Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No: 21930

IMPLEMENTATION COMPLETION REPORT(CPL-36700)

ON A

LOAN

IN THE AMOUNT OF US$ 11.0 MILLION

TO THE

INDEPENDEINT STATE OF PAPUA NEW GUINEA

FOR THE

PETROLEUM EXPLORATION AND DEVELOPMENT TECHNICAL ASSISTANCE PROJECT

March 22, 2001

Energy & Mining Sector Development UnitEast Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the perfornance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of January 1, 2001)

Currency Unit = Kina (K)1 Kina = US$ 0.30

US$ 1.00 = Kina 3.33

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMS

BGS - British Geological SurveryCNG - Compressed Natural GasDME - Department of Minerals and EnergyDMP - Department of Mining and PetroleumDMR - Departnent of Mineral ResourcesDPE - Department of Petroleum and EnergyGOPNG - Government of Papua New GuineaGTQ - (PNG) Gas to Queensland (Project)ILG - Incorporated Landowners GroupIRC - Internal Revenue CommissionLNG - Liquefied Natural GasLPG - Liquefied Petroleum GasMRDC - Mineral Resources Development

CompanyPD - Petroleum DivisionPNG - Papua New Guinea

Vice President: Jemal-ud-din KassumnCountry Manager/Director: Klaus Rohland

Sector Manager/Director: Yoshihiko SurniTask Team Leader/Task Manager: Salahuddin Khwaja

FOR OFFICLAL USE ONLY

PETROLEUM EXPLORATION AND DEVELOPMENT TECHNICAL ASSISTANCEPROJECT

Ln. 3670-PNG

CONTENTS

Page No.1. Project Data I2. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 35. Major Factors Affecting Implementation and Outcome 96. Sustainability 117. Bank and Borrower Performance 128. Lessons Learned 149. Partner Comments 1410. Additional Information 25Annex 1. Key Perfornance Indicators/Log Frame Matrix 26Annex 2. Project Costs and Financing 28Annex 3. Economic Costs and Benefits 30Annex 4. Bank Inputs 31Annex 5. Ratings for Achievement of Objectives/Outputs of Components 32Annex 6. Ratings of Bank and Borrower Performance 33Annex 7. List of Supporting Documents 34Annex 8. Policy Framework Initiatives Undertaken and Supported by the Project 35Annex 9. Investments in Exploration and Development 38Annex 10. Oil Production, Price, Tax and Royalty 39Annex 11. Gross Domestic Product (GDP) and Export Earnings 40Annex 12. Organization of the Dept. of Petroleum and Energy showing Petroleum 41DivisionAnnex 13. List of Tasks Undertaken by the Project 42Annex 14. Studies Undertaken during the Project Implementation 50Annex 15. Promotions and Presentations 51Annex 16. PNG Oil and Gas License Map 52Annex 17. Project Implementation Schedule 53Annex 18. Project Implementation Schematic Part 54

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Project ID: P004391 Project Name: PETROLEUM EXPLORATIONAND DEVELOPMENT TECHNICALASSISTANCE PROJECT

Team Leader: Salahuddin Khwaja TL Unit: EASEG

ICR Type: Core ICR Report Date: March 22, 2001

1. Project Data

Name: PETROLEUM EXPLORATION AND L/C/TF Number: CPL-36700DEVELOPMENT TECHNICAL ASSISTANCEPROJECT

CountryIDepartment: PAPUA NEW GUINEA Region: East Asia and PacificRegion

Sector/subsector: GI - Oil & Gas Exploration & Development

KEY DATESOriginal Revised/Actual

PCD: 11/04/91 Effective: 09/21/94Appraisal: 01/08/92 MTR:Approval: 12/09/93 Closing: 12/31/99 09/30/2000

Borrower/lImplementing Agency: GOVERNMENT OF PNG/DEPARTMENT OF PETROLEUM AND ENERGY;PETROLEUM DIVISION

Other Partners: None

STAFF Current At AppraisalVice President: J. Kassum G. KajiCountry Manager: K. Rohland M. HaugSector Manager: Y. Sumi P. SchererTeam Leader at ICR: S. Khwaja S. KhwajaICR Primary Author: S. Khwaja

2. Principal Performance Ratings

(HS=Highly Satisfactory, S--Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: HS

Sustainability: HL

Institutional Development Impact: SU

Bank Performance: HS

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The project aimed to: (a) assist the Government in the development of an improved framework ofregulatory and ownership policies that would increase investment in the petroleum sector and Governmnentrevenue; (b) strengthen the capacity of the Government for comprehensive management of petroleumexploration and development; (c) upgrade the capacity of the Government to gather, process, analyze andmarket to international investors exploration and development data on the sector; (d) formulate betterstandards for safe and efficient storage, handling and transportation of petroleum products; and (e) toevaluate the potential for commercial development of natural gas reserves for LNG export, develop anappropriate framework for gas development and present the results in international seminars to attractinvestment.

The formulation of the project objectives was far-sighted. The project objectives were assembled at a timewhen PNG's first oil production had only just commnenced. The Government had no experience at that timeof managing oil production in any form or manner, let alone the capacity to envisage future developments.The objectives therefore represented sound planning for the development of the sector.

The prevailing framework of policy and law was basic and prospective in design in anticipation of a singlelarge oilfield development. It did not envisage multiple oilfield development nor gas development;processing, transportation and utilization matters were not addressed at all. Equally, little consideration hadbeen given to the monitoring and regulation of activities, or the impact of petroleum developments andsharing of benefits with landowners and provincial governments.

At the time of formulation, the responsibilities for management of petroleum exploration and developmentwere distributed within the branches and divisions of the former Department of Minerals and Energy.Functions were amalgamated to a high degree with mining industry management. No single entity hadeither the manpower or coherent responsibility for petroleum matters. Clearly, there was a need toconsolidate and strengthen the Government's capacity to manage the petroleum sector.

Earlier Bank support in the form of Petroleum Exploration Promotion Technical Assistance Project (Cr.1279-PNG) had re-kindled international oil industry's interest in petroleum exploration in PNG. It broughttogether historic data that was assessed by overseas experts who promoted exploration opportunities to theindustry. Whilst vital and significant early steps were taken, little capacity existed in the Government togather, process, analyze and market exploration and development data to the industry. There was a need todevelop the capacity of the Government to undertake such work itself.

As a side observation to the development of exploration and production, it had been noted that there wereno apparent standards for safe and efficient storage, handling and transportation of petroleum products inPNG. Whilst this was an obvious area for study, and the development of appropriate standards, thisobjective of the project was clearly at discord with the other objectives. Such manifestly downstreamdistribution matters were not in the ambit of petroleum exploration and development.

The objectives took into account the fact that PNG's initial oil discoveries were fields containing light oilswith considerable volumes of associated gas; additionally, several significant gas discoveries had beenmade. With the lengthy gestation period for gas development the objectives wisely contained the evaluationof the potential for commercial gas development. However, the objectives focused on LNG export withoutregard to other development scenarios. They did nonetheless realize that an appropriate policy andlegislative framework was required for future gas development and that it would require promotioninternationally to attract investment.

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3.2 Revised Objective:No revisions were required to objectives as there was a clear perception of likely sector development at thetime of project preparation.

3.3 Original Components:The project consisted of:

a) Institutional Strengthening of the Department of Mining and Petroleum (now Department ofPetroleum and Energy) through employrment of experts in petroleum geology, archive management,geophysics, reservoir engineering, production engineering, drilling, pipeline and facilities engineering,petroleum economics and legal and fiscal policies; the experts to provide responsible advice and technicalassistance, and concomitant with this, to provide on-the-job training to national officers

b) Studies and Promotions involving provision of experts and services to: (i) conduct studies onlocation, size, product mix and feasibility of a petroleum refinery, and the feasibility of LNG export; (ii)organize and conduct intemnational seminars to promote LNG export; and (iii) compile appropriatestandards for safe handling, storage and transportation of petroleum products.

c) Equipment and Support Facilities to enhance the capability of DMP (now DPE) in monitoring andanalyzing petroleum exploration and development activities through the provision of: (i) a computer systemwith appropriate hardware and software; and (ii) laboratory equipment.

d) Training: (i) activities would involve post-graduate studies of nine nationals in foreign universitiesin various petroleum disciplines and intemships with operating companies; and (ii) training of six nationalsas laboratory technicians.

3.4 Revised Components:No significant revisions were made. Minor revisions were:a) elimination of the refinery study, as the Government had already decided to establish a refineryand had made agreements with developers;b) broadening the scope of the evaluation of gas development by the inclusion of developmentscenarios other than just LNG export; andc) the inclusion of prefabricated office space in the component of Equipment and Facilities to allowfor growth of establishment.

3.5 Quality at Entry:The quality at entry was satisfactory as the project concept, design, and components were endorsed by peerreviewers and the Bank management. (QAG was not in existence)

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:(a) to assist in the development of an improved framework of regulatory and ownership policiesthat would increase investment in the petroleum sector and Government revenue. This objective wasfully achieved as the project provided substantial assistance to both the development and the improvementof policies, particularly in the area of gas resource development. Policies on gas, pipelines, frontier areasexploration, landowner benefits, and national participation in the sector have all been developed andintroduced through successive legislative efforts. The initiatives undertaken and recognized during the

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course of project are listed in Annex 8. These efforts culminated with the introduction of newcomprehensive legislation (Oil & Gas Act of 1998) for the sector, which laid the foundations for futuresector development (particularly in gas) and involvement of local communities in sector activity.

Policy work commenced with the revisions to the Standard Petroleum Agreement leading to issue of revisedstandard versions 6.01 and 6.02. This included revised domestic market obligations, landowner equityprovisions, revised guarantee formats and natural gas policy provisions. Amendments to eight currentPetroleum Agreements were made to accommodate the provisions of the Mineral Resources DevelopmentCompany (Privatization) Act. Substantial assistance was provided to the Mineral Resources DevelopmentCompany (MRDC) in preparations for the launch of Orogen Minerals Ltd. and the initial public offering(IPO) of equity in that company. Through the project, the Petroleum Division was able to take up its fullresponsibility as a State entity in the associated processes for the IPO, such as float committee participationand due diligence processes.

The natural gas policy was presented to Parliament and endorsed by the Government in November 1995.Revisions were then made to the Petroleum Act and the Income Tax Act to legislate its provisions.Fundarnentally, the policy provided for tax incentives for gas development with the lowering of the tax ratefrom 50% to 30% for gas developments and the introduction of retention licenses as a new class of license.A holder of retention license is pennitted to retain title over a gas field that is not presently commercial, buthas the likelihood of future commercial development. As more than 14 trillion cubic feet (TCF) of gasreserves await commercial development, the legislation of the gas policy principles has sparkedconsiderable interest in commercial gas development. This singularly has the greatest potential to increaseinvestment in the petroleum sector and Government revenues. The Gas to Queensland Project currentlybeing frmed up would be the largest ever investment in PNG with an estimated capital cost of USD 2.3billion and expected Government revenues of about USD 3.6 billion over the project life of 30 years.

A pipeline policy was formulated and subsequent amendments introduced into the legislation. The policysought to optimize the use of pipelines through regulatory principles whilst maintaining regard to theirownership. Prior to the introduction of the policy, the only provisions for pipelines were common carriageprinciples, and direct regulation of the conditions of use of pipelines, tariff control and the prevention ofleaks. The pipeline policy introduced a two-tier hierarchy of pipeline license. Pipelines carrying petroleumfrom a particular production project are designated project pipelines. Pipelines carrying petroleum fromtwo or more projects or facilities; transporting petroleum to an intemational boundary; or transportingpetroleum from a strategic facility are designated as strategic pipelines. Strategic pipeline licensees arerequired to put forward access principles for other users for the approval of the Minister in return for whichthey preserve their usage rights. Strategic facilities are those facilities that may be required to have openaccess to other users; generally, only those facilities that are linked to a strategic pipeline may be soclassified. Common carriage requirements nevertheless remain for project pipelines however any commoncarriage regulation must give priority to commercial access arrangements that the licensee has previouslymade.

In order to foster exploration in less prospective areas, policies were introduced to provide incentives toexplorers. This consisted of a reduction of the tax rate from 50% to 35% for designated frontier areaswhere the Minister for Petroleum includes a condition for such designation in the petroleum prospectinglicense.

Substantial efforts have been made in the analysis and redefinition of landowner benefit policies. Initially,the only benefit for landowners hosting petroleum activities was compensation for damage to anddeprivation of land, and for the exercise of rights of way and easements. During the development of the

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Kutubu oil project the Government decided, in 1990, to share some of its benefits with affected landowners.Royalty on petroleum production was hitherto collectable by the State and transferable to the hostprovincial government. The Government decided that a portion of the royalty with the agreement of the hostprovincial government would go to the landowners. Also, part of the State's 22.5% equity in the projectwould be held for the benefit of the provincial govenrnents and landowners of the project area and pipelineroute. These complex arrangements weire contrived at the executive level to placate landowner expectations.Under the constitution, the accrued royalties were supposed to be transferred to the respective provincialgovernments at the end of each year. In addition, a Derivation Grant was to be paid to the provincialgovernment amounting to the difference between the percentage of royalty paid and the same percentage ofexport value. To effect the sharing of royalty with landowners, constitutional requirements were forsakenby agreement with respective parties. A new Organic Law on provincial governments was introduced in1995. This introduced the concept of a development levy and variously confirmed or amended this style ofbenefit sharing arrangement and called for implementing legislation. This complex array of benefit sharingprovisions of different vintages, variously in law, policy, agreements, and executive decisions, wasrationalized with the introduction of Oil and Gas Act of 1998. An important feature of the new legislationis a mandatory cap on the extent of benefits granted in accordance with the Act to landowners and otheraffected parties. This cap is set at 20% of the net benefit to the State from a petroleum project.

As the industry has grown from a single field development to multiple developments and gas developmenthas received serious consideration, downstream industry development has been borne in mind. In the Oiland Gas Act of 1998 downstream regulation of facilities including refineries was introduced. Also,provisions were made for the regulation of domestic gas utilization businesses: this pertains to domestic gassuppliers and operators, and the owners of facilities for storage and transportation of CNG and LPG.

(b) to strengthen the capacity of the Government for comprehensive management of petroleumexploration and development. This objective was substantially achieved with significant enhancementbeing made to the capacity of the Government to manage petroleum exploration and development. Specificskills have been developed in resource evaluation, exploration promotion and management, developmentplans review, economic analysis, industry regulation and monitoring. As important adjuncts to skilldevelopment, management training and the introduction of informnation technology (IT) have produced astep change in the capacity of the Petroleum Division to conduct its business.

Whilst there have been capability increases, these have been somewhat eroded by staff attrition during thecourse of the project. Some 15 professional staff left the Division for better paid jobs in the industry.Replacements only partially made up for the loss as the newcomers missed the training in the earlier part ofthe project. Nevertheless, the Petroleum Division retains a basic capability much improved above the levelprevailing at the time of inception of the project. Further institutional development will explore thetransition of the Petroleum Division into a Statutory Authority whilst the recently approved GasDevelopment and Utilization TA Project (Ln. 7019-PNG) will seek to enhance the Petroleum Division'scapability in gas matters.

(c) to upgrade the capacity of the Government to gather, process, analyze and market tointernational investors explorationt and development data on the sector. This objective wassubstantially achieved, though there will be an on-going need for the Petroleum Division to keep abreast ofadvances in Information Technology. 'Petroleum Division has enhanced its capability to gather and analyzeexploration and production data, and sector costs. Key to the enhancement was the introduction ofInformation Technology (IT) systems throughout the Division; this has enabled the development of a moreprofessional corporate culture in dealing with sector information of all kinds. This not only pertains tonumerical data, but also to industry reporting, basin studies, production analysis, policy papers, sector

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studies, economic analysis and other business documents and reports. A significant outcome is thedevelopment of an array of data bases covering: well samples, digital tapes, archives, well geology,production, reserves, seismic surveys, wells, and licenses. Some of the data bases are linked to a MapInfobased GIS system enabling the generation of maps. This capacity has aided the Division in preparing notonly data documentation and reports, but also display materials for promotions to industry at internationalconferences.

