Factors that affect growth :

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1 Development of Oil Palm in PNG: Factors that affect growth : Vanimo Rainfall mm / year Wewak Sunshine Temperature min of 2000 h / Rabaul year between o C Kimbe Altitudeless than 500 m above SL Mt. Hagen Gusap Lae 2005 Ramu oil palm project 1987 New Kavieng Ireland oil palm project 1969 Bialla oil palm project 1967 Hoskins oil palm project 1976 Popondetta oil palm project Popondetta Daru Port Moresby 1920 s observation plantings 1960 s WB study re recommendation Alotau 1985 Milne Bay oil palm project

2 Value of Major Agricultural Exported from PNG to ,200,000 1,100,000 Palm Oil & Derivatives 1,000,000 Coffee Export Value (K'000, fob) 900, , , , , ,000 Cocoa Copra Palm Oil Coffee 300, , , Year

3 Exported Oil Palm Products in 2009 PGK Tonnes Crude Palm Oil (CPO) 729,791, ,227 Palm Kernel (PK) 9,913,584 15,420 Palm Kernel Oil (PKO) 61,873,379 34,425 Palm Kernel Expeller (PKE) 1,951,280 13,654 Refined Bleached Deodorized Palm Oil (RBDPO) 48,273,700 21,321 Olein 23,041,254 14,223 Stearin 24,085,339 11,370 Palm Fatty Acid Distillated (PFAD) 3,722,056 3,366 Waste acid oil 39, TOTAL VALUE OF EXPORTS 902,691,791

4 Change in Quantity of Agricultural Commodities Exported from PNG 2007 to ,000 1,800 1,600 Coffee Cocoa Palm Oil & Derivatives % Change relative to ,400 1,200 1, Copra Oil Palm Year

5 Oil palm production & area in PNG Area Estimates Dec 2009 (ha) Project Area Plantation Smallholder Total Hoskins (NBPOL, Mosa Group) 32,228 21,902 54, % 82.3% Popondetta (NBPOL, Kula Group) 8,994 14,285 23, % Milne Bay (NBPOL, Kula Group) 11,629 1,699 13, % New Ireland (NBPOL, Kula Group) 5,689 2,613 8, % Ramu (NBPOL, RAIL) 7, , % Bialla (Hargy Oil Palms) 9,906 13,163 23, % TOTAL 76,114 53, , % 41.5% FFB Production in 2009 (tonnes) Project Area Plantation Smallholder Total Hoskins 876, ,332 1,295, % 83.1% Popondetta 196, , , % Milne Bay 210,711 10, , % New Ireland 108,440 16, , % Ramu 56, , % Bialla 211, , , % TOTAL 1,659, ,375 2,438, % 31.9%

6 Focus and commitment to sustainability: All palm oil companies achieved ISO14,001 accreditation PNG a leader in development of RSPO All palm oil companies RSPO certified (or in the process of being) Large investment in sustainability A profound systems change - not an add-on Increased cost of production (~8$ per tonne) large capital investment (refining, fractionation & CDM) A major driver is market access: All PNG s palm oil destined for Europe Highly sensitive market to issue of sustainability and traceability Other Markets?: Production costs in PNG very high, and timelines long Can t compete on price Indonesian, Malaysia & others

7 WHAT ARE THE ISSUES THAT WILL AFFECT SUSTAINABLILITY OF OIL PALM DEVELOPMENT IN PNG? THE TOP SPECIFIC ISSUES RAISED BY STAKEHOLDERS... Shortage of skilled labour and experienced management staff Over-population in oil palm development areas Infrastructure development, support & maintenance Land issues accessibility & disputes Pests & disease increasing risk & impact Lack of Government support & services Cash management, rural financial services & high cost of living Poor quality of political & public leadership Public opinion and anti-oil palm campaigns Law & order, alcohol & drugs, HIV and other social issues

8 Palm oil s importance to PNG: Only growth area in PNG s rural economy Half of all agricultural exports By far the largest employer in the country But Globally: Only 1% of global palm oil production HOWEVER: PNG producing ~37% of global production of Certified Sustainable Palm Oil (CSPO) 80% of smallholder produced CSPO A MAJOR global player in the sustainable production of palm oil PNG s REPUTATION is a key to market access

9 Industry Growth in next years? Very little alienated land available for development Expansion via; Smallholders Lease leaseback sub-lease arrangement with customary land owners RSPO Criteria 7.3 (primary forest & HCV) Carbon value threshold to be adopted Focus on yield intensification and planting on non-forest land Possible new viable and sustainable new projects? One per decade, max two!

10 Industry Growth in next years? Very little alienated land available for development Expansion via; Smallholder Lease leaseback sub-lease arrangement with customary land owners RSPO Criteria 7.3 (primary forest & HCV) Carbon value thresholds to be adopted Focus on yield intensification and planting on non-forest land Possible new viable and sustainable new projects? One per decade, max two!

11 Government and palm oil development? No support for the actual palm oil sub-sector 15-years of Government facilitation of new palm oil developments has led to?? DSP2030 & NADP triple palm oil exports by 2030? Expressed strong desire for new investors Appears PNG is being advertised overseas as a large available land bank Departments & politicians courting any entrepreneurial proposal now matter how little expertise, credentials or lack of financial capacity are exhibited BUT: No consultation with the country s palm oil sector No understanding of palm oil development and its requirements in PNG

12 Oil Palm activities outside of the real palm oil industry? Emergence of many oil palm agro-forestry projects All with a focus on securing FCAs! Land grab using SPABLs Over 5 million ha LLB to third parties, usually for 99-yrs Most profess to be for palm oil development!! Major risks to PNG s palm oil industry: Massive reputational risk for the country and its palm oil exports; this will directly affect our market access Blocks real development opportunities from real investors LNG and Dutch Disease impact

13 Minimum Viable Development: 10,000ha plantation and 60t/hr CPO mill Investment Costs: PGK Agricultural Field development, planting, roads etc 99,500,000 Capex (buildings, vehicles & K6,000/ha) 60,000,000 General development charges yrs 1-3 (@K600/ha/yr) 12,000,000 Milling & Oil Storage/Handling 60t/hr CPO mill 45,000,000 Mill tank farm (4x 1,500 tonne tanks)+(pump hse, piplