN exodus of highly-skilled public servants to the LNG project is being experienced as workers are quitting their jobs in search of greener pastures.Several public servants in Simbu province have attended interviews with developers of the project, according to president of the Public Employees Association Simbu branch Peter Nulai.He told The National in Kundiawa yesterday that there would be an acute shortage in public service workforce after an exit of several highly-skilled and experienced public servants.“The onus is on the Government to re-negotiate their remuneration packages to keep them serving the people at their current respective levels,” Mr Nulai said.He said public servants not only in Simbu province but also other provinces and in the National Government were opting to join the LNG work force.“Most of those who expressed interests to work in the project are likely to leave public service as so much money is involved.“The Government will make millions of kina because of the LNG projects, so they should increase the salaries and improve working and living conditions of its workers to keep them in the public service,” Mr Nulai said.It has been revealed that PNG lacked the manpower capacity for the LNG project to start and developers were looking at recruiting skilled manpower overseas to meet the requirement of the project.

Oil price tumbles as stock market stumbles

NEW YORK: Oil prices dropped Thursday to the lowest level in a month after a government report showed the United States continues to use less energy than last year, raising doubts about the strength of the fragile economic recovery.
A proposal by President Barack Obama for tougher bank regulations also pulled the stock market sharply lower and left traders wondering how it would affect commodities markets.
Goldman Sachs and other major banks have helped funnel billions of dollars of speculative money into oil and natural gas contracts during the past several years.
Obama's call to limit speculation by commercial banks could make it more expensive for them to buy oil contracts, hedge fund manager Mike Masters said.
Masters, who called for tighter scrutiny of energy markets last year, cheered Obama's announcement.
"If you can reduce the impact of banks in commodities, you're going to have much less volatility in food and energy prices," Masters said.
Benchmark crude for March delivery fell $1.66 to settle at $76.08 a barrel on the New York Mercantile Exchange.
The contract dropped as low as $75.66 earlier in the day, the lowest price since Dec. 23.
Energy prices dropped in morning trading after the Energy Information Administration reported that demand for gasoline and jet fuel both weakened during the past few weeks.
America is consuming less petroleum than the same time last year, and refineries, which have struggled to pass higher crude costs along to consumers, are now operating at the lowest levels since September 2008.
Natural gas supplies dropped more than expected to 2.6 trillion cubic feet and are now slightly lower than the five-year average.
The Labor Department also said Thursday that initial claims for unemployment insurance rose last week by 36,000 to a seasonally adjusted 482,000.
In other Nymex trading in February contracts, heating oil lost 3.55 cents to settle at $1.9856 a gallon, while gasoline dropped 6.36 cents to settle at $1.9829 a gallon.
Natural gas futures gained 11.9 cents to settle at $5.615 per 1,000 cubic feet. In London, Brent crude for March delivery lost $1.74 to settle at $74.58 a barrel on the ICE Futures exchange. - AP

LNG project to transform Santos’ image

THE PNG liquefied natural gas (LNG) project alone will transform the earnings quality of Santos Ltd when the project comes online in 2014, chief executive David Knox said.The final investment decision (FID) reached last Dec 8 by project partners marked the next step in Santos’ transformation in LNG growth strategy, he said in a statement when the company released yesterday its last year’s fourth quarter activities report ending Dec 31.Santos has 13.5% interest in the PNG LNG project.“By 2015, Santos’ goal is to have production from Darwin LNG (Australia), PNG LNG, Gladstone LNG (GLNG) and would be constructing Bonaparte LNG,” Mr Knox said.“This will represent a transformation of the company into a leading Australian and Asian energy company,” he said.Santos estimates that capital expenditure guidance for this year included A$1 billion (K2 billion) for GLNG; A$500 million (K1.234 billion) for PNG LNG; A$500 million (K1.234 billion) sanctioned projects (Kipper, Reindeer, Henry and Chim Sao); and A$150 million (K370 million) for conventional exploration.The royalty-related taxation expense guidance assumed an average oil price of A$90 (K222) per barrel this year.Santos claimed its production of 54.4 million barrels of oil equivalent (mmboe) last year was in line with its guidance range (53-56mmboe) and December quarter production of 13.9mmboe was 2% higher than the same period in 2008 (13.6mmboe) and in line with last September quarter.“The base business delivered a solid production performance with new production from Oyong in Indonesia and strong production from John Brookes.”But its sales revenue of A$2.181 billion (K5.384 billion) was 21% lower than 2008 sales revenue of A$2.762 billion (K6.818 billion) due to lower international oil prices.The December quarter average oil price of A$85.37 (K211) per barrel was 5% lower than a year earlier.December quarter average gas price of A$3.99 (K10) per gigajoule was 16% lower than the A$4.74 (K11.70) posted during the same period in 2008 due to lower oil prices.