The development of the IT system and the training of the professional staff in its use has enabled thewidespread use of computers for many applications. The capacity to collect and compile data, and adapteconomic models to make useful and meaningful economic analyses of data has been particularly enhanced.

As a result of the capacity enhancement and a greater understanding of the sector arising from theirtraining, the Petroleum Division has been better able to manage the petroleum sector and promoteinvestment in sector development. Investments during the course of this project, during the six-year periodfrom 1995 to 2000, have been around US$ 503 million in exploration and US$ 752 million in development(annual figures in Annex 9). During the same period, the State has received US$ 915 million as tax androyalty (annual figures in Annex 10) on production of 190 million barrels of oil valued at US$ 3.77 billion.For the same period the petroleum sector's contribution to GDP and export earnings (annex 11) wasrespectively US$ 2.8 billion (PNG kina 5.87 billion), and US$ 3.77 billion (PNG Kina 6.71 billion).

(d) to formulate better standards for safe and efficient storage, handling and transportation ofpetroleum products. In the absence any prior standards, the standards for safe and efficient storage,handling and transportation of petroleum products were compiled. These were then handed to the NationalInstitute of Standards and Industrial Technology (NISIT) for their review and adoption as PNG standards.

(e) to evaluate the potential for commercial development of natural gas reserves for LNG export,develop an appropriate framework for gas development and present the results in internationalseminars to attract investment. The evaluations, framework development and presentations werecompleted thus fulfilling this objective. However, market changes will necessitate ongoing re-evaluations,adjustments to the framework as necessary and continued promotion. Building on earlier work where thePetroleum Division assessed the gas reserves of PNG, a thorough evaluation of the potential forcommercial development of such reserves was undertaken. It was not limited to just LNG export, butconsidered all possibilities. (More details are given in Outputs by Components below). Associated withthis, was the development of an appropriate policy framework for gas development, which has beendiscussed above. Numerous papers were given at select regional conferences to raise the awareness of thegas development opportunities. Resulting from these efforts, two major schemes for gas development havebeen under consideration during the course of the project. They were the export of LNG to Asian marketsand the pipeline transmission of gas to Queensland, Australia. Whilst these schemes competed for sometime, having different industry proponents, the prospect of LNG export has receded due to Asian financialcrisis while the markets in Queensland have been stimulated by a growing awareness of the extent of PNG'sgas resource, and the Government's policies for its development.

4.2 Outputs by components:Institutional Strengthening of the Department of Mining and Petroleum (now DPE)This was substantially achieved both organizationally and professionally within the Petroleum Division.Institutional strengthening was the main feature of this project and through a variety of implementationefforts it has been substantially achieved. The implementation strategy involved the creation of thePetroleum Division (Annex 12) with a spread of expertise grouped in five branches covering petroleum

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geo-science, engineering, economics, law, titles management, and community affairs. The professionalshave received extensive training through a technical collaboration agreement with the British GeologicalSurvey (BGS). The BGS provided 257 man-months of expertise for training, which included 472 seminarsand 61 formal courses along with responsible advice on industry issues.

For this, the BGS deployed a multi-discipline team of experts who resided in the Petroleum Divisionalongside National counterparts. Their remit was to provide responsible advice, technical assistance andon-the-job training. Aside from the large number of seminars and courses, the experts engaged thecounterparts in the context of day to day work of the Division. This was organized along with other trainingactivities as tasks documented in project task forms (PTFs). The tasks undertaken are listed in Annex 13.

It is through this methodology that, the Government's capacity to manage petroleum sector investmentactivities has been enhanced. The overall skills base of the Petroleum Division has been enhanced inevaluation of petroleum resources, promotion of the resource for investment, management of explorationand development activities, development planning, economic analysis of projects, regulation and monitoringof the industry, and related community affairs. Select management training and the widespread introductionof information technology (IT) have produced enormous changes in the ability of the Petroleumn Division toconduct its sector business, and business in general.

Studies and PromotionsThe designated studies were substantially completed apart from the refinery study which became redundantdue to the availability of willing investment in the establishment of refining capacity from severalproponents. Additional appropriate studies were initiated on selected matters. The studies conducted underthe project are listed in Annex 14. Prominent studies and their impact on sector development are brieflydiscussed as follows.

Seismic Hazard StudyIn view of PNG's high seismicity, a special study was conducted on the impact of seismic events onpossible gas facilities locations and pipeline routes. The study concluded that northerly locations and routesare distinctly more hazardous and, that in the longer term, the possibility of a major disruptive event greaterthan Richter magnitude 8 was likely. As concepts for LNG development had envisaged gas being pipedfrom the Highlands to a LNG plant near Wewak on the north coast, this was an important finding.Southerly pipeline systems and plant locations are therefore preferred.

LNG and Gas Utilization StudyA comprehensive analysis of gas development options was undertaken to select viable schemes. Two viableschemes ernerged and were studied in detail: pipeline transportation of Gas to Queensland (GTQ) and LNGexport to Asian markets. The study concluded that:

* only large-scale gas export projects will enable PNG gas development to take place,* both the LNG project and the GTQ project are financially viable, and technically and environmentally

feasible,* there are sufficient gas reserves in PNG to allow both the LNG and GTQ projects to proceed,* the GTQ project is an opportunity unlikely to re-occur in the medium term,* a LNG project would not likely start until at least 2006 and would face stiff competition from other

regional LNG projects and recent financial contraction in Asia will most likely delay start-up,* each project would bring immnense benefits to PNG in terms of income tax revenue, royalty payments,

landowner income, permanent ermployment for PNG nationals, upgrading of infrastructure and generaleconomic activity,

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* the return to the PNG nation from the projects is commensurate with that received from gas projects inother countries,

* both projects would employ very large numbers of PNG nationals for construction activities,* the two projects are not in conflict,* the GTQ project will produce large amounts of LPG for export or local use,* PNG stands to gain much and lose little through strong public support of both projects, and* both projects need public and government support to succeed.

Standards for Safe Storage and Transport of Petroleum ProductsRegional standards were reviewed and appropriate standards selected and compiled. A draft of thecompiled standards was submitted to the National Institute of Standards and Industrial Technology wherethe Unit Standards and Calibration Committee is reviewing the proposed standards before forwarding themto the Standards Advisory Board with a recommendation for adoption as a PNG Standard.

Promotion of PNG's petroleum prospectivitvPromotion of PNG's petroleum prospectivity and development opportunities has been undertaken throughthe vehicle of regional and international petroleum conferences. This has variously entailed the delivery ofpapers on PNG's petroleum industry, poster displays and exhibitions. Typically, senior professional staffof the Petroleum Division have manned the exhibition booths whilst the Secretary, Deputy Secretary orDirector have delivered papers. The visibility of PNG representatives at such events has raised the profileof PNG in international petroleum industry and fostered good industry contacts. Valuable training andexperience has been gained by the professional staff of the Division through such participation. Thisapproach has been cost-effective, rewarding and sustainable. A list of conferences where such promotionswere carried out is given in Annex 15.

Equipment and Support FacilitiesThe provision of equipment and support facilities was judiciously and wisely used to advance thePetroleum Division's capacity to conduct its business thus meeting the objective. The Petroleum Divisionhas received substantial benefit from the acquisition of equipment and support facilities under this project.A Local Area Network (LAN) has been installed providing both Intranet and Internet capacities to all staff.Data bases have been erected on the LAN server and peripherals linked for the production of digital plots,plans and maps. The LAN is also connected to the Government Wide Area Network (WAN) through theDepartment of Finance and Treasury server. Additional office space was provided through the installationof modular office units allowing the Division to consolidate with departmental management in one locationand provide office space for additional staff. The core storage facility was rehabilitated with the installationof a two story racking system; this allowed the repatriation of substantial volumes of oil well core andcuttings samples from overseas repositories. A laboratory for analyses was installed for use by licensees,students and the Petroleum Division. Geophysical archives previously located in Australia and contained ona vast number of deteriorating magnetic tapes were transcribed onto Exabyte tapes and delivered togetherwith tape copying facilities to the Petroleum Division.

Training

A very large amount of training was provided through a variety of modes, though more training willnecessarily be required in gas industry matters, in specialist fields and to new recruits as they join thePetroleum Division. Whilst most training was conducted in the context of institutional strengthening andthe concomitant on-the-job training by the experts, National staff were also dispatched as appropriate foroverseas training and education. Four professionals undertook post-graduate studies at overseasuniversities; two cadet-professionals studied for bachelors degrees; and 20 extemal course-places were

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taken up by the professional staff in a wide variety of petroleum disciplines.

4.3 Net Present Value/lEconomic rate of return:Not applicable

4.4 Financial rate of return:Not applicable

4.5 Institutional development impact:Prior to the project, the Govermnent's responsibilities for petroleum exploration and developmentmanagement were spread amongst the various branches and divisions of the former Department of Mineralsand Energy. Some functions were bunched together with mining industry management, and accordinglythere was a lack of sector focus. No single division had coherent and overall responsibility for petroleummatters. With the advent of oil production in 1992, it became imperative to consolidate and strengthen theGovernment's capacity to manage the petroleum sector.

The institutional development strategy for this involved the creation of the Petroleum Division as a basisfor project implementation. As a Bank requirement for project support, the Petroleum Division wasestablished in January 1993 within the Department with a spread of expertise grouped in five branchescovering petroleum geo-science, engineering, economics, law, titles management, and community affairs.Subsequently, building upon the successful development of the Petroleum Division supported by theproject, the petroleum functions were separated entirely from the mining sector functions and a full-fiedgedDepartment of Petroleum and Energy established. The Petroleum Division remains intact and represents themain body of professionals in the Departnent.

The project was implemented at a time of rapid sector development during which many demands were madeon the Government. Without the support of the project, the Division may easily have been swamped. Theproject provided the necessary capability enhancement to the Division. This resulted in better assessment oflicense holder's work programs, approvals of development plans, promotion of petroleum potential,evaluation of oil field performance and monitoring of development costs. The capacity enhancement alsohelped to anneal the sector understanding of the National professional officers as the Division sought tokeep pace with sector development.

The Government's petroleum entity of 1985 was just a small group of geologists and a petroleum licenseregistrar comprising the Petroleum Resources Assessment Group in the Department of Minerals andEnergy. The Department of Petroleum and Energy, of which the Petroleum Division is the main component,has thus come a long way. The simplistic focus on exploration and licensing has shifted in response todevelopment and production and the consequent impact on the economy and communities. This wider focushas embraced policy, socioeconomic and legal aspects that have become increasingly necessary for sectordevelopment. With the project having a prime objective to assist in the development of an improvedframework of regulatory and ownership policies, it was thus able to inject timely support and advice inthese areas.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Oil price volatility necessarily affected the levels of sector investment during the course of projectimplementation. The volatility has been of such amplitude that the project's impact on sector developmentmight be perceived to be overridden were investments in the sector to be a measure of outcome. Whilst theproject had a prime objective to increase investment in the petroleum sector and Govemment revenue, oil

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prices necessarily are a key industry determinant.

Economic Recovery Program (ERP) agreed with the Bank in 1995 impacted the project. The recruitment ofadditional professional staff for the Petroleum Division was delayed on account of Public Service cuts andblanket freezes on recruitment. However, the Govemment did whatever it could to provide as manycounterpart staff as possible by saving the Petroleum Division from staff cuts. It also permitted theDepartmnent of Petroleum and Energy, on its inception, to create a support services division through whicheconomists and lawyers were recruited and then permanently seconded to the Policy Branch of thePetroleum Division. Notwithstanding this, unrealized staff expansion necessarily diminished the greaterimnpact that the training might have achieved. The Petroleum Division had formnulated plans for a 35%increase in staff establishment, but despite being timely, the mandated freezes thwarted this development.

Staff attrition took place during the course of the project leading to the loss of 15 professionals to theindustry. During a period of high industry interest and investment little could be done to mitigate theattraction of jobs in the corporate scene of the oil companies. Whilst special domestic market allowancesranging from 40-50% of base salary were introduced to improve staff emoluments, these did little to stemthe attrition. Only now with reduced industry activity and reduced corporate presence has the attritionstopped. The consequent impact on the institution is that new staff had to be trained and overall trainingtargets reduced. The advent of gas development and the infusion of billions of dollars of investment capitalwill likely resurrect staff attrition as new and exciting opportunities open up with industry.

As the Petroleum sector represents a significant portion of the economy, impacted communities have madeincreased demands for a share of the sector benefits. These demands have at times inundated the PetroleumDivision, particularly at management level, distracting it from core sector issues: licensing, work programnegotiation, promotions of prospectivity, data receipt and curation, development negotiations and policyformulation. Despite this distraction, with the help of the project, the Division has achieved significantsector development.

5.2 Factors generally subject to government control:Some non-critical delays were encountered in contract processing which has entailed gaining legal opinionson contract from the State Solicitor's office prior to execution by the Minister for Finance and Treasury.

The recruitment of staff requires the approval of the Department of Personnel Management (DPM) whorequire evidence of funding before recruitment to vacant position and establishment of new positions.Meanwhile the Department of Finance and Treasury requires DPM's approval of positions before budgetallocations are made. This creates a needless impasse, which requires tenacious management tosuccessfully achieve the desired recruitment.

Overall, central Government agencies have been supportive of the project. The Department of Finance andTreasury, and the Department of National Planning and Monitoring have shared the vision of the PetroleumDivision and increasingly worked closely and effectively towards project implementation.

In the early part of the project, three officers were seconded from the Internal Revenue Commission (IRC)to the Policy Branch of the Petroleum Division. Whilst seconded, they were trained in petroleum matters.Although the secondees subsequently took up positions in the Petroleum Division, and so represented lossof staff for the IRC, a lasting and valuable working relationship has been forged between the IRC and thePetroleum Division.

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Early in the course of project implementation, it was realized that the general level of education andgraduate competency was lower than might be expected. Therefore, allied with management training anattempt was made to raise general competencies and skills whilst specific attention had to be paid to coreskills in the different graduate disciplines that might otherwise been learnt at university. This hasnecessarily impacted the expected outcome of training initiatives contained in the project.

5.3 Factors generally subject to implementing agency control.From the outset, the Petroleum Division focused on project implementation, quickly establishing processesfor project operation. A task-based worlk system was devised to serve as a management and reporting tool.Project activities were captured on Project Task Forms (PTF) which provided an accountable process fortraining in the context of the Petroleum Division's business.

The project commenced activities upon receipt of advances from the Government and a Special Accountadvance from the project loan. These were consolidated in a single account with the central bank- the Bankof Papua New Guinea. This quickly became unsatisfactory and wisely the project management segregatedits funds into two separate accounts with a reputable commercial bank. At this time, as the volume ofproject financial transactions was increasing, they elected to engage outsourced supervision of accounts anda competent accounting firm was engaged thenceforth for this purpose.

In line with the Govermment's localization plans, during the course of the project the Director's positionwas localized. The Assistant Director, E]xploration, who had been the National understudy of the Director,took up the post. Such a move attempted to promote management sustainability. However, shortlythereafter the incumbent was promoted to the position of Deputy Secretary of the Department and theAssistant Director, Policy took over as the Director of the Division. The subsequent change in Director wasperhaps too rapid, nevertheless a process of inline promotion and appointment of National Directors hasbeen finmly established.

5.4 Costs andfinancing:The equipment category of the loan financing was substantially reduced (from US$ 3.9 to US$ 1.6 mnillion)permitting an increase in the consultant services category. The emergence of compact high-speed desktopcomputers (PCs) negated the necessity for installation of main frame computers of considerable cost.Additionally, the Petroleum Division installed only limited laboratory facilities and equipment, as theestimated volume of use did not warranit elaborate facilities. Nevertheless, the Petroleum Division today hasIT facilities commensurate with intemational business standards and appropriate laboratory facilities forthe needs.

The reorientation of funds enabled substantially more training to be conducted and advice to be provided,particularly in the area of policy development.

