PNG LNG PROJECT BENEFITS DISTRIBUTIONS: SUB-NATIONAL & LANDOWNERS MINERAL RESOURCES DEVELOPMENT COMPANY LIMITED

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1 Mineral Resources Development Company PNG LNG PROJECT BENEFITS DISTRIBUTIONS: SUB-NATIONAL & LANDOWNERS

2 What is MRDC? - A trustee and management company incorporated under the Companies Act. - State is the 100% shareholder - Invest and manage equity interests in petroleum and mining projects in trust for the landowners and provincial governments - Distribute the 2% royalty payment to landowners as per the Oil & Gas Act

3 Vision/Mission Statement Vision To become the leading management company in Papua New Guinea and the region, enhancing the wealth and improving the quality of life for our beneficiaries. Mission To provide prudent and efficient management of royalty and equity interest for Provincial Government and Landowners in resource project areas.

4 Oil & Gas Act 1998 Impacts on Royalty and Equity Benefits Section management of 2% equity and royalty - Management of 30% of the royalty and equity in Future Generations Trust - Management of 30% of royalty and equity in Community Investment Trust - Distribution of the balance of 40% as cash to the landowners

5 Governance between MRDC and Subsidiaries - All Subsidiaries are wholly owned by MRDC - All subsidiaries are incorporated under the Companies Act and have their own constitution and independent Board of Directors - Each subsidiary has a Management Agreement with MRDC, which is reviewed every three years - The operations of the subsidiary and its funds are governed by an irrevocable Trust Deed - All accounts are audited by international accounting firms (Deloitte and KPMG)

6 Subsidiaries of MRDC Petroleum Projects Project/License PDL2 Kutubu Project PDL5 Moran Project PDL3 &4 Gobe Project Participati ng Interest Subsidiary Company 6.75% Petroleum Resources Kutubu Ltd 2% Petroleum Resources Moran Ltd 2% Petroleum Resources Gobe Ltd Beneficiaries Kutubu, Kikori, Gulf and Southern Highlands Provincial Government Moran Huli, Moran Fasu Erave and Kikori

7 Subsidiaries of MRDC Mining Projects Project/License Participating Interest Subsidiary Company Beneficiaries Ok Tedi Project 3.05% Mineral Resources Star Mountains Ltd 10 Special Mining Lease Villages Ok Tedi Project 3.05% Mineral Resources Ok Tedi No.2 Ltd Porgera Gold Project 5% Mineral Resources Enga Ltd Fly River Provincial Government Porgera landowners and Enga Provincial Government Ramu Nickel Project 2.5% Mineral Resources Ramu Ltd Ramu Landowners

8 Landowners Equity Interest in PNGLNG Project New Subsidiaries Gas Resources Kutubu Ltd % Subsidiary of Petroleum Resources Kutubu (PDL2) Gas Resources Gobe Ltd % Subsidiary of Petroleum Resources Gobe Ltd (PDL3/4) Gas Resources Moran Ltd % Subsidiary of Petroleum Resources Moran Ltd (PDL5) Gas Resources Gigira Ltd % Hides 1, LNG pipeline & plant landowners (PDL1) Gas Resources Juha Ltd % Juha, LNG pipeline & plant Landowners (PDL9) Gas Resources Angore % Angore, LNG pipeline & plant landowners (PDL8) Gas Resources Hides % Hides 4, LNG pipeline & plant landowners (PDL7) Total %

9 MRDC s Track Record Payment to the petroleum beneficiaries - MRDC has been distributing cash in the fields for the last 20 years Dividends Royalties CITF (Trust Funds FG (Trust Funds) K387 million K151 million K60million K106mllion

10 Payment of cash Benefits - Past - Cash payments used to be transferred physically to the field and distributed under Police, DPE, Operator and landowner presence - Risky business - Costly exercise - Time consuming

11 Payments of Cash Benefits Present Built two banks: Kutubu Kikori Bank South Pacific (BSP) is now operating in the fields Opened 383 ILG accounts at Moro BSP for Kutubu beneficiaries 435 ILG accounts at Moro BSP for Moran beneficiaries 213 ILG accounts at BSP Kikori branch Dividends and Royalty payments are now credited into their respective accounts. Which can only be accessed at these branches. Existing oil field landowners now have access to banking facilities

12 Impacts Of The Bank New BSP Bank in Kikori built to distribute landowner equity benefits through modern banking services.

13 Landowners Benefits - UBSA Royalty 2% of the well head value PNGLNG Project Kroton Equity 4.22% CDOA Equity 2.78% - CDOA equity is the current interest in the PNGLNG Project - Kroton Equity is the indirect interest in the PNGLNG project through National Petroleum Company PNG as per the UBSA. This includes the landowners, provincial governments and local level governments interests

14 Benefit Management & Distribution MRDC Set Up Trustee Company 40% Cash Payment to Landowners 30% Future Generation Trust Fund 30% Community Investment Trust - As per the UBSA, the royalty from the PNGLNG Project will be shared between the Upstream landowners (72%) and pipeline & LNG plant landowners (28%)

15 Challenges & Lessons Learnt From The Oil Field Projects - Delays in royalty payments - Incomplete identification of genuine beneficiaries - Gobe Petroleum project is an example - Landowners have been in dispute for 20 years - Benefits are kept in trust accounts - Landowner leadership disputes

16 Application Of Lessons Learnt To The PNGLNG Project - Identification of landowner beneficiaries (clan vetting process) - All stakeholders; landowners, State and project operator must go back to the project site and resolve all clan vetting issues - Election of Directors to the green field subsidiaries - Needs to be a clear and transparent election process - Directors on the board of subsidiaries will now have a fixed term

17 Legacy To ensure the subsidiaries continue to operate/ pay dividends after the project life. - MRDC oil subsidiaries invested into the PNGLNG project of about K280 million (equity) from their own cashflow. - Without Government support as is the case with other new petroleum project - Will sustain dividend flows for the subsidiaries - Continue to invest in sectors outside of the extractive industries

18 Our Footprints - Oil projects have been there for 20 years. Now the PNGLNG project will be there for more than 30 years - Apart from the cash payments, the challenge is to improve quality of life for our beneficiaries - Our footprints is not the cash payments but the quantity and quality of community infrastructure - MRDC has developed guidelines to implement CITF projects in the PNGLNG

19 The End MERRY CHRISTMAS & HAPPY NEW YEAR 2015