ExxonMobil-PNG To Take Defensive Measures By Cutting PNG Jobs Amidst Energy Price Collapse?

The tumbling oil price has forced major oil and gas companies to slash cost. FTSE 100 Oil and gas major, Tullow Oil, has cut back US$2.3 billion on expenses. Other companies in the energy sector are also cutting back as they are hit by over 60% drop in the Energy price in just seven months – Brent Crude Oil for example, has fallen by nearly 50% from US$110 a barrel to US$48 a barrel.

So, where does the huge fall (and continual dip in price) leave Papua New Guinea’s much-talked-about gas development led by ExxonMobil-PNG?

Pic Courtesy: ExxonMobilPNG Twitter

The PNGLNG development has moved onto production since April 2014. That meant that it has completed exploration and development phases of the initial project. To date, over 50 shipments have left the country.

At the peak of energy price, the Prime Minister of PNG (in a response to the Opposition questions) said one shipment was valued at, an average of, US$50 million – yes that is 50 million US Dollars. If price fluctuated at US$50 million ExxonMobil-PNG would have recovered the development cost in less than five years. This also means that if the company continues production at current rate, the time it takes to recover development cost would double. Would ExxonMobil-PNG want to recover US$19 billion development cost in 10 years, instead of 5 years?

The prime minister gave his response to the Opposition MPs when Energy price was at record US$110 a barrel. The price has, since, dropped to US$48 a barrel. Here is what ExxonMobil-PNG’s accountants would have worked out by now – value of a shipment would have averaged at US$25 million.

There is prediction that the price is likely to fall even further based on the fact that Opec countries have not slowed down on production to spike energy price. Major Oil and Gas producing countries like Russia, USA, Venezuela, Nigeria, Saudi Arabia, Libya, etc. have not reacted at all.

What can ExxonMobil-PNG do? 

Apart from shelving any plans for exploration and further development, one thing is for sure – ExxonMobil-PNG does not have to cut down on production. The company must produce at full capacity. This has to be done as the Opec group of countries are not cutting down on production, either. Their economies are dependent on oil and reducing production would have drastic consequences on government’s revenue. Russia, for example, whose economy is very much dependent on Oil has considered its options.  

A BBC report indicated that many oil and gas dependant countries have not cut down on production to spike Energy price. If they had cut-back on production their economy would have been shaken to the ground.

There are two defensive measures ExxonMobil-PNG can (has to) contemplate on doing. Look within its structure and readjust main expenditures. That would imply that ExxonMobil-PNG would have to either make adjustment to its expanses or increase production (and increase revenue).

Here is one option.

First, ExxonMobil-PNG would have to reconsider its employees’ remuneration and benefit. Many top level employees may have to take a pay cut or agree to some in-house cost cutting measures, like halting fly-in-fly out arrangements.

Second, casual employees the company has used during (and in) exploration and development phases will have to be laid off. This also applies to apprentices, interns and others on the job training exercises. This could, probably, affect their awareness and charity programs too. 

Third, the project developer would have to evaluate performance of contractors. Those who have been given chance to partake in contracts awarded by the company will have to prove their worth to remain with it. 

Another option would be to increase production like what many Opec counties are doing by producing at full capacity - even increase production capacity. By doing this the company does not have to take the three measures highlighted above, but expand on each area.

This will create more opportunities and increase production – a win-win situation for the company, PNG government and every stakeholder who participates in this project.

All in all, it is eminent ExxonMobil-PNG takes defensive measures now by finding areas where cost can be minimised. But, any cost cutting measure taken in the name of maximising revenue for the company must not compromise Papua New Guinean jobs.

Reflection On Change - Use Education As A Medium of Change

A lot of changes in the education system have been going on at the National level (NDoE) this year. The obvious one is the change in structure, called the 2-6-6. With this structural change comes curricular change too - moving from Outcome-Based Education (OBE) to Standard Based Education (SBE). A much talked about change, yet little is known.

Many do not know what it is, not even the education minister. He has no idea whether the structural change will have an impact on the current curriculum or not. Teachers will have to go through trial and error as they did OBE. 

Again, this year the NDoE will have come up with National Education Plan 2015 - 2024. This plan is the road map for education in Papua New Guinea for the next 10 years, but the documents are not out yet as I write.

So, why are the structural (2-6-6) change, curricular change and NEP 2014-2024 important? All provincial governments should consider ways to fine-tune the education system in each of the 22 provinces.