6. Sustainability

6.1 Rationale for sustainability rating:With the passage of the Oil and Gas Act by Parliament, the improved policy and regulatory framework isset. Implementation of the provisions of the new legislation is now very much the focus of the work of theprofessionals in the Division who have been trained under the project.

The Petroleum Division is now well established, well known and respected amongst Government agencies.It is considered a source of reliable inf.ormation and is widely consulted. The envelopment of the PetroleumDivision as the cornerstone of the Department of Petroleurn and Energy has added weight to its stature.

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The Division matured during the project as the staff obtained greater ownership of the Division's businessdemonstrating a keenness to enhance their skills. Staff attrition has ceased, largely due to diminishedopportunities in industry. This has enabled the Division to consolidate its staff and obtain more institutionalmemory. The project has exposed the professionals to a wide variety of training and industrial experience.This should translate into a very sound career base in the sector for those prepared to build upon it.

Some tangible items that will have an enduring effect on the sector management are: a) the adoption of ITsystems and databases; b) the rehabilitation of the core store facility; and c) the transcription and deliveryof the geophysical data base to its sovereign home; and d) the introduction of improved cost data reportingformats, in coordination with the IRC and other Government agencies.

Of particular importance has been the local area network (LAN), its links to the Government wide areanetwork (WAN) and peripherals to support data output. This has created a business environment tointernational industry standards and has been a great help in enhancing the capacity for business output ofthe professionals.

6.2 Transition arrangement to regular operations:The project was designed to enhance the capacity of the Petroleum Division in the course of regularoperations and performance of its duties. This institutional strengthening supported it during the early stageof sector development and has left the Division operationally ready.

Nevertheless, sector development is an interminable process and will necessitate continuous updating ofskills and know-how. The follow-up Gas Development and Utilization Technical Assistance Project wouldspecifically seek to enhance the Division's skills in gas matters in preparation for impending gasdevelopment.

7. Bank and Borrower Performance

Bank7.1 Lending:As early as 1984, the Bank commented on the necessity for the Government to obtain petroleum expertiseand consolidate petroleum functions into a single operational division (Energy Sector ManagementAssistance Program Report No. 023/84). The project pre-appraisal mission (November, 1991) emphasizedthis need and the establishment of the Petroleum Division was made a necessary precursor for the project.This was a key step in the institutional development for managing the sector.

The Bank helped the Government in project design realizing the necessity for the sector to be properlymanaged given the development of the country's first oil field. The project design concept centered on theprovision of a team of experts to provide responsible advice on sector management concomitant withon-the-job training. This would bring about the required institutional development in parallel with sectormanagement. Such an approach alleviated the difficulty of recruiting foreign expertise into line positionsthus freeing up those positions for national recruitment whilst providing them appropriate guidance andtraining.

7.2 Supervision:Implementation progress was documented in the supervision mission aide memoires attached to which weredetailed tables of tasks undertaken. The project dispatched sector information regularly to the Banktogether with project updates. Increasingly, communication through e-mail has enabled sector and project

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information to be provided in a timely manner. Equally the Bank's approvals, recommendations andrequirements have been served.

Project Supervision Reports (PSRs) are considered to have been realistic. Compliance with loan covenantswas regularly monitored and no lasting infringements were realized. Necessary modifications were made toloan categories, closing date and project components after due assessments during supervision missions andtaking into account sector evolution. Mission preparations and prompts to the implementing agency weretimely and greatly aided Bank/Borrower partnership. [ The QAG-Rapid Supervision Assessment (RSA 3)of FY 99 found the project particularly well supervised in that year].

7.3 Overall Bankperformance:Taking into account the assistance provided in project preparation, particularly the advice regardinginstitutional framework, project design and supervision of its implementation, overall Bank performance israted as highly satisfactory.

Borrower7.4 Preparation:Following the Bank's advice, the Government created the Petroleum Division, consolidating all petroleumfunctions in the Division. Also, the Government upgraded the positions of the National professional staffthus improving the benefit package to attract the best possible candidates for these positions.

The Departmnent of Mining and Petroleum worked closely with the Bank mission and clearly identified theareas of skills upgrading, the number of National professional staff to be trained, and the mechanisms oftechnology transfer. Full details of the project as planned were contained in the Government's ProjectFormulation Document.

The process of loan negotiations, signing and effectiveness was delayed, however, as the Governmentneeded more time for internal reviews and clearances.

7.5 Government implementation performance:Despite the financial stringency prevailing at the commencement of the project, the recruitment of staff forthe Petroleum Division was proceeded with, albeit at a slower pace. However, attrition of staff trainedunder the project was not forestalled; indeed, some of the most experienced and qualified staff were lost tothe Division. Though improvements were made to the staff remuneration, they were not introduced in atimely or ready manner.

Adequate provision of counterpart funds was maintained. Every effort was made to comply with thecovenants under the loan, (e.g. when the Auditor General was not able to field officers to audit the projectfinancial statements in a timely manner, the Petroleum Division engaged a reputable international firm toconduct an audit).

7.6 Implementing Agency:The Department of Mining and Petroleum (later divided into the Department of Petroleum and Energy[DPE] and the Department of Mineral Resources [DMR]) had the overall responsibility for implementingthe project However, the project's home was the Petroleum Division, its Director being the ProjectManager, and the Division being the beneficiary of the project. DPE was very supportive of the project.Localization of and succession to the position of Director, Petroleum Division, mid-stream of

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implementation, was smoothly carried out. The Division, nevertheless, subsequently engaged an adviser toassist the Director and Project Manager with regular business and project implementation.

The Petroleum Division maintained a focus on implementation (schedule in Annex 17) throughout theproject despite occasional set backs and delays. This focus was driven by the project management whodevised implementation activities to be consistent with the objectives and project components that alsoserved the needs of the Division. An example was the adoption of IT systems to modemize the work andbusiness environment of the Division.

Early in implementation, it was realized that more attention would have to be paid to the book keeping andaccounting functions. The Division, pragmatically, introduced immediate remedies by outsourcingnecessary services. Such pragmatism was exemplified throughout the project.

The emphasis on getting things done stimulated the Division to take increasing responsibility for sectormatters and indicated to other government departments and agencies that it was serious about its business.The judicious use of the project components to address developmental issues substantially aidedachievement of the project objectives e.g., Gobe oilfield development: landowner policy work and Stateparticipation negotiation. In such manner alignment of project and Government objectives was fostered.

7.7 Overall Borrower performance:Overall borrower performance is assessed to be satisfactory.

8. Lessons Learned

Objectives should not be included that are extraneous to the implementing agency's responsibilities e.g.inclusion of standards for storage, handling and transportation ofpetroleum products.

Objectives should not suggest or prescribe modalities of development at too early a stage e.g. framingstudies for commercial gas development by LNG export (without including other development scenarios).

Systems and procedures for project management and implementation should be in place before thecommnencement of the project and should be maintained. Their usage should be closely monitoredthoughout the project to ensure acceptable standards of project implementation. Organized implementationof project activities through defined documentation such as the Project Task Form (PTF) is most usefiul formanagement control.

Contracts for goods and services should, as far as possible, be denominated in the currency of the loan toavoid impacts from exchange rate fluctuations and consequent costs variations.

9. Partner Comments

(a) Borrower/implementing agency:The report of the Borrower follows. It concludes (page 25) that the project was not only timely in itssupport of the Government's efforts to manage the sector, but was a vital contributor to the success of thefirst decade of petroleum production in Papua New Guinea.

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Implementation Completion ReportPetroleum Exploration & Development Technical Assistance Project

IBRD Loan 3670-PNGPrepared by the Petroleum Division

Department of Petroleum and EnergyGovernment of Papua New Guinea

January 2001

Background

Petroleum exploration efforts have taken place in Papua New Guinea over many decades. The first reportsof oil seeps along the Vailala River in the Gulf Province as far back as 1911 aroused the interests of thepetroleum industry. The recognition of many such seeps throughout the Papuan Basin together with thesimilarity of the PNG's geology to that of lran, stimulated many valiant and heroic exploration efforts. Thefirst gas discovery was made at the Kuru 1 well in 1956, but the well blew-out and had to be abandoned,whilst the first oil discovery was made discovery at the Puri-I well in 1958, but it watered out after threedays. In 1968, a major gas-condensate discovery was made offshore in the Gulf of Papua at the Pascawell, but onshore no substantial oil discoveries were forthcoming. The responsibilities for managingpre-Independence activities lay with the agencies of the Federal Government of Australia, such as theBureau of Mineral Resources.

In the post-Independence years, exploration activities waned, as the subsidy for exploration that had beenavailable from the Commonwealth Government of Australia was no longer available. The Governmentresolved to encourage further exploration and the Parliament passed the Petroleum Act in 1977. In 1980,the then Department of Minerals and Energy (DME) that was responsible for petroleum matters, requestedthe World Bank to provide it with technical assistance as it desired to establish a better understanding ofpetroleum resource evaluation and management. In November 1992, in preparation for such, the PetroleunResources Assessment Group was established within the Geological Survey with responsibilities forexploration monitoring, data management and licensing. The World Bank was receptive to the request forassistance, and the Petroleum Exploration Technical Assistance Project was approved for funding throughIDA Credit 1279-PNG. Additional co-financing was sought and obtained from the OPEC Fund with Loan312P.

Concurrent exploration activities gave rise to the significant, but non-commercial Juha gas-condensatediscovery in the Westem Province in 1982, further demonstrating the petroleum potential of PNG. At thesame time, the disastrous blowout of the Pasca A-3 appraisal well at the offshore Pasca gas-condensatediscovery emphasised the need for the Government to enhance the monitoring and management ofpetroleum industry activities.

The Petroleum Exploration project aimed to improve the investment attractiveness of PNG to petroleumexplorers and to enhance the DME's institutional capabilities. It was highly focussed on the promotion ofthe upstream exploration potential of Papua New Guinea and involved the acquisition and organisation ofexisting historic exploration data and its geological and geophysical reassessment for the promotion ofinvestment. Allied to these activities was the training of National officers in petroleum exploration, theconstruction of an office by the Government, and the acquisition of a storage facility to house well samples.

In 1986, the Petroleum Resources Asisessment Group was made a full Branch of the Geological Survey in

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recognition of its advancement. Most importantly, around the same time, PNG's first commercial oildiscovery was made onshore at the Iagifu 2X well in the Southern Highlands.

The Petroleum Exploration Project closed in June 30, 1988 having collated and organised the existingpetroleum data; completed the assessment of the petroleum prospectivity of Papua New Guinea; and havingaccomplished promotion of such to the industry. Three geologists, one engineer and one technical officerreceived extensive training under the project. Exploration intensity had substantially increased during thecourse of the project and was further spurred by discovery; there were just seven licences in 1982 and someforty-two in 1988.

At close of the Petroleum Exploration Project, the Petroleum Branch had a staff of twelve professionalofficers comprised on seven Nationals and five expatriates, and had developed a sound reputation.

Whilst the Petroleum Exploration Project can reasonably be credited with establishing the basic frameworkfor the management and administration of petroleum exploration, the impact of the development ofdiscoveries and the consequences of oil and gas production remained to be addressed. In the wake of thelagifu oil discovery, the international petroleum industry focussed its attention on PNG and in the fouryears thereafter 58 wells were drilled at an investment of around US$ 700 million. These wells resulted inan array of new oil and gas discoveries and the proved up the oil reserves at lagifu and in adjacentgeological structures. Significantly, major discoveries of natural gas were made. One of these, large Hidesgas field, was placed into small-scale production in late 1991 to supply gas 15 million standard cubic feetof gas per day to the power plant for the Porgera gold mine.

The Iagifu/Hedinia and Agogo oil fields with an estimated 170 million barrels of recoverable oil reserveswere licensed in December 1990 for development in the Kutubu Petroleum Development Project. Thisrequired establishment and construction of extensive fields facilities, a trunk oil pipeline to the coast, andan offshore marine loading terminal in the Gulf of Papua at a total investment of US$ I billion.Commercial oil production commenced on the June 27, 1991 and quickly rose to a peak of close to 150,000barrels per day in 1993.

Clearly, the industry was not only in transition from exploration to production, but was expanding at atremendous rate, thus introducing a many new facets to the Petroleum Branch. In 1991, the PetroleumBranch raised its needs with the World Bank and pre-appraisal discussions were held for the possiblefimding of a project. Such a project was conceived to assist the institutional development of the PetroleumDivision in a broader spectrum of petroleum disciplines and pave the way for further investment inpetroleum sector development.

Obiectives of the Proiect

Rationale

With the discovery of oil in commercial quantities, and its subsequent development, the petroleum industryin PNG had clearly and dramatically entered a new phase. No longer was production just a distantpossibility. The transition to oil exporter was to be a tough test of the country's admiinistrative capabilitiesand attitudes towards foreign. During this period of transition from passive observation of explorationactivities to direct and beneficial involvement in production, there were three basic necessities for theGovernment. These were: a) to ensure that, as much as possible, petroleum developments were designedand implemented in ways which were in the country's best long term interest; b) strict adherence to a solidand reasonable policy framework, (the most important parts of which already existed, but the other parts of

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which needed to be developed); c) the avoidance of radical policy changes which might be seeminglybeneficial to the State in the short-term, but damaging to the long-term development of petroleum in thecountry (especially through discouragernent of foreign investment), and d) the thorough and expeditiousprocessing of exploration and development approvals.

To meet these objectives, PNG needed to have the capability in its Public Service to deal with the manysector issues effectively and face the international oil companies with confidence. Of equal importance, wasthe fact that a Public Service, which demonstrated a very strong understanding of and ability to deal withthe issues, would help allay undue suspicions about developers and be able to effectively deal withinitiatives for darnaging changes in policy. This would be brought about by vigorous efforts to trainNationals in petroleum matters and bring them into responsible positions with the Public Service. The lackof National petroleum expertise in the irnportant policy and development areas needed to be redressed.

Need for the Project

With the considerable assistance of the Exploration Project, the Petroleum Branch had geared upreasonably successfully for the increased scale of exploration activity. It now had to prepare for what wasthe logical outcome of that activity - thle even more complex phase of development and production whichwould present policy and technical issues which had never before been faced in PNG and for which itspublic service was ill-equipped to address.

The Department proposed that the a new project - the Petroleum Exploration and Development TA Projectwould be needed to fully meet the Department's technical assistance needs in the development phase as wellas to continue the appropriate efforts in the promotion of exploration.

The Kutubu Project had recently cormnenced production. It was therefore vital that the State geared upimmediately, so that it would be able to cope with the vast array of complex regulatory, technical andpolicy decisions relating to this huge project and other forthcomning developments.

Philosophy of the Project

The greatly increased level of petroleum exploration in PNG and the impending petroleum developmentsgave the project increased importance. The conduct of the project required highly specialised skills whichcould only be met by the use of foreign experts either as advisers or within study teams. The Governmenthad had considerable difficulty attracting highly qualified petroleum personnel under employmentarrangements and this problem was seen to get worse as the sector developed. At the same time, rnajoradvantages were seen in having a strong on site staff so as to: a) produce cost effective and realistic results;b) establish strong in-house capabilities and consequent continuity of knowledge; and c) to maximiseknowledge transfer to Nationals.

The pernanent transfer of vital skills and knowledge to Papua New Guineans was to be a prominent andexplicit goal of the project. This was seen as being best being achieved through onsite, on the job,instruction supplemented, but not replaced by, and formal training courses.

Detailed Objectives

The objectives of the project were as follows:

(a) to assist in the development of an improved framework of regulatory and ownership policies that

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would increase investment in the petroleum sector and Government revenue;(b) to strengthen the capacity of the Government for comprehensive management of petroleum exploration

and development;(c) to upgrade the capacity of the Government to gather, process, analyse and market to international

investors exploration and development data on the sector;(d) to formulate better standards for safe and efficient storage, handling and transportation of petroleum

products; and(e) to evaluate the potential for commercial development of natural gas reserves for LNG export, develop

an appropriate framework for gas development, and present the results in international seminars toattract investment.