Cue to sell gas asset to PNG LNG project

NEGOTIATIONS are in progress for Cue Energy Ltd to sell its Southeast Gobe field (petroleum development licence 3) to the PNG liquefied natural gas (LNG) project.And Cue Energy has completed the acquisition of 60km 2D seismic survey over the Barrikewa gas field in the Papua basin.The energy company revealed this yesterday when it released its fourth quarter report ending Dec 31.It posted a fourth quarter revenue of A$12.1 million (K30 million) on sales of 153,281 barrels of oil and 160 million cubic feet of gas.Revenue in line with last quarter and attained quarter end was A$18.1 million (K44.8 million).“At the end of the quarter, the SE Gobe field was producing an average of 4,500 barrels a day for the calendar year 2009,” Cue said.The company said it had shared about 150 barrels of oil per day.“Cue’s oil production revenue received during the quarter from the field was A$0.92 million (K2.3 million) equivalent to 11,179 barrels.“Cue did not have any hedging arrangements in place during the quarter,” it said in a statement.Cue’s oil production revenue realised during the quarter from its Sampang PSC field in Indonesia was A$3.4 million (K2.5 million) equivalent to 42,485 barrels of oil.The average production rate for the quarter was 3,800 barrels a day.

New oil prospect in Gulf’s Antilope licence: Kalinoe

OIL was found in the lower part of the Antelope Reef reservoir within the Antelope-2 appraisal well in the Gulf province, Petromin PNG Holdings managing director Joshua Kalinoe announced.He said on Dec 1, Antelope-2 recorded the highest rate of high quality natural gas at 705 million cubic feet of gas per day (mmcfd), and condensate at rate of 11,200 barrels day (bcpd), within the upper part of the Antelope Reef reservoir.Antelope-2 is a joint-venture appraisal well among Petromin PNG Holdings, Clarion Finance Pte and InterOil Corp.Mr Kalinoe said the indications of oil, if successfully tested to be a significant oil column and commercially viable, would completely change the economics of the second liquefied natural gas (LNG) project for PNG which was being driven by InterOil and Petromin.“While cleaning the wellbore to conduct drill stem test No. 3, oil shows were circulated to surface at the depth of 2,325m.”

Henry Aldorf named PLNGO president

PACIFIC Liquid Niugini Gas Operations Ltd has announced the appointment of Henry Aldorf as its president.Mr Aldorf is a director on the board of Liquid Niugini Gas Ltd (LNGL), the company in which InterOil Corp has 52% interest and which is developing the second LNG project.Pacific LNG Operations is an affiliate of Switzerland-based Clarion Finanz AG, a substantial indirect interest holder in the Elk and Antelope discoveries and 47.5% LNG partner in Liquid Niugini in which InterOil Corp has 52% interest.“The gas resource in Elk and Antelope is onshore and a great liquids rich gas asset. “We are anxious to move forward with solid LNG partners and complete this project on time and on budget,” Mr Aldorf said.He was most recently president of Marathon International and vice-president Global Upstream of Marathon Oil.He has 37 years of experience in the petroleum and chemicals industry, the last nine of which was with Marathon Oil.