It is time for every provincial education authority to take charge. They should not wait for autonomy - a word closely related to procrastination. If provincial governors and senior education officials, who are responsible for the change, want quality education they must take the lead to make a change.

One change in a system like the education system will have a ripple effect in the next 10 to 14 years. That means that the 10-year National Education Plan which starts this year and ends in 2024 will have an impact on 10 generations.

So, with this change must come to a 14-year strategic plan to follow up on children who start his/her early learning years now. By doing this will enable the planners today to track the progress (and achievement) of a population – the generations – that goes through the change and allow planners to compare and contrast OBE to SBE.

In fact, monitoring students as well as effecting the new system makes education outcomes attainable and measurable. Without doing this would mean that the Papua New Guinea education system is heading down a part of ‘scrape-and-replace’ like what happened to OBE after 22 years. The last thing any developing education system would want to see is a failing system.

So how practical can provincial education authorities are in taking a leading role – and a proactive one – in the fine-tuning education system in their localities?

Take for instance, Simbu Province has 5 secondary schools producing grade 12 annually: Rosary Secondary School - Kondiu, Kerowagi Secondary School, Yawe Moses Secondary School, Gumine Secondary School and Muaina Secondary School. There are 4 classes per grade – i.e. 4 classes of grade 9, 4 classes of grade 10, 4 classes of grade 11 and 4 classes of grade 12. At 35 students per class, a school’s population would be 560 students.

What does this benchmark number mean? Senior education officers, parents and leaders have to see that having lots of secondary schools does not mean all is good. In fact, it is the opposite – more secondary schools is a recipe for disaster. Fact.

Look, each secondary school in Simbu would have produced only 140 (35 x 4) grade 12s annually. So, 5 would produce 700 grade 12s every year.

In fact, if 3 secondary schools take in grades 11 and 12 (and done away with grades 9 and 10) this would have increased grade 12 classes to 8 (and grade 11 classes to 8 too.)

This means that one secondary school would be producing 280 (35 x 8) grade 12s annually. Now, 3 secondary schools would be graduating 840 students - 140 students more. 

Perhaps the most important thing here is the fact that Simbu Province does not have to have many secondary schools to be competitive in developing its ‘human resource’.

END: Nelson Mandela once said ' Education is the most powerful tool you can use to change the World'. This is true. You - the change-makers - can make it happen. 

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DISCUSSIONS ON FACEBOOK

This is what I mentioned is a discussion on how to improve student's performance.

"I think Simbu Provincial Government can take ownership of education trends/changes locally instead of relying on NDoE. I like what *Benjamin mentioned above. For example, Simbu can do well if it concentrates its resources and reduces its secondary schools to only 2 or 3: expand on Years 11 and 12, tighten students' selection process, get the best teachers and administrators to teach and manage the schools, give them performance incentives, sponsor top students, etc. What Simbu Provincial Government needs to do is to align its plans with NEP 2015-2024 or make the adjustment to existing failures within the system. There is never a better time to start than now when changes are happening left-right-and-centre at the national level."

*Here is the commentary by Benjamin Sipa:

"This discussion is about over but to tell from what I know while having my other cousins and siblings attending those secondary schools and hearing from what they say I understand that we should do something different for the secondary & high schools of Simbu Province.

1. Grade 9 & 10 should not be made part of the secondary schools of Simbu, should be catered in designated high schools strictly. 

2. Ensure to equip only 3 secondary schools with highly qualified teachers, fully resourced facilities like science labs, computer lab, Library, textbooks and dormitories – do away with 6 secondary schools, in fact produce junk that even can’t speak and write better English. 

a. Too many secondary schools also allows for enrolling less qualified students who at the end brings overall performance of school down by average.

3. Provide good incentives for the 3 secondary schools teachers to attract and have them stay in Simbu secondary schools. Facilities and technical expertise goes hand in hand, if the Simbu Prov. Govt and Division of Edu. in Simbu are serious, should think about.

4. Most of qualified teachers would like to stay close to where they can have easy access to decent services. Rural outback secondary schools do imperatively miss the ingredients. Thus require re-strategize to produce best outcome as a province.

5. These are some things that I picked up when talking to some of those young folks who have enrolled in some of those secondary schools. Since we mentioned Gumine Secondary here in the discussion, at the beginning of last year, there were qualified graduates went there at the beginning of school year, they decided to leave the school after few weeks. The positions left were filled by people with lesser qualification. Should we change our approach or leave?!"