Project Components

The project included the following components to achieve the objectives:

(a) Institutional Strengthening of the Department of Mining and Petroleum (now Department ofPetroleum and Energy) through employment of experts in petroleum geology, archive management,geophysics, reservoir engineering, production engineering, drilling, pipeline and facilities engineering,petroleum economics and legal and fiscal policies; the experts to provide responsible advice and technicalassistance, and concomitant with this, to provide on-the-job training to national officers;(b) Studies and promotions involving provision of experts and services to: (i) conduct studies onlocation, size, product mix and feasibility of a petroleum refnery, and the feasibility of LNG export; (ii)organise and conduct international seminars to promote LNG export; and (iii) compile appropriatestandards for safe handling, storage and transportation of petroleum products;(c) Equipment and support facilities to enhance the capability of DMP (now DPE) in monitoring andanalysing petroleum exploration and development activities through the provision of: (i) a computer systemwith appropriate hardware and software; and (ii) laboratory equipment.(d) Training: (i) activities would involve post-graduate studies of nine nationals in foreign universitiesin various petroleum disciplines and intemships with operating companies; and (ii) training of six nationalsas laboratory technicians.

Implementation

Project Management

The Petroleum Division which was created in 1993, and which succeeded the Petroleum Branchimplemented the project. The Project Manager was the Director of the Petroleum Division. The main modeof implementation was through a technical collaboration contract with an institution of internationalreputation namely, the British Geological Survey (BGS). The BGS, in collaboration with several otherentities, was able to provide a team of petroleum professionals with expertise in a wide variety ofdisciplines.

Technical Collaboration

The team of experts provided by the BGS provided responsible advice on petroleum sector issues andproject implementation as well as providing an extensive programme of on-the-job training to the nationalofficers. The diversity of expertise deployed reflected the wide range of skills that needed to be enhanced.Whilst the project in design had identified the need to training in core petroleum industry technicaldisciplines, such as petroleum geology and engineering, and commercial disciplines such as petroleum law

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and econornics, training solely of such a kind was not enough. Considerable resources within the technicalcollaboration arrangement were given to information technology as well as business and management skills.The team's IT experts promoted the installation of a Local Area Network (LAN) linked to the Government's Wide Area Network (WAN) which provided universal email access for the staff and selected internetaccess. This has been a lasting legacy of the technical collaboration that has made a dramatic impact on thePetroleum Division's capacity to carry out its business capacity. The network design, procurement,installation and commissioning was carried out under the supervision of IT experts from the team.

The technical collaboration provided 22 mnany-years of expert advice and training to an average of 33professional staff over a four year period. A total of 472 seminars and 61 courses were delivered throughthe technical collaboration. Daily interaction between team members and the counterpart staff of thePetroleum Division varied in extent and quality. The ability of the foreign experts to understand the stafftraining needs and requirements and the willingness of the counterparts staff to solicit and submit totraining was also variable. Some team members excelled in their training efforts whilst others excelled inthe provision of technical advice. A balance was sought and obtained through the constant intervention ofthe project manager.

The technical collaboration team varied in strength according to the training requirement and the phase ofthe training up to a maximum of ten. The team composition changed during course of the project reflectingthe implementation emphasis and sector priorities, particularly in respect to work on improving the policyframework.

The capacity of any one organisation to deliver such a broad range of expertise was indeed a challenge.The British Geological Survey has distinguished capabilities and particular strengths in petroleum geologyand geophysics, but depended very much on other entities to assist them with other disciplines. Somepersonnel were especially contracted for the purpose of the technical collaboration whilst others wereout-sourced from specialist companies. This tended to provide a variable level of experience, commitment,quality, and suitability of expertise amcngst the team members. At the request of the project managementthere were therefore several changes of team personnel during the course of the technical collaboration.This was an important indication of ownership. Some difficulties were found in achieving a balancebetween desired the academic excellence of the team members, their ability to transfer skills and theirknowledge of the petroleum sector. Often, a compromise was made between these required attributes.Nevertheless, the residency of the team despite its variable make-up provided an umbrella of technicalcollaboration for an enduring period of four years.

Another feature that indicated strong project ownership, was the constant re-focussing of the technicalcollaboration to make sure that the thrust of training and advice matched the sector development needs.With the transition to oil production being relatively new, much of the petroleum law and policy of PNGwas being tested for the first time, and sector development required extensive work on new policyformulation and refinement. The technical collaboration team members were therefore thrust into providingoperational advice to address such sector development needs instead of just theorising and training staffwithout reference to sector activities and Government priorities. The project management thus got thetechnical collaboration team and their counterparts very much involved. One feature of the projectimplementation was that the staff of ihe Petroleum Division ostensibly managed the project themselves;there was no removed project implem.entation unit divorced from the Divisional management. Whilst thetechnical Collaboration team were present to training the professional staff and provide responsible advice,they were not allowed to usurp the authority of the line officers. This may have given rise to someinefficiency and some delays, but ownership was thus enhanced. The ability of the Petroleum Divisionofficers to discern the strengths and weakness of the technical collaboration team was an indicator of this.

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Nevertheless, the persistence and tenacity of the Technical Collaboration team provided a counterbalance tounplanned use or dismissal of their activities by the professional staff.

Some concerns were expressed that the cost of the technical collaboration was unduly high. These concernsfailed to recognise the significant work in maintenance and administration of the team, particularly theprovision of considerable flexibility by the collaborator, who willing replaced several staff upon the requestof the Project Manager and who provided specialist team mnembers whenever they were required. Currencymovements in made an impact as the collaborator negotiated a contract in British pounds. Unfortunately,the British pound substantially strengthened detrimentally against the US dollar during the course of theproject raising the cost of the technical collaboration. Overall, the technical collaboration team providedgood value and represented themselves in a professional manner.

External Courses and Post Graduate Studies

Much of the training was provided in the context of institutional strengthening and the deployrnent ofresident experts for on-the-job training. However, external training was also provided. Four professionalsundertook post-graduate studies at overseas universities; two cadet-professionals studied for bachelorsdegrees; and twenty external course-places were taken up by the professional staff in a wide variety ofpetroleum disciplines.

LNG and Gas Utilisation Study

Using the expertise of the pipeline and Facilities Engineer of the Technical Collaboration Team a detailedCost, Time and Resources (CTR) catalogue was constructed for a study on natural gas utilisation. Thestudy was bid out to pre-qualified international engineering firms of repute in gas engineering, and thestudy was awarded to Worley Ltd. The study was tightly controlled by the CTR catalogue and wasproduced in a most timely and accountable manner. Its findings were fed straight into the Government'sTask Force on Natural Gas Utilisation and its subsequent report and advice to the Government. This was agood example of the project components meeting project objectives whilst matching sector requirements.

Refinery studies

The refinery studies were dropped following the endorsement by the Government of several plans for thedevelopment of a refinery by investors. In view of the existing development agreements for these refineries,after consultation with the Dept. of Trade and Industry, the project management elected to drop theproposed studies on refinery development. The Bank concurred with this as it seemed somewhat futile to bestudying refinery development opportunities to promote investment in such when already there wasconfirmed and agreed investment.

Standards for Handling Petroleum Products

This study was included in the project design and formulation only as a result of the suggestions of earlypre-appraisal Bank missions. It did not correctly fit the functions of the Department as they were at thetime of project launch, although the need was clearly present for standards to be produced. This work waswell removed from the upstream concentration of the Petroleum Division. Nevertheless, the study wasundertaken and a system of standards was put together and endorsed to the PNG Institute of Standards.

Seismic Hazard Evaluation for Gas Projects

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As the petroleum industry became interested in natural gas development arising from the work andsubsequent promulgation of the Government's on gas policy, the opportunity to supply gas to east Asianmarkets was aggressively pursued by BP and Esso the then licenses of the Hides gas field. The conceptualscheme envisaged a pipeline transporting gas from the Southem Highlands to a location on the north coastof PNG where a liquefaction plant and LNG loading terminal would be constructed for export of LNG tosuch markets. It was perceived that a LNG plant located on the northem coast of PNG being nearer tomarkets than one located on the Gulf of Papua coast could have a distinct economic advantage. However, itwas noted that the northem part of PNG was an area of high seismicity. A specialist study was thereforeundertaken to screen the seismic hazard and ascertain the potential seismic risk. This study looked at allpotential routes for pipelines and sites for the location of LNG terminals. It was conducted by aninternational seismic expert with extensive experience in PNG and concluded that the hazard for a northerlypipeline and north coast LNG plant was considerable. The costs associated with mitigation of suchincreased risk as opposed to that of a southerly route and site balanced economic advantage. This studywas a practical example of the project vitally contributing to the assessment of gas developmentopportunities.

Other studies

Two studies were directly and intimately related to the training and capacity building of the staff and thepromotion of opportunities of investment in petroleum exploration. These were a study of the internal foldand thrust belt of the Papuan Basin and a review of the potential of the North New Guinea basin.

Two specialist fluvial hydrological studies were undertaken to assess the impact of petroleum infrastructureon the Mubi River and the Kikori River where communities had complained variously of undue floodingand sedimentation. These studies were commissioned through the technical collaboration team and involvedthe Petroleum Division in field visits and follow workshops with landowners.

Seismic Data Transfer

The historic seisrnic data arising from exploration efforts undertaken during the time of the Australiancolonial administration were deposited by the Bureau of Mineral Resources with the Australian Archives inSydney. In the post-Independence years, the Australian Govemment permitted PNG to continue using theAustralian Archives as their repository for seismic data. However, in the mid-1990s, the AustralianArchives were commercialised. They announced to the petroleum agencies of the various States ofAustralia and PNG that they would no longer be able to offer a free service and that users would becharged deposit, storage and retrieval fees. Additionally, users were encouraged to make their ownarrangements. This placed the PNG Government in a dilemma as almost 67,000 reels of magnetic tape andalmost 100 shelf feet of support data were stored with the Australian Archives. The Petroleum Divisioncommissioned an audit assessment of the data and recommendations were made for the transfer of the datato PNG. As many. of the tapes were old and subject to deterioration and degradation over time, there wasalso a need to retrieve data and to convert it into a useable and compact modem format. The PetroleumDivision therefore elected to transcribe the entire archive onto high data density Exabyte tapes. A contractwas awarded to Guardian Data Seismic Pty. Ltd. to retrieve the data from the Australian Archives, verifythe data, transcribe the existing magnetic records on to Exabyte tapes and deliver the new tapes togetherwith the paper support records to PNG. Also included in the contract was the provision of a tapetranscription system for the replication of the Exabyte tapes for sale of the data to the industry. This wasan extensive activity that required close monitoring and which cost around A$ 850,000. It neverthelessaddressed an urgent problem and assisted the Government in a most important core function and providedfor sovereign repository of an immense volume of very valuable seismic data. This was clearly in

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accordance with the project objectives of upgrading the capacity of the Government to gather, process,analyse and market to international investors exploration data on the sector.

Project Adviser

The Dept. of Petroleum and Energy was created in 1997 when the former Dept. of Mining and Petroleumwas split into two new Departments. At that time, the expatriate incumbent Director of the PetroleumDivision stood down when the position was localised by one of the senior National professional staff. As anexpedient to provide institutional continuity and to assist the new Director and his Assistant Directors, theformer Director was engaged by the Petroleum Division as Adviser to the project. This enabled theDivision to have steady and continued advice toward project implementation and sector matters utilising theAdviser's extensive sector and country experience. The adviser also mentored the Division's staff andmanagement.

Equipment and Support Facilities

Information TechnologyThe Petroleum Division has received substantial benefit from the acquisition of equipment and supportfacilities under this project. A Local Area Network (LAN) has been installed providing both Intranet andInternet capacities to all staff Data bases have been erected on the LAN server and peripherals linked forthe production of digital plots, plans and maps. The LAN is also connected to the Government Wide AreaNetwork (WAN) through the Department of Finance and Treasury server. The Information Technologysystems of the Division have been maintained at a relatively high level of technology in its efforts to keepabreast of industry standards. The existing system consists of a switched 10/lOOBaseT LAN 130 portsspread between four buildings; each linked by an optical fibre backbone. The network supportsapproximately 50 Windows NT 4.0 client Personal Computers and one Windows NT 4.0 server.

The personal computers (51) run a standard suite of Microsoft Office 97, Lotus Notes 4.6, and NortonAntiVirus 5.0. Further to this, specialist software is used to meet specific needs within the variousBranches, such as, Wood-Mackenzie for economic modelling; DSS32 for oil production monitoring;PNGInLaw for historical legislation and Maplnfo for spatial data analysis and storage. Support andtraining in the above software has also been supplied as part of the Technical Assistance project.

Various customised database and GIS systems have also been developed as part of the project, usingMicrosoft Access and Maplnfo. These systems provide various functions such as an index to paperarchives; an index to drill-core, cuttings and fluids; technical drilling information; oil and gas reserves andproduction; exploration and production licensing and historical oil-price indexes.

This computer system supports the function of the Departnent in regulating and promoting the petroleumindustry in PNG and greatly aids the custodianship and archival of related documentation and data.

Pre-fabricated office spaceWith increasing staff numbers, the Petroleum Division faced serious problems in respect of the provision ofoffice accommodation. This was exacerbated by the creation of the new Department of Petroleum andEnergy in 1997 and corresponding further increases in staff. The existing buildings were becoming denselypopulated and cramped. To resolve the problem, the Petroleum Division elected to purchase pre-fabricatedmodular office units for installation on the vacant Government land along side the main Petroleum Divisionbuilding in the currently occupied compound. At the request of the Government, the Bank created a newcategory in the Loan Agreement to provide funding for this initiative. Two units were installed providing

- 22 -

approximately 600 square meters of additional office space. The buildings were hooked up to utilities andcabling was installed to provide for both voice and data communications. After essential furnishing, thebuildings were commissioned in early 1999..

Other equipmentThe core storage facility was rehabilitated with the installation of a two-story steel racking system; thisallowed the subsequent repatriation of substantial volumes (four container loads) of PNG oil well core andcuttings samples from the Australian Geological Survey Organisation (AGSO). AGSO had previouslystored and curated these samples of more than 50 key exploration wells dating from pre-independencetimes, but had decided to no longer provide this service to PNG necessitating that PNG took custody of thesamples.

A laboratory for rock analyses was installed for use by licensees, local university students and the staff ofthe Petroleum Division.

To provide for the new buildings and to ensure Y2K compliance, the existing PABX telephone exchangewas replaced with a new dual digital/analogue system and the existing communications cabling upgrade topermit data transfer.

During the early part of the technical collaboration, the City of Port Moresby suffered widespread poweroutages due to a severe drought and disrepair of the installed generating capacity. 'This severely disruptedthe program of on-the-job training and the provision of advice to the Petroleum Division. Power blackoutsof up to 4 hours per day occurring during office hours meant that the expertise was not being fullydeployed. The Petroleum Division discussed this with the Technical Collaborator who agreed to install a200 KVA back-up generator to help alleviate the problem and to thus maintain the efficiency of thecollaboration program. This reflected true collaboration and exemplified the pragmatism of the PetroleumDivision towards project implementation.

Promotions

Allied to the generation of materials frorn the studies, the in-house appraisal of petroleum prospectivity,and the promotion of gas development, promotions were made at twenty of international conferences.During the term of the technical collabora,tion these promotions were made under the tutelage of the expertswho provided advice on exhibition methods and materials. In many of these promotions, technical paperson the opportunities for investrnent in PNG's petroleum sector were presented. The value of PNG'spresence at such events cannot be overstated. The interaction with the industry during such events givesconfidence to investors. Generally, meetings with corporate representatives during conferences are followedup by dispatch of promotional packages giving the latest information on petroleum exploration anddevelopment opportunities in PNG

A co-ordinated effort was made to stimulate interest in exploration of the North New Guinea basin througha formal solicitation to the international oil companies in a trial bid round. Extensive technical data wascomplied, drafted, printed and dispatched to over 100 intemational oil companies. Alas, the retreat ofinternational oil prices to very low levels stymied interest in the opportunity despite the incentive of specialfrontier tax terms for explorers entering during this time. In any event, the preparation of the materials andthe efforts was a valuable training exercise that benefited the participant staff.