LNG projects in region face delays

HALF the liquefied natural gas (LNG) plants proposed in the Australia-Pacific region may be delayed as increased competition and a skills shortage threaten profitability, Bank of America Corp’s Merrill Lynch said.A growing number of supply options for Asian LNG customers could hurt the prices producers receive and give buyers the advantage in contract negotiations, Mark Hume, a Merrill Lynch analyst based in Sydney, wrote in a report to clients.“Project attrition, delay and even outright cancellation are inevitable,” Hume said.Woodside Petroleum Ltd, Chevron Corp and Royal Dutch Shell Plc are among energy companies in Australia competing for LNG customers and seeking to tap demand for cleaner-burning fuels.About half of the 30 proposed processing plants in Australia and PNG may stay on schedule, he said.“We think it’s time to get selective,” he wrote in the report dated Jan 15. BG Group Plc, Inpex Corp, Oil Search Ltd, a partner in Exxon Mobil Corp’s PNG venture, and Origin Energy Ltd are Bank of America Merrill Lynch’s “preferred global LNG supply-side picks,” Hume said.Most of the companies in the state of Queensland planning to convert gas extracted from coal seams into LNG, a grouping that includes Origin and BG, use the same technology to liquefy the gas and could collaborate to boost profits, he said.Hume didn’t specify how the rivals could work together.A shortage of engineers and other specialists could push labour costs higher, and the emergence of floating LNG plants with “clear cost advantages” over land-based facilities could add to the pressure facing ventures using conventional technology, he said.While annual LNG demand is forecast to grow to 384 million metric tonnes by 2020, exceeding supply, “it is a far cry from the heady days of 2007 when expectations were for demand to grow to circa 500 million tonnes a year,” Hume wrote.Rising domestic gas production in China may reduce demand for imports, Adrian Wood, a Sydney-based analyst at Macquarie Group Ltd. wrote in a Jan 12 report.Supplies from Qatar and increased use of nuclear power generation in Asia are among other risks for Australian LNG ventures, he said.LNG processing units proposed now may generate lower returns than similar developments approved in recent years, Wood said.About half of the growing list of proposed LNG projects may be approved, the Macquarie analyst said in the report.“While we continue to see huge value in the large portfolio of undeveloped LNG projects held by Australian companies, we nevertheless believe investors should brace themselves for project delays, higher construction costs and the potential for a more competitive pricing environment going forward,” Wood said. – Bloomberg

LGL output at record high as Hood quits

LIHIR Gold Ltd (LGL) produced another record gold production at 1.13 million ounces last year in line with guidance for the year of 1m oz to 1.2m oz.This was disclosed in last year’s fourth quarter financial report which LGL acting chief executive officer and chief financial officer Phil Baker will present on Friday.The report will also include this year’s production goals.Mr Baker said total cash costs for the year were also in line with guidance provided to the market (below US$400/oz (K1.081 million) excluding Ballarat).“The company’s operational performance has been excellent … I look forward to providing full details on Jan 22,” Mr Baker said.LGL chief executive Arthur Hood, who saw LGL transform from a single mine operation to a multi-mine company producing more than one million ounces of gold per year, has resigned.Mr Hood stepped down just months before his four-year term expires this year end.LGL chairman Dr Ross Garnaut announced the board’s acceptance of Mr Hood’s resignation with Mr Baker being appointed the interim chief executive until the position is filled.“The board had also been considering the future of the company for some months now and concluded that it was time to find a successor to take LGL forward and build on the great foundation established under Arthur’s leadership,” LGL said.“LGL is now one of the world’s leading gold producers and is consistently performing very well, with excellent growth options for the future.“It is, therefore, the right time for me to step aside to enable an orderly transition to a new CEO,” Mr Hood said.Dr Garnaut paid tribute to Mr Hood for his contribution to the company.“Arthur has successfully led LGL through a major growth phase which has seen production increase from around 600,000 ounces per year in 2005 to more than 1.1 million ounces in 2009, with diversified operations in PNG, Australia and West Africa.

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