Landowner Studies and Assistance

- 23 -

The project supported considerable interaction with landowners and efforts to convey the Government'spolicies to communities. Two particular efforts were the project support of the forums with landowners forthe Gobe oil project and efforts to rationalise the proliferation of Incorporated Land Groups (ILGs) in theKikori River Basin area through which the Kutubu project oil export pipeline transits. In the case of theGobe oil project the involvement consisted of the deployment of an experienced negotiator and landman tobroker discussions with the communities involved and the provision of legal expertise for the conduct of theforum meetings. The latter efforts in the Kikori area comprised of document review and the fielding of aland expert to identify the causes of the chaotic proliferation of ILGs and to make recommendations forimprovements. The project as conceived was quite techno-centric and these activities were somewhatpioneering. They did provide useful assistance at the time particularly in the case of the Gobe project. It isfelt that a great deal needs to be done in this area in the future.

Policy Initiatives

Substantial development of regulatory and ownership policies emanated during the course of the project.This was supported by the availability of legal and economics experts, who during the course of training,provided responsible advice on policy issues and matters. Notable accomplishments included, but were notlimited to, the development of policies for the privatisation of State petroleum assets, landowner benefits,gas development, pipelines and facilities, and frontier exploration areas. These initiatives were variouslyconsummated in amendments to the Petroleum Act, the passage of Mineral Resource DevelopmentCompany (Privatisation) Act, and finally encapsulated in the Oil and Gas Act of 1998.

Additional policy work examined various taxation issues, cost reporting mechanisms and the preparation ofupdated regulation. This had the effect of producing a higher degree of engagement of the PetroleurnDivision in sector development planning than hitherto possible and has enhanced its capacity to respond tosector policy matters. In undertaking policy work, the Policy Branch was considerably strengthened. In theearly part of the project, three officers were seconded from the Intemal Revenue Commission for training inpetroleum matters; these three officers subsequently took up positions during in later restructures thatprovided more staff positions for the Petroleum Division. This fostered much closer co-ordination of thePetroleum Division's work with the Government's fiscal authorities.

Conclusion

Although current exploration levels are recognised to be low, the petroleum industry maintains an interestin PNG. This was exemplified by its participation and attendance at the 4th PNG Petroleum Conventionheld in Port Moresby in May 2000 and is measured by the current level of licensing and the extent oflicensed acreage. License details and a map are attached to this report.

Despite the efforts of the Government to enshrine its progressive new policies with respect to benefitdistribution, gas and pipelines in the Oil and Gas Act, perceptions of high risk remain on account of localand regional political developments. This translates into the industry seeking higher NPVs and rates ofreturn.

The project enhanced the Government's capacity at a vital time, during the first decade of commercial oilproduction. The industry's contribution to the GDP and export eamings has been large and on a per capitabasis, it far exceeds that of major regional producers, for example it is three times that of Indonesia. It is,therefore, no surprise that there has been significant political and community arousal to an industry that hasemerged as providing such a significant input in the economy. This has created a plethora of sector issuesthat the Government has had to deal with at an early stage in the development of its sector management

- 24 -

capacity.

Following the establishment of the Petroleum Division upon the Bank's sector recommendations, theproject provided the necessary capability enhancement to the Division. This helped to anneal the sectorunderstanding of the National professional officers as the Division sought to keep pace with sectordevelopment. Without the support of the project, the Division may easily have been swamped.

In 1985 prior to the first commercial oil discovery, the Government's organisation responsible forpetroleum matters was comprised of just a small group of geologists and a petroleum licence registrar.This was the Petroleum Resources Assessnient Group in Geological Survey Division of the Department ofMinerals and Energy. At the end of the project, the Government had a full department of the Governmentresponsible for such matters with the Petroleum Division at its core. The relatively small administrativetask of licensing and the monitoring of just occasional exploration activities have given way to major sectordevelopments and production. This has had an associated and consequent impact on the economy andaffected communities which has required exhaustive work by the Petroleum Division. The Division has hadto embrace many more policy, socio-econonic and legal aspects that have become increasingly importantfor sector development. The project had the prime objective to assist in the development of an improvedframework of regulatory and ownership policies; it has done such at a time when sector activities havemade enormous leaps. The project was most essentially not only timely in its support of the Government'sefforts to mange the sector, but was a vital contributor to the success of the first decade of petroleurnproduction in Papua New Guinea.

**E,nd of Borrower Report**

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):

10. Additional Information

Not applicable.

- 25 -

Annex 1: Key Performance Indicators/Log Frame Matrix

Outcome/Impact Indicators:St k3t Proj'd n t ?S R ,Ac*zia) Latest ''''''.Strengthening of Borrower's Gas Policy - Formulated and presented toframework of fiscal and Parliament, Nov 1995regulatory policies. additionally

- amendments made to Petroleum& Income Tax Act, Dec 1996

- integrated Oil & Gas Actformulated and passed byParliament, Nov 1998

Retention license regime for gas - Drafted and legislated, Dec 1996discoveries and

- applied in the grant of fourRetention Licenses, 1998-2000

Fiscal regime appropriate to:(i) gas development - Formulated and drafted

and- Passed by Parliament, Mar 1998

(ii) petroleum exploration and - Formulated and drafteddevelopment in frontier areas and

- Passed by Parliament, Mar 1998and- Reviewed in Tax Review, Jun

(ii) marginal fields development - Reviewed

and- Incentives provided in Tax

Review, Jun 2000General Gas Agreement - Concept and content

developed in 1998and- terms sheets developed in 2000

leading to draft agreement.Upgrading of Borrower's Consolidation of petroleum - Achieved in 1993 before loancapabilities: comprehensive functions into a single Division of negotiationmanagement of petroleum the Department of Mining and andexploration and development Petroleum - lead to creation of

Department of Petroleum andEnergy in 1997.

- 26 -

Output Indicators:.liliPt ind h the last PSR ActuAV,atest £tate

Upgrading of Borrower's Technical collaboration with a - Collaboration in place withincapabilities: gathering, process reputable international first year of projectand analysis of petroleum organization implementation andexploration and development data maintained up to substantial

completion of the project,1996 thru 1998

Upgrading of National Staff skills - A quarter of the Nationalprofessional staff are able toperform their duties

but- but less than projected (a

third) due to a 40% attritionof professional staff trainedduring the course of theproject.

Upgrading Data Bank - Geophysical data transferredfrom overseas locations toPNG, Dec 1997

- seismic hazard studycompleted, Jun 1998

and- geophysical data transcripted

to Exabyte tapes, Jan 1997- core store facility refitted,

remaining cores and wellcuttings transferred to PNGDec 1998

- various exploration andproduction costs and otherdatabases created, 1997 thru1998.

Development of basic capacity - Achieved and put to use tofor data compilation and screen developmenteconomic modeling proposals.Capacity to conduct basin studies - Capacity acquired and in-of frontier area house studies on various

areas for promotion ofinvestment completed 1997thru 1999.

Enhancement of safety in storage, Compilation of standards for safe - Compiled and endorsed tohandling and transport of storage, handling and transport of implementing authority, Decpetroleum products petroleum products and action 1998

planEvaluation of potential for Study report on LNG export - Study completed, Dec 1997commercial development of andnatural gas reserves for LNG - included review of otherexport development options, Feb

1998.Note: Well defined objectives and components were provided in the project design and the Memorandumof the President. Subsequently in 1997, in accordance with the revised Bank procedures, key performanceindicators were retro-fitted in consultation with the Borrower.

- 27 -

Annex 2. Project Costs and Financing

Pro ect Cost by Co onent (in US$ million e uivalent)

Institutional Strengthening 4.20 7.61 181Studies and Promotions 1.00 0.84 84Equipment and Facilites 4.90 3.50 71Training 0.50 0.65 130

Total Baseline Cost 10.60 12.60Physical Contingencies 0.85Price Contingencies 0.70

Total Project Costs 12.15 12.60Total Financing Required 12.15 12.60

Proect Costs by Procurement Arrangements (A praisal Estimate) (US$ million equivalent)

1. Works 0.00 0.00 0.00 0.50 0.50(0.00) (0.00) (0.00) (0.00) _(0.00)

2. Goods 4.65 0.00 0.47 0.00 5.12(4.00) (0.00) (0.47) (0.00 (4.47)

3. Services 0.00 0.00 6.53 0.00 6.53(0.00) (0.00) (6.53) (0.00) (6.53)

Total 4.65 0.00 7.00 O.S0 12.15(4.00) (0.00) (7.00) (0.00) (11.00)

Prolect Costs by Procurement Arrangements (ActuallLatest Estimate) (US$ million equivalent)

1. Works 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

2. Goods 0.00 0.00 1.90 1.60 3.50(0.00) (0.00) (1.90) (0.00) (1.90)

3. Services 0.00 0.00 9.10 0.00 9.10(0.00) (0.00) (9.10) (0.00) (9.10)

Total 0.00 0.00 11.00 1.60 12.60(0.00) (0.00) (11.00) (0.00) (11.00)

" Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.

- 28 -

vIncludes civil works and goods to be procured through national shopping, consulting services, services of contractedstaff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local govemment units.

Project Financing by Component(in US million euivalent)tPercentage of Appraisal

Copnn A4pprasal £Etisate Actualiatest Estimate - -

Natk Gout C:oF. Batik Gpvi* Ca. Bank _vv CoF.Institutional 4.43 0.00 0.00 7 61 0.00 0.00 171.8 0.0 0.0Strengthening

Studies and Promotions 1.60 0.00 0.00 0.84 0.00 0.00 52.5 0.0 0.0Equipment and facilities 4.47 1.15 0.00 1.90 1.60 0.00 42.5 139.1 0.0

Training 0.50 0.00 0.00 0.65 0.00 0.00 130.0 0.0 0.0

Total 11.00 1.15 0.00 11.00 1.60 0.00 100.0 0.0

- 29 -

Annex 3: Economic Costs and Benefits

The project provided technical assistance and as such does not lend itself easily to quantitative investmentanalysis. The benefits to the borrower are not directly linked to the project investment and are swamped byexogenous factors such as oilprice.

- 30 -

Annex 4. Bank Inputs

(a) Missions: ,___ _

~Stage of Project CyAe . No. of Persons and Specialty -- Performnceane Ecnmist I FMS, _ plmntatibn Development

Month/Year Count Specialty ;rore.s bjtive'A._

Identification/Preparation11/91 2 A, B

Appraisal/NegotiationAppr: 11/91 2 A, B

Post Appr: 12/92 1 A,Nego: 10/93 2 A, C, DBoard: 12/93 1 APre-Sign: 5/94 2 A, CSign: 7/94 1 AEffect: 9/94

Supervision2/95 1 A HS HS12/95 1 A HS HS12/96 2 A, E HS HS8/97 2 A, E HS HS3/98 2 A, E HS HS12/98 2 A, E HS HS6/99 2 A, E HS HS11/99 2 A, E HS HS7/00 2 A, E HS HS

ICR1/01 2 A, E HS HS

Specialty: A: Hydrocarbon SpecialistB: Reservoir EngineerC: Country EconomistD: LawyerE: Petroleum Econornist

(b) Staff.

Itage of P i>oje -CycleActual/Latest EstimateNo. Staff weeks USS OO

Identification/Preparation 8.3 31.00Appraisal/Negotiation 20.3 71.75Supervision 45.7 343.50ICR 13.0 49.77Total 87.3 496.02

-31 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N-Negligible, NA=Not Applicable)Rating

FMacro policies O H OSUOM O N * NA[Z Sector Policies * H OSUOM O N O NAZ Physical O H OSUOM O N * NAN Financial O H OSUOM ON * NAZ Institutional Development * H O SU O M 0 N 0 NAZ Environmental O H OSUOM O N * NA

SocialF Poverty Reduction O H OSUOM O N * NA3 Gender O H OSUOM O N * NA

D Other (Please specify) O H OSUOM O N O NA• Private sector development * H O SU O M 0 N 0 NAF Public sector management 0 H 0 SU O M 0 N 0 NAO Other (Please specify) O H OSUOM ON * NAPoverty Reduction: While the project itself didnot directly reduce poverty, it triggered substantialcontributions (Annex 11) to the National GDP and Foreign Exchange eamings without which poverty mayhave been exacerbated.Private Sector Development: Through the strengthening of Borrower's framework of fiscal and regulatorypolicies, the project helped provide an enviroment conducive to investment by the intemational oil industryin PNG's oil and gas resource development. Additionally, the project assisted the privatization of the State'sMineral Resource Development Company (MRDC).

-32 -

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bankperformance Rating

Z Lending OHS OS OU QHUE Supervision OHS OS Ou OHUF Overall OHS OS O U O HU

6.2 Borrowerperformance Rating

2 Preparation OHS OS O u O HUF Government implementation performance O HS O S O U 0 HUZ Implementation agencyperformance OHS O S 0 U 0 HUZ Overall OHS OS O U O HU

- 33 -

Annex 7. List of Supporting Documents

On Project File:

I. Annexes to ICRIt has not been possible to include the following annexes in the PDS. These annexes are on Project Fileand are included in the printed ICR.

Annex 13: List of Tasks Undertaken by the ProjectAnnex 14: Studies Undertaken during the ProjectAnnex 15: Promotions and PresentationsAnnex 16: PNG Oil and Gas License MapAnnex 17: Project Implementation ScheduleAnnex 18: Project Implemetation Schematic Chart

IL. Other DocumentsStaff Appraisal ReportLegal DocumentsSupervision ReportsProgress Reports

- 34 -

Additional Annex 8. Policy Framework Initiatives Undertaken and Supported by theProject

Title (Status)

1. Revision of Standard Petroleum Agreement (Accomplished)

* Revision to accommodate the Mineral Resources Company Pty Ltd (Privatisation) Act 1996.* Revision in respect of natural gas policy provisions of the Petroleum (Amendment) Act 1996.* Amendments of eight current petroleum agreements with licensees.* Issue of New Standard Petroleumr Agreement versions 6.01 & 6.02.* Revision of Standard Guarantee format.* Inclusion of revised Domestic Marketing Obligations.* Inclusion of Land Owner Equity provisions.

2. Privatisation of the Mineral Resource Development (Accomplished)Company

- Assistance with the preparation of the Mineral Resources Co. Pty Ltd (Privatisation) Act 1996.- Representation of DMP in the due diligence processes for the MRDC float* Participation in final drafting of Option Agreement* )Drafting and negotiation of ameendments to Memoranda of Agreement with Kutubu landowners

and provincialgovernments to be consistent with float proposals

* Participation in EIB refinancing to release State Kutubu project assets from security

3. Development and Introduction of Gas Policy (Accomplished)

* Holding of workshops and seminars in preparation for a Green Paper on Natural Gas Policy* Drafting and passage of the Natural Gas Policy 1995

Amendments to the Petroleum Act for the introduction of retention licencesAmendments to the Income Tax Act for the new fiscal regime to apply to gas developments

* Assistance with drafting of the report of the Gas Utilisation Strategy Task Force

4. Development of Pipeline Policy (Accomplished)

* Preparation of draft White Paper and associated meetings* Drafting and passage of the Pipeline Policy 1998* Preparation of amendments to legislation for inclusion of pipeline policy provisions

5. Preparation of Policies on Frontier Areas (Accomplished)

* Develop proposals for frontier terms for acceptance by Govemment* Draft amendments to Petroleum Act for frontier terms

6. Analysis and redefinition of Landowner Benefit Policy (Accomplished)

- 35 -

* Preparation of detailed proposals for new a Kutubu landowner equity regime* Negotiations with existing licensees for amendments to their joint venture documents to facilitate

the participation by landowner entities as equity participants in their joint ventures* Preparation of detailed proposals for new landowner structures* Establishment of new landowner structures including preparation of a model trust deed* Preparation of detailed proposals for new landowner equity regime for future projects including

Gobe* Negotiation and drafting of amendments to Gobe Petroleum Agreements to effect policy* Introduction of a 20% cap on benefits payable to landowners, provincial & local governments

7. PNG Petroleum Refinery Proposals (Accomplished)

* Participation in development of State policy re: refinery proposals* Participation in State negotiation team to negotiate a project agreement with refinery developer

(Napa Napa refinery)

8. Fiscal Task Force Input (Accomplished)

* Assessment of impact of VAT, fly-in/fly-out tax and tumover levies on the petroleum industry* Participation in Governnent Department Task Force to mitigate the impact of these policy

initiatives that distorted the prevailing fiscal regime (VAT retained, others not applicableto petroleum industry)

9. Legislation Revision (new Oil and Gas Act) (Accomplished)

* Preparation of drafting instructions for amendments to Petroleum ActDrafting of Petroleum Act amendment

- Consultation with industry- Integration of proposed Petroleum Act amendments with Private Members' bill on gas= Drafting of integrated Oil and Gas Act- Passage through Parliament

Implementation of the provisions of Oil and Gas Act

10. Establishment of Cost Reporting System (Accomplished)

* Analysis of current cost reporting requirements of Government departnents and Agencies* Preparation of draft integrated reporting fornats* Discussion with licensees on introduction of cost reporting systems* Preparation and implementation of integrated cost reporting system

11. Development and Legislation of Downstream Development (Study Preparations)Policy

* Some downstream policies were included in the new Oil and Gas Act* Studies to support downstream usage planned are:* LPG Policy & Utilisation

- 36 -

* Gas Based Industrial Development* Gas Based Power Generation* LPG & CNG in Transportation* Off-take of Gas for Local Industrial Use* Opportunities for Gas Reticulation* Petroleum Resource Evaluation* Standards for LPG & Natural Gas Quality, Handling,* Transport, Storage & User Equipment* Review of LNG Market

12. Gas Agreement Negotiation (In Progress)

* Preparation of concept paper for content of gas agreement* Definition of issues for negotiation in a gas issues matrix* Review of draft agreements proposed by industry

- 37 -

Additional Annex 9. Investments in Exploration and Development (US$ million)

Year Exploration Development Operating Total US$/K rateExpenditure Expenditure Costs Expenditure (end ofyear)

1985 31.9 0 31.9 0.9877

1986 46.8 0 46.8 1.0404

1987 84.2 2.1 86.3 1.1384

1988 140.4 8.4 148.8 1.2100

1989 173.3 17.4 190.7 1.1633

1990 236.5 43.9 280.4 1.0511

1991 178.5 557.2 735.7 1.0498

1992 81.0 437.3 22.4 540.7 1.0127

1993 61.1 90.3 66.6 218 1.0190

1994 59.4 50.4 57.9 167.7 0.8485

1995 88.3 54.2 50.8 193.3 0.7545

1996 143.1 113.4 57.4 313.9 0.7533

1997 147.3 256.9 82.5 486.7 0.5710

1998 57.2 170.4 62.7 290.3 0.4770

1999 53.4 74.0 73.9 201.3 0.3710

2000 13.2 83.0 80.Oe 176.2 0.3300

2001 40.0e 77.7e 80.Oe 197.7 0.3500e

TOTALS 1635.6 2036.6 634.2 4306.4

Note: 'e' means estimateData source: Petroleum Division

-38 -

Additional Annex 10. Oil Production, Price, Tax, and Royalty (US $ million)

Financial Oil Production Oil Price Total Value Tax RoyaltyYear (million barrels) (US$/barrel) Production US$ million (iUS$

million)

1991 0.158 0 0 0

1992 19.314 21.034 406.25 41 4.0

1993 45.884 18.082 829.67 152 9.0

1994 44.008 16.199 712.89 180 8.4

1995 36.344 17.729 644.34 128 7.5

1996 39.018 21.183 826.52 225 4.5

1997 28.183 20.715 583.81 228 5.1

1998 29.480 13.394 394.86 93 8.3

1999 32.020 18.566 594.48 79 3.1

2000 25.082 28.983 726.95 124 9.6

Totals 299.41 5719.77 1250 59.5

Note: 1991 production start up wasforproject constructionfuel requirements onlyData source: Petroleum Division

- 39 -

Additional Annex 11. Gross Domestic Product (GDP) and Export Earnings (Kina million)

Year GDP Petroleum Petroleum % Total Petroleum Petroleum %

Total Contribution Contribution Exports Contribution Contribution

to GDP to GDP to Exports to Exports

2000 9855 1802 18.28% 5517.9e 1743.2e 31.6%

1999 9103 1382 15.18% 4909 1397 28.5%

1998 8901 705 7.92% 3678 813 22.0%

1997 6859 728.5 10.62% 3059 852 27.85%

1996 6914 636 9.20% 3314 1073 32.38%

1995 6309 620 9.83% 3399 827 24.33%

1994 5441 629 11.56% 2662 702 26.37%

1993 4922 746 15.16% 2527 817 32.33%

Notes:1. For exports, the 2000 figures are estimates based on the January to September data only

[Jan-Sep Total exports = 4138.4 and Petroleum Exports = 1307.4:source BPNG QEB].2. For GDP, the 2000 figures are for the full year (source: BPNG & Dept Finance & Treasury)

-40 -

Additional Annex 12. Organization of the Dept. of Petroleum and Energy showingPetroleum Division

Department of Petroleum and EnergyPetroleum Division

SecretaryDept. of Petroleum & Energy

_ Ga1

Deputy Secretary lDept.of Petroleum and Energy _

BEmaqd PaWlh

Director DirectorCorporate Services - 0 i Energy Division

Chwmna Kt,rna.a VW. VW.e

Establishment of the Petroleum Division

Offices and New Establishment Old Establishment

Branches Professional Support Total Professional Support 'Iotal ChangeDirector's Office 1 3 4 1 2 3 1

Exploration 13 5 18 9 1 10 8

Engineering 13 1 14 5 1 6 8

Coordination 14 1 15 11 1 12 3

Policy 14 2 16 8 1 9 7

Registrar 2 2 4 2 1 3 1

Totals 57 14 71 36 7 43 28

Note: New establishment approved September 6th 2000

- 41 -

Annex 13: List of Tasks Undertaken by the Project

1: Upgrading & transfer of geophysical Guardian Data July 5,1995 12 months; 1 st , 1997 AUD859,6 00 Data transription continuing, Pono, Advent & Behori summary, status report, 394databank AU$120,000,00 cost transcription system installed & being exabyte types and transcription

over run used. system2: Earthquake hazard evaluation D5r H Letz; July 1, 1995 3 years, June 30,1998 USD490,000.00 On schedule Report completed Anton, Moihoi & the late Luke status reports, monthly, 6-monthly

Bibot & annual reports3: Upgrading of DMP core shed BGS(BH,PWb):contract awarded April, 2 man months spread over 1 year USD300,000,00 Shelving, racks and inspection lab & Kloah, Navu, Tomson &

1996 equipment installed. Training on use of geologistsequipment concluded.

4 North New Guinea Basin (NNGB) BGS(PWb); April 1 1996 12 months; Mar, 997 PGK31 ,600D00 Data packages sent out to lOCs July, Haumu, Kttoah & Advent Prospecbtvity reportProspectivity 1997, Completed5 Preparatory work; promotion of NNGB BGS(PVvb); April 1,1996 till the completion of bid round in PGK129,600.00 Promotions conducted at intemational Pono, Kloah, Rimua, Advent, date packages and LOis

Julv, 1997 conferences LOIs and data packages Sebong & Haumusent to 145 companies.

6: Fiscal regime for gas development BGS(TM);July, 1996 4 months none Regime developed, legislation drafted Sebong & Hua report titled "Revisions to Incomepresented to Parliament in Nov, 1996. Tax, 1996"Enacted

7: Fiscal regime for exploration & BGS(TM);June, 1996 6 months none Completed Sebong & Hua New regime endorsed anddevelopment in frontier areas (see Task No approved by NEC

8: Fiscal regime for marginal fields BGS(TM);June, 1996 18 months, Dec, 1997 none Reviewed Rimua draft legislationS Cost databank BGS(PWb, TM); July,1996 6 months, none Kutubu, Hides & Gobe data analyzed, Geologists, Engineers & Policy report

analysis specific to exploration in staffprogress. Database built (WM).

10: Promotion of PNG resources at APPEA- BGS(PWb), 16-19 June 6 weeks preparation PGK10,488.00 Completed Pono,Kloah report & complimentary letters1996 conference & exhibition, Darwin11: Assess geological aspects of Gobe BGS(BH) & Manggal; April, 1996 4 man months: End of July, 1996 USD1500 00 Completed All geologists reviews, comments & answersAPDL

N) 12 Assess engineering aspects of Gobe BGS(PWn),Mandibi & Morokai; April, 5 man months, End of July, 1996 none Completed All engineers reviews, comments & answersAPOL 199613: Assess the economics of Gobe APDL BGS(TM); June 1996 6 weeks; July, 1996 none Completed Tiensten,Sebong & Rimua review report14: LNG study BGS(IT,TM),Mandibi; May28, 1996 19 months, Dec, 1997 PGK650,000.00 Contract awarded to Worley Ltd Phalanger, Mandibi, Bomai & reports submitted.

contract 16/6/97 Completed 21/2/98. Morokai15: Refinery proposal review BGS(IT); Jan 23,1996 2 man months: none Proposed refinery studies canceled by (none) summary, status report & paper

_____ _____ ____ _____ _____ ____ __ __ ____ _____ _____ ____ _____ ____ ____ _____ ____ _____ ____ ___agreem entag eeme t twit BBan

16: Install IT system in PD BGS, Dec, 1995 1 year, Dec, 1990 USID50,000,00 Network installed ard useF s S iarai, sum vinary report & installation otnos 64 & 65 system network

17: Pilot study, heavy mineral stratigraphic BGS(BH,ACM): Nov, 1995 80 man days; Jan, 1997 UKP2,500.00 Completed Manggal & Woyengu report & paperanalysis, Papuan Basin18: Impact assessment; Mubi bridge study BGS;(CJ) Feb 1,1996 31 man days,a.s.a p UKP15,091.00 Completed (none) report & press release19: Impact assessment; Kikori river export BGS: (CJ) Feb 1,1996 31 man days,a.s.a.p UKP15,909.00 Completed (none) report, & press releasepipe20: Strengthening of the Petroleum BGS(PWn, IT, WMc); May 23,1996 2 years: June, 1998 USD4,000 00 Review of regulations completed all engineers & geologists 6 competent inspectorsInspectorate: Good oiltfield practice21 Reservoir management BGS(PWn); May 23,1996 1 year; June, 1997 none Complted All engineers report & system being used22 Moran field development review BGS(PWn); 3 months, none Reviews based on Moran 1xST1 & ST2: Robert,Lapira,David report

_________________________________ ~~~~~~~~~~~~~~~~~~~~~~~~completed Dec, 1996.

23: Geophysical well logs interpretation BGS(IEP): Dec 1995 2 weeks, 13-26 Mar, 1996 UKP13,421.00 Completed Geologists and engineers course outline & assessment formscourse24: Teaching assistance to mining BGS(PWb,PWn,IT,TM), July 1, 1996 6 days; 5-9 Aug, 1996 PGK4316 00 Completed university students lecturesengineering, Unitech, Lae.25: Promotion publication, Repeat Formation BGS(PWb), Jan, 1996 5 months;June 7,1996 PGK100.00 courier Completed Woyengu,Boas,David conference paperTester pressure analysis I_I_ _

26: Promotion publication; Gas ratio BGS(PWb), Jan, 1996 5 months:June 7,1996 PGK460 50 fig S Completed Kloah conference paperinterpretation courier27 Assistance with MRDC privatization BGS(MB): April 4, 1996 2 man months, July 31, 1996 none Completed Tiensten various reports plus task

I opeinrpr

28 Drafting amendments to Petroleum Act for BGS(MB); Jan, 1996 1 month; Aug, 1996 none Amendments passed by Parliament in Joshua Hua new legislation i.e. introduction ofGas Policy Implementation September, 1996 Completed retention licences.29: Petroleum Economics, Inception report BGS(TM), Mar 30,1996 1 day; April 5,1996 Report submitted; completed supporting documents30' Develop economic model; Wood BGS(TM), July, 1996 6 months; Dec, 1996 Developed, used for Gobe field Policy staff modelMacKenzie development appraisal; completed31 Economic analysis of LNG proposal BGS(TM), July, 1996 12 months; July, 1997 Paper produced for Govemment task Kepsey report

force.32 Economic analysis of oil refinery proposal BGS(TM); July, 1996 12 months, July, 1997 Completed Rimua & Hua report

33 Gas utilization & pricing model BGS(TM); Oct, 1996 12 months Completed Tiensten,Kepsey report & model34: Oil/gas prices database BGS(TM); Juty, 1996 on going Completed; monthly oil price reports are Rimua monthly reports

____________________________________ _______________________________ regularlyeglarlycirrclated.35 Assessment of landowner benernts BGS(TM), July, 1996 6 months; Dec, 1996 PGK2.0 000o00 rCompleted. Albert & Kepsey report36. Review of State particpation in oiVgas BGS(TM); June, 1996 12 months; June, 1997 negligible Complted Tibnsten & Kepsey reportindustry

37: On sie training - pipelines & facihties BGS(IT); June 12, 1996 1 week; June, 1996 PGK5,220 00 Completed Cletus, Boas, Robert, Lapira & report

38: IDT-1 1 Rg fire investigation BGS(vWMc, IT); July 5, 1996 3 weeks; July 31, 1996 none Completed Mandibi, Bob & Cletus reports & recommendations39: Technical review of refinery proposal BGS (IT); June, 1996 3 months; Sept, 1996 PGK200.00 Completed. Joseph & Cletus report40: Drilling program reference guide BGS(VWMc); Aug 16,1996 3 days none Completed All engineers Reference guide in use by

41: Review BP proposal Hides 1 & 2 BGS(MvMc); July 29, 1996 2 days; ASAP none Completed Mandibi reportPressure Survey_42: _,renor ,dabase on on l,gas reserves BGSrPilAM; A,u,, 30J 190R 4 eh.- .-_d 4. non C,.,..,i C. .... ,. .A,&k. .AA.....43: Drihing Engineering Course BGS(JF); Sept, 1996 30 Sep-40ct, 1996 Complted All Engineers report44 Reservoir Engineerng Course BGS(AB): Nov, 1996 4-8 Nov, 1996 Completed All Engineers/Geologists report to be prepared45: Annual inspection - Kutubu & Hides BGS(IT);Sept 1, 1996 10 weeks;mid Nov, 1996 travel costs only Report completed all Engineers reportProduction facilities46: Review of PNG gas utilization studies BGS(IT); Sept 1, 1996 On going Reviewed all Engineers report47 UPNG 4th year Geophysics class BGS(PWb), Nov 1,1996 2 hatf days, 14-15 Nov, 1996 Completed Pono & Advent course well received by studentss&

staff of UPNG

48 Geochemical analysis of oil seeps & mud BGS(BH), Manggal; Aug 22,1996 end of January, 1997 PGK1200 00 erfares & Completed Manggal, Woyengu & Morokai reportrocks USD3224 00 analysis

49 Promotion of PNG od/gas potential at IPA BGS(PWb), July, 1996 October, 1996 USD8740.00 Completed Haumu & Sebong lOC's contacted & data packages25th Convention, Jakarta, October, 1996 given out50. Promotion of PNG oil/gas potential at SPE BGS(PWb), July, 1996 October, 1996 USD5400.00 Completed Advent & Rimua IOC's contacted & data packagesAPOGC conference, Adelaide, October, 1996 given out51: Landowner equity regime implementation BGS(MB), Jan, 1996 3 months, December, 1997 none Completed Mengere Proposals & Trust deeds52: Legal review of Gobe APDL & Agreement BGS(MB). June, 1996 1 month, August, 1996 Completed Hua review paper, draft Amendments53: Terms for Frontier Areas (see task No 7) BGS(TM); Oct, 1996 6 months, March, 1997 Completed Kepsey, Sebong & Rimua New legislation54. Review of Standard Petroleum BGS(MB), Nov, 1996 3 months: December, 1997 none Completed Tiensten & Kepsey Review paper on changes &Agreement, Petroleum Act & Regulations. revised draft.55: Assistance to IRC in redrafting provisions BGS(MB); Sept, 1996 2 months, Noevmber, 1996 Completed Rimua & Hua Amendment draftfor Petroleum projects5B L o....o,osstant ,or Moran F-jec BGS(MB), Dec, 19996 3 rvunths, April, 1997 Compleied R, ua & ManYqul draft poiicy papers, drat reguiationcommencement for taxation57: Compilation of standards for the safe BGS(IT,MB), June, 1996 18 months, end 1997 PGK3,000 00 Completed & standards recommended David & other trainee TOR & Pacific Island Petroleumstorage & transportation of petroleum engineers Storage & Handling Standard Pi tproducts. 1994 attacheds5: Transcription service for Gobe LTC Austcript Technical Service, QLD, mid 4 months, March, 1997 AUD68,000 00 957 recorded tapes transcribed into Mr Idau of the NJSS assisted in 5887 pages of transcripthearing Nov, 1996 5887 pages of transcript, completed preparabon59: Petroleum Engineering Review BGS(KS,SM), Jan, 1997 1 week preparation, March, 1997 PGK4,690 00 Completed Mandibi & National Engineers Report60: Gobe accumulated liability assessment & MB/AJ Feb, 1997 1 month, April, 1997 none Agreements signed with companies Puiye & J Sios (MRDC) Final report preparednegotiations.61: Gobe landowner business development BGS(FL), June, 1996 6 months PGK1 million (Grant Completed Michael, Gabriel & Philip and Report & Grant.assistance from MRDC) for landowner groups from Gobe

landowner business ae_development area

162: Training & development of national staff Capital Markets Course at International 3 weeks, April 25, 1997 USD11,260 00 S Mr Hamou attended April/May session Mr Aloysius Hamou, DoF certificate of participation, Report(DoF) Law lnst.ute, Washington D C _ _I PGK112,400 00 Completed

613: Promotion of PNG resources at APPEA- BGS(PWb): November, 1996 6 weeks preparation, 13-16 April. AUD10,243 00 Completed B Pawih & K Puiye List of Industry delegates1997 conference & exhibition, Melbourne 1997 contacted64: Install network server & PC clients BGS(1A); October, 1996 3 weeks. December, 1996 UKP8,926&00 Completed F Advent & B Joku Working server & network; Final

__ _ _ _ _ _ . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~report,3 weeks: February, 1997 UKP10,679.00 Completed F Advent Fully operational network; Final

65: Connect PC clients to server BGS(BC); December, 1996 report.66: 'Contracts in the oil & gas industry" BGS(DS); March, 1997 1 week; 6 June, 1997 USD16,76075 ++ Completed National staff from DMP & other Course & attendees feedbackcourse Gov Departments form.67: Teaching assistance to mining BGS(team); April, 1997 1 week: 11 August, 1997 PGK2,64B20 Completed university students lecturesengineering at Unitech, Lae.68: "Effective Business Communications & BGS(PWb) Chevron Course offered to 3 days, 16-18 June, 1997 none as Chevron Completed 6 participants from DMP Course & attendees feedbackPresentations" course. DMP staff, June 16-18, 1997 provided the course form.

free of charge69: Promotion of PNG oitligas at the World DMP(MMdBP); June, 1997 1 week, 10-16 Oct, 1997 Successful participation. B Pawih & M Mandibi with International exposurePetroleum Congress, Beijing: Oct 12-16, McWalter accompanied1997. Minister & Secretary who are

members of the PNG NationalCommittee to the WorldPet.Congress.

70: Training course on "Production Logging" BGS(PWest); November, 1996 1 week,3-7 Feb, 1997 UKP10,164.00 Completed DMP Engineers: Boas, Cletus, course & course assessment formsJoseph, Robert, Bob, andLapira: Chevron: Eme &Kisombo.

71: Training course on "Land Management" Pacific Land Tenure & Policy Centre; 12 1 week; 16 April, 1997 PGK1,820.30 Completed P. Manda course & course reportApril, 1997

72: 1997 Annual Inspection of Kutubu and BGS(IT, Mm); 20 June, 1997 3 months, December, 1997 travel costs out of DMP Completed DMP Engineers: Mark, Bob, Inspection reports & check list forHides Production facilities. budget Cletus and David future use73: Development of ownership policy to Delta Kikori Pty Ltd (a Kikori 4 months: September, 1997 PGK40,000.00 Completed P Manda, J Kuatowa Reports and database on theincrease investment in petroleum sector Landowners company); 15 April, 1997 Incorporated Land Groups withinKikon River Basin Pipeline Licence No. 2. the Kikori River Basin74: DMP Leadership of PNG Gas Policy Task BGS(MB,TM,IT); January, 1997 12 months; January, 1998 none Completed Mandibi, Phalanger and Bomai Draft Gas Policy recommendationsForce. to be circulated to members of the

p. gas task force for comments prior. to seeking NEC endorsement.

75: Review of CNPL Gas to Queensland BGS(MB,TM,IT); January, 1997 12 months; January, 1998 none Completed Mandibi, Phalanger, Morokai NEC has endorsed in principle theproposal. and Bomai recommendations of DPE.76: Management of LNG and Gas Utilization BGS(IT); June 1, 1997 a months; January, 1998 USD475,000.00 Completed Mandibi and Phalanger Reports submitted to DPEStudy; Contract awarded to Worley Ltd77: Petroleum Economics course BGS(PS); March, 1997 4 days; June 24-27, 1997 USD15,000.00 Completed 7 DMP staff, 14 from other Report

Government Departments78: Assist in the DMP administration of the BGS(WMc); 3rd Q, 1996 as required no additional cost to Completed Engineers; Morokai, Taymen, Trained drilling engineers &Petroleum Regulations DMP Boas & Mandibi Compliance for safety of resources

79: Daily monitoring of drilling activity reports BGS(WMC); 3rd 0, 1996 ongoing no additional cost to Completed Engineers with part time Trained drilling engineers OperatorDMP involvement of geologists compliance to Regulations

S0: Set up a Drilling Data Base BGS(WMc); 4th Q, 1996 ASAP; ongoing no additional cost to Completed engineers; Morokai, Boas & Drilling Data BaseDMP David

BGS(WMc); June, 1996 as required travel and printing of Completed engineers; Mandibi, Boas, Rig inspection forms, complianceinspection forms costs Taymen, Morokai & Cletus with the Regulations, Directives

B1: Inspection of drilling and workover rigs. and the ActBGS(WMc); April 28, 1997 1 week; August 6, 1997 travel and Completed university students lectures

82: Lectures to mining engineers, Unitech. accommodation onlyBGS(MB); Nov, 1996 1 month; June, 1997 none Completed Puiye Final draft agreement done and

83: Refinery project agreement negotiations executed May, 199784: Tax ammendments - frontier area fiscal ter ffGS(MB); Jan, 1997 2 weeks; Sept, 1997 none Comoleted Rim.a Draft amrnmendments85: Gas Policy - Outline gas agreement BGS(MB); Jan, 1997 4 weeks, Dec, 1997 none Completed Rimua Outline Agreement86: Assistance in dealing with landowners BGS(MB); Jan, 1996 2 months; June 1998 none Completed All Policy Branch staff better imformed landowners67: Gobe Landowner negotateions BGS(MB); Nov, 1996 2 months; Mayv1997 none Completed Mengere & Baitia Draft MOA88: Hides LNG Project gas agreement BGS(MB); Aug, 1997 1 week; Dec, 1997 none Completed Rimua Agreementnegotiations I IOS: Kutubu gas project gas agreement BGS(MB): Aug, 1997 1 week; Dec, 1997 none Completed Rimua Agreementnegotiations

Tak A f. TO ttonIpItiloI utD ;ii; 6i46 T i a afl90: Drafting various amendments to BGS(MB); Jan, 1997 1 month; Dec, 1997 none Completed Hua & Puiye Draft amendmentsPetroleum Act91: Preparation & implementation of Gobe BGS(MB); Dec. 1996 1 month, Dec, 1997 none Completed Mengere Proposals & Trust deedlandowner equity regime92 Training- Course on Reserve Esitmation BGS(LD) Jan, 1998 3 days, 4 -6 March, 1998 PGK1 3,900 00 Completed Petroleum Division Staff Training on Rexserve Estimation93: Policy on Landowner Benefits Distribution DPE(MD); Jan, 1998 4 weeks, 4 Feb, 1998 PGK7,887 10 Completed Dume & Manau Paper on various topics & Reports94: Training of National Engineers BGS(WMc), _Completed IDPE National Engineers Training95 Administration Support - Administrative BGS(WMc); 1 month Completed Engineering section Admin/Job guideline for drillingguidelines for the drilling section section96. Training- source appropriate courses to BGS(WMc), start of Protect US$13,300.00 Completed Engineers drilling skills & optimization, wellEngineers planning97 Review Gravity & Magnetic Data BGS Team, Nov. 1997 2 weeks, 28 Nov. 1998 PGK7,835 Completed Pono Audit Report, Action Plan, Training

_____________________Package

98. UPNG - Undergraduate re-orientation from Silo Vali 5 months, July, 1998 PGK2.476 00 Completed Vali Successful complstion of firstMedicine to Geology semester geologY99. Training - Applied Reservoir GeologY US$6,833 00 Completed national staff Applied Reservoir Eng. By OGCI100 Prepare Project Slide Show & handout BGS(IT); Sept, 1997 1 month, Oct, 1997 Completed Mandibi, Bomai, Timereke, Presentation to Members of PNGfor NEC/Parliament on PNG Gas Options Tayman, others Parliament101: Promotion: Petroleum Potential of Cape DPE(Pono), Sept, 1997 4 months, Jan, 1998 Completed Pono, Regional Geology, identify &Vogel Basin Catalogue potential reservoirs, etc,

_____________________prospects102: Promotion: Petroleum Potential of the Fly BGS(PWb) & DPE(S Kloah); Sept 1997 4 months, Jan, 1998 Completed Kloah, Advent, Haumu, Report with accompanying mapsPlatform Woyengu and sections103: Promotion: Petroleum Potential of the BGS(PWb) & DPE(Woyengu), Sept 4 months, Jan, 1998 Completed Woyengu, HaumuAdvent, Report with acoompanying mapsPapuan Fo.ld g Thrust Bee Hintertand 1997 _ iK-h and sections104 Promotion- Petroleum Potential of Aure BGS(PWb) & DPE(Advent): Sept 1997 4 months, Jan 1998 Completed Advent, Woyengu, Report with accompanying mapsFold Belt Kloah,Haurmu and sections105. Promotion: APPEA Conference & BGS(PWb), Sept 1997 8 months, 8 March, 1998 A$8,000 Completed Woyengu & I Policy officer Deliver paper Conference, BoothExhibition 1998 Exhibition108: investigate oil spillage from Shell Oil BGS(IT). 15 March 1998 3 days. 20 March 1998 Completed Bomai Investigate & report to SecretaryTerminal POM, 13-Mar-98

4- 107 Inspection of Gobe production facilities BGS(IT): March 1998 1 week, 24 March 1998 Completed Mandibi, Trattner Inspection Report, Approval &

Followup108 Promotion. 1998 Indonesian Petroleum BGS(PWb), Feb 1998 7 months, 23 Oct 1998 US$4,852 Completed Tiensten, Woyengu Present Poster, Technical note,Assciation Conference on Gas promotional documents109 Educational Trip to London DPE(R Rimua), 27 Mar 1998 4 weeks, 28 April 1998 PGK31,715 00 Completed Rimua Report on Educational Trip,

_____________________________ ~~~~~~~~~~~~~~~~~~matrials from courses110' I T Network - extend network via leased BGS(Killen): April 1998 3 months, July 1998 Total K9240 and Completed Internet and Email Accountsline to Internet Monthly. K300111. Inspection of gobe Field Facilities BGS(IT), April 1998 1 week, mid April 1998 Completed Mandibi, Trattner, Bomai Inspection, Approval, followups112. Landowner Coordination - Attend DPE(Yakopa); May 1998 3 Weeks, May 1998 K4,458 50 Completed Yakopa Trainingcourses in land Administration113 Create/Maintain Production/Reservoir BGS(Bogatchev): April 1998 300 man/hours 15 October. 1998 Completed Tayman,Bomai, Trattner Gobe Prodn/Reservoir Database,Database for Gobe Field Template for other fields,

___________________ ___________________________Excel/Acces114 Landowner Coordination - Attend DPE(Koyama), May 1998 3 Weeks, May 1998 K3,92260 Completed Koyama Training in Landowner issuescourses115. Pipeline Policy - Workshop on Pipeline 27-May-98 K700.00 ICompleted Teinsten, Bomai, Pawih interaction & consultation withPolicy Green Paper

________________industry revised pipeline policy118' Landowner Policy- Course in Land DPE(Mengere); May 1998 3 Weeks, May 1998 K5992 00 Completed Mengere Training in Landowner issues

Administration117. Landowner Policy- Course in Land DPE(Mengere), May 1999 4 Weeks, May 1998 K5992.01 Completed Mengere Training in Landowner issuesAdministration118. Training - International Gas Business DPE(Mandibi), June 1998 1-12 June 1998 US$5,600.00 Completed Mandibi courses presented by IHRDCManagement Certificate Program119. Technical Training - Project Management BGS(Bogatchev), June 1998 2 Weeks June 1998 K100 00 Completed Morokai, Seteri, Taymen, Kota, Project Management seminai &

Trattner, Bomai, Haumu, HandoutsWoyengu, Koyama

120 Training potential recruits to Engineering BGS(PWb, WMc, Bogatchev, IT,TM) & 6 days, 17 August 1998 K1,940 00 Completed Woyengu Lectures, Lecture notesBranch of PD, Unitech DPE(Woyengu): June 1998121' Reporting Environmental Impact DPE(Kuatowa, Manda, Manau), June 1 week, 15-19 June 1998 KS 427 60 Completed Kuatowa, Manda, Manau learn basics of erivironementalAssessments as part of landowner 1998 impact assessments etccoordination work

> -0 XX =19,|-'00 '..=:= :2122: Drilling Presentation at Unitech BGS(W!Vc); June 12,1998 1 week, 12 August 1998 K4S0 Completed 4 hours presentation oill/gas

123: rraining- Trainee Drilling Engineers BGS(WMc); July 1998 2 weeks, 2 August 1998 Completed Seteri, Kota Better knowledge in drilling and

124: Training- C-PES -Oford Courses DPE(Tiensten): July 1998 27 days, 4 August 1998 K39,810,64 Completed Tiensten Successful completion of course

125:Reviw ofthe ulf OA DPE(Dume); July 1998 3 days, 26 July 1998 1(10,806 00 Completed DumeT Kuatowa, Gabonen. Signing MOA S Training of natioriaPawih staff in landowner dealings

126: ~Technical --Training - Petroleum BGS(Bogatchev); July 1998 15 days; 13 August 1998 -K2000+ Completed Bomai Lectures, handoutsProduction systems Unitech Lae127: Review of Hides Wells - Evaluation af BGS(VVMc). June 18, 1998 18 June - 24 July 1998 Completed Tayman, Bomai, Trattner, Kota, Determine causes of wellHides Gas Wells: 1,2,3 S 4) Morokai, Seteri, problems, gain

128: Technical Training- Gobe sand control, BGS(Bogatchev); Aug 1998 12 man/days, 27 Aug 1998 Completed Seteri, Trattner Sand producing wells, completion,data gethering, analysis and production S well testing dataRecommendations129: Independent Review of Oil Searrh7s BGS(IT); November 1998 3 weeks, end Nov 1998 AUS$10,000 Completed Bomai, Mandibi Consultants findings, DPEAltemative Gas to Queensland Project recommendations to GOPNGExpenditure Phasing S Gas ReservesAllocSation`130:. Reviewy impact on GTQ Project on BGS(IT); Oct 1998 6 weeks, 7 December, 1998 AUS$9,000 Completed Bomai, Mandibi Study report of findings, DPEsending NGL's and Condensate lo POM by assessment on whether to proceedpipeltine Instead of being processed offshore with proposal131: Msc Course in Energy Management DPE(Ponoj; October, 199 ameyear, Odtober '19993 UKP22,900 Completed Stanley Pono Msc Degree in Energy Studies

132: Review Gas to QLD Project BGS(IT); Aug 1998 1 month, Sept 1998 Completed Bomai Detailed Results of DPE appraisal

Environemenlal Plan enytronmental plan, Brierng to~~~~~~~~~~~~~~~~~~~~~~~~~~~nvrometa pan Biein t-P Secretary S minister meetings with

_ _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~serm,nwr to staff aJn progress.133: Landowner policy - workshop DPE; Sept 1998 8 - 9 Sept 1998 K9,968.67 Completed Staff of Coordination and Policy An effective Benefas legislation

branch of Petroleum Division fthat will solve a lot of issues

134: Drilling Trainirng - Secondment of BGS(WMc); Aug 1998 2 -3 monfth Contpleted Boas Kota National DPE Erggineer to gotEngineer to Oil Search hands-on expertence135: Tecshnical Training-Gobe sand control, BGS(Bogatchev); Aug 1998 12 days, 27-Aug 1998 Completed Seteri, Trattner Sand produrcing wells, oompkrdion,data gathering, analysis & recommendations production & weh testing date136: Atteneding a short coutrse on Projec DPE; Nov 1998 16 - 20 Nov 1998 K5,370.00 Completed Kuatows, Tarigua, Manau Project developmentDevelopment Planning & Budgetary Control at plannrngffnancial corurses-hetpful.Untech, Lars137: Petroterr Cost Reporlhg Vvorkshop DPE; Dee 1903 Jun-99 Kt, ,t92.94 Completed Rimua, Seborng, Tole Petrobumn Cost reporting project to

t138: Local Area Network Extension BGS(Kilten); Oct t1998 3 months Jan t1999 K35,000 Completed an opertoa comp uted byJ ne t590 Telehoe systenm within two now

139: To receive training DPE(J.Hua); Mar 1999 3 mornths, May 1999 UKP10,000 Cancelled Joshua Hua rre140. Training of Staff DPE(engineers); Jan 1999 Completeo J.Taymen, B. Kota, D.Seten, A national staff that can become

C.Bomai, B. Morokai, engineers. more proaictive and efficient in the

141: Induction Training DPE(A.Goiye); Sept 1998 9 months, May 1999 K450/Fortnight rising to Cadetship completed Alex GoiYe Gnralnmnducth nioncore,igBainc_ ~~~~~~~~~~~~~~~~~~~~~~~K550/FN experience, assisting advisor.

142: Landowner Awareness _ DPF(Cnr-dirathon); March 10999 2 days, Marclh 1SS99 K16,000 - K17,000 Co duv.. J Kuatcywa, s Koyama, P Landowners were more informedManda, D.Manau, K. Puiye, F of their benefit entdtlements, andLola, W.Tangua, Albert the status of the gas project

. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Mengere, Alphonse Hagap,_ ~~~~~~~~L.Takopa

1143: Computer Training iDPE(D.Sebong, R.Rimua); Completed

k mo d Du7 atIt>Vfcomi.t0onN tto t _- _ S S__s T4tipWI abV"iPnt

144 Certificate Course in Land, Resources & DPE(Coordmnation), May 1999 1 week, May 1999 K4,874 70 Completed Sarufa Maupua David Manau Course to help them learn aboutEnvironmental Compenstation legal & national policies

concerning land and resources andto deal with them effectively

145 Training to aquire knowledge and DPE(A Laepa) K14,808 Completed Ahovo Laepa maintain, coordinate to establisheperience to at international levels to deal with appropnate degree of risk sharingpetroleum industry matters effectively in the Gas Development Project146 Promotion 1999 Australian Production OPEM Mandibi, K Puiye & P Woyengu) 2 Weeks Aprf, 1999 Aus$15,265 69 Completed Mark Mandibi Kepsey Pulye. Display Posters on the Petroleumand Exploration Association Ltd (APPEA) Peter Woyengu potential of the NNGB, internalConference & Exhibition - Perth Australia PFTB and the Papuan Foreland

area during the Conference at theExhibition boot Provide promotiondocuments

147 Information Technology Development of BGS(G.Wiggans) & NERC(M France), 2 Months, May 1999 UKP48,000 for six Completed lati Ai, all staff in exploration & Afully functioning GeographicGeographic Information System Aug 1998 months work coordination branches, some Information System capapble of

engineering branch staff producing any licence maprequired as well as allowing theusual database queries to beanswered

148 Attend Technical Workshops and DPE(B Morokai, G Mangal, J Taymen), 3 days: Mar 1999 K27DC Travel Completed Bob Morokai, Gerard Mangal, talking & listening to JVP aboutMeetings in to develop Moran Oil Field Mar 1999 allowance, other Joseph Taymen their plans & DPE plans

expensees met byChevron

149. Management Training Joint Venture Training UK; Feb 1999 2 weeks, Mar 1999 UKP20,808 Completed 34 national Staff Course manual for attendee150 Personal Skills Training: Technical BGS, April 1999 4 days: May 1999 Completed 25 National Staff & 18 Course manual & supplemantarnyReading & Writing Skilis secretatrial staff of DPE exercises151 Geolgical training and promotion of BGS(Dr G.K Lott), Mar 1999 2 months, April 1999 Completed Gerard Manggal. Peter Develop confidence of nationalgeological activities of the Petroleum Division Woyengu, Jimmy Haumu, staff to promote work of Petroleum

Jennifer Kapi, Gregory Balavue Division to an extemal audience

152 Management Training Senior Josnt Venture Training UK, June 1999 2 weeks, June 1999 UKP14,500 Completed Joseph Gabut, Bernard Paw)h, Course manuals & an independent. Management Development Program Paul Tiensten, Francis Lola, assessment of management

Joshua Hua, West Tangua, techniquesChannan Kumulau, Kiara MaoRema, Nathan Mapeso, VoreVere, Martin Bonan, Allan Larn

153 Development & Integration of Databases BGS(J Gibson): April 1999 2 months; June 1999 Completed Saskia Ani, Boio Haro Completed Database systems inin the Petroleum Division m ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~icrosoft access for dIrillingin the Petroleum Division .engineering, licence registry,

reports archive & borehole

geology Standard hegrationinterface wilth password security,available to alt staff

154 Policy Training: Natural Gas Contracts BGS (D. Stickley), Jan 1999 1 week, end April 1999 UKP 5000 Conducted Policy Branch Officers Course delivered and manualand managment available155:Community relations impact assessment Tony Power, May 1999 5 days; end July 1999 PGK 7500 Done Policy & Coordination Branch Report on Community Relationsof the new 01 and Gas Act officers aspects of Oil and Gas act and

I _________________ I ] ~~~~~~~~~~~recommendations on deficiencies156. Training in Non-Destnuctive testing Dept. Mechanical Engineering, 3 days, 8th July 1999 PGK 4127 Attended Bob Morokai and Cletus Bomai Course attendianceMethods Universtity of Technology, Lae

Explanation of abbreviations used

General:..BGS = British Geological Survey. the expertteamOMP = Department of Mining & Petroleum.MRDC = Mineral Resource Development CoDOF = Department of FinanceBPNG = Bank of Papua New GuineaNJSS National Judicial Staff SernvicesGOPNG = Govemment of Papua New Guinea

DPE = DePt of Petroleum & EnergyBGS & Oither Experts:PWb = Peter Webbs Petroleum Geologist 1.BH = Bemard Humphreys, PetroleumGeologist 2,IT = Ian Taylor, Pipeline a Facilities Engineer..

WMc = Walter McCullum, Drilling EngineerPWn = Paul Winchester. Reservoir Eng.MB =Martin Bymes, Petroleum Lawyer.TM Tony MacKay, Petroleum EconomistACM = Dr Andrew Morton (BGS short termexpert)

CJ = C. James (BGS short term expert,sedimentologist).IEP = Dr Ian Penn (BGS short term expert,seismic interpreter).JF = John Ford (BGS short term drilling

G.o expert)AB = Alasdair Brown (BGS short termreservoir engineer)

KS =Prof Ken Sorbie (Heriat-Watt University)

SM =Sandy MacFarlane (BGS ProjectManager)

AJ = Ashok Jain iDMP)JS = Jennet Sios (MRDC)FL = Frank Leibfried (BGS consultant)LA = Ian Ainslie (BGS short term IT expert)BC = Brian Cannell (BGS short term IT exp)DS = Dennis Stickley (BGS short term expert,Lawyer)MMc = Mick McWalter (Director Pet. Div.)ILD = ILauie Dake MO =Mpesa Dume (Atdirector-Coord. DPE)

Annex 14: Studies Undertaken During The Project Implementation

LNG and Gas Utilisation Study

a major study and assessment of gas dvelopment options

costing around Aust $ 400,000

contracted to Worley Ltd.

provided key input to GoPNG Gas Utilisation Task Force recommendations

Seismic Hazard Study for LNG and Gas Developmenta major study to assess the seismic hazard for proposed gas development schemes[

costing around US$ 440,000

contracted to Dr. Horst Letz

determined that schemes traversing the northern PNG area have significant seismic risk

Standards for Safe Handling, Storage and Transportation of Petroleum Productsa minor study of existing standards in use in the region

conducted in-house under the guidance of consultants

recommended to the National Standards Institute for adoption

Assessment of the Petroleum Potential of the Internal Fold and Thrust Belt: Papuan Basina minor study to assess the pctential for petroleum accumulations in an untested areaconducted in-house with out-sourced compilation and printing of presentation montage

Assessment and Promotion of the Petroleum Potential of the North New Guinea Basina minor study conducted in house with the assistance and guidance of' consultants

promotional packages prepared, printed and sent to international petroleum companies

Assessment of Impact of Kutubu Oil Pipeline on Kikori River Sedimentation by BGS experta minor study of effects of the oil pipeline on river sedimentation

Assessment of Impact of Mubi river bridge as a possible cause of flooding by BGS experta minor study of the effects of the Kutubu oil project access road Mubi River bridge on

the local environment after a series of floods

Other small studies conducted in house with help and assistance of consultants:Correlation of Wells in the Papuan Basin: a study of wells throughout the Papuan Basin;

Gas Ratio Studies on Oil and Gas Discovery Wells: a study of hydrocarbons in wells

Provenance Study for Gobe Oil Reservoir Sands: a study and analysis of heavy mineral

distribution designed to reveal the source of reservoir sands in the Gobe Oil field

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Annex 15: Promotions and Presentations

JUNE 1996 1996 APPEA Darwin, AustraliaAttendee: Stanley Pono and Sabah KloahConference & Exhibition

SEPT 1996 Third PNG Petroleum ConventionPort Moresby, Papua New GuineaAttendees: All professional staff

OCT 1996 25' IPA Annual ConventionJakarta, IndonesiaAttendee: Jimmy Haumu and Dominic Sebong

OCT 1996 SPE APOGC ConferenceAdelaide, AustraliaAttendee: Francis Advent and Rendle Rimua

JAN 1997 Australasian Energy Pacesetters Conference,Sydney, AustraliaAttendee: M. McWalterA Paper Presentation

APRIL 1997 APPEA, Melbourne, AustraliaAttendee: Peter Webb, Bernard Pawih, Kepsey PuiyeConference and Exhibition

SEPT 1997 Petroleum 2001, BGS HQ, Keyworth, UKAttendee: Peter WebbIndustry Technology Forum & Display

OCT 1997 World Petroleum Congress, Beijing, P.R.C.Attendees: Minister Maibawa, Secretary Gabut

Bernard Pawih, Mark Mandibi, Mick McWalterPress Conference Exhibition

DEC 1997 PNG Mining and Petroleum Investment ConferenceSydney, Australia.Attendees: Minster, Secretary, B. Pawih, M. Mandibi,

M. McWalterTwo Papers and Exhibition.

JAN 1998 Australasian Energy Pacesetters Conference, PerthAttendee: Bernard PawihPaper Presentation

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MAR 1998 APPEA. Canberra, AustraliaAttendees: Peter Webb, Peter Woyengu, Paul Tiensten,

Secretary GabutConference, Exhibition and Poster Session

MAY 1998 LNG 12 ConferencePerth, AustraliaAttendee: Mark Mandibi, Bernard Pawih

OCT 1998 26"t IPA Annual Convention & Gas Habitats ofSE Asia and Australasia ConferenceJakarta, IndonesiaAttendee: Peter Woyengu

NOV 1998 PNG Mining and Petroleum Investment ConferenceSydney, AustraliaAttendee: Bernard Pawih, Joseph Gabut

FEB 1999 Australasian Energy Pacesetters ConferenceAttendee: Paul Tiensten

APRIL 1999 1999 APPEA, Perth, AustraliaAttendees: Mark Mandibi, Peter WoyenguConference, Exhibition and Poster Session

OCT 1999 IPA, Jakarta, IndonesiaAttendee: Paul Tiensten, Peter Woyengu.

DEC 1999 PNG Mining and Petroleum Investment ConferenceSydney, AustraliaStanley Pono, Paul Tiensten, Rendle RimuaAttendance and exhibition

MAY 2000 2000 APPEA Conference and ExhibitionBrisbane, AustraliaPeter Woyengu, Joseph Taymen

MAY 2000 4th PNG Petroleum Convention, Port Moresby3 days exhibition, four papers and attendanceAll professionals of the Division

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04.16: PNG OIl 0-d G,s Ulcono Map

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Petroleum Exploration and Development Techncial Assistance ProjectImplementation Schedule >

Calander Year 1994 1995 1996 1997 1998 1999 20001Quarter F 234112341 12 34112 34 12 34A1 23 4 11 2 3 4w

Experts

*Procurement |*Duration of assignent LiA~ A L

Training U…_______

Inhouse-training _ _ m **…Recruitment of additional Staff n 'L * U * *Overseas training I I I I = = _3

Building i-* TendersConstruction/Refurbishment I I I-

Studies/PromotionsGas export (LNG pipeline) * - _ _ _

* Seismic hazard _ _ _ _ - _ _ _ _*Resource Promotion ___Standards for pet. storage, etc 4 _

Database upgrade* Procurement of equipment _Installation/Training _ _ _ _

*Data Transfer-

Estab. Core/cuttings store& lab | |_

*uuuuuuuUU planned actual

Annex 18: Project ImplementationSchematic Chart

Promotion

NNG Bidround. Conference Attendance.

LO. Studies

Kikori Basin ILG Study. Gobe Forum.

PETROLEUM Courses

EXPLORATION Short courses Overseas & Degree Programs.

AND Advisor

DEVELOPMENT Retention of McWalter to assist new Director and Project.

TA PROJECTSeismnic Data Transfer

Relocation PNG Archive From Australia and Transcription ofTapes.

Equipment

i I .Core Store Rehabilitation 2. Laboratory 3. IT LAN 4. Software

PROJECT MANAGER: 5. Library 6. Backup power.Director, _ I

Petroleum Division I Standards for Handling Petroleumli _ Conducted by BGS with Petroleum Division.

Refinery Study

Dropped but input provided on review of refinery proposals byWORLD BANK: BGS experts.

US$1 1.0 million Seismic Hazard Study for Gas Development

Dr. Letz - Study on Seismic Impacts, Particularly NorthernPipelines & Facilities.

GOPNG:LNG & GAS Utilization Study

US$1 .15 million Worley - Comprehensive study on Gas Development

Technical Collaboration

BGS Experts in: Pet. Geology, Pet. Engineering, Pet. Law.

Resident team & Visiting Experts

Responsible advice, On the job Training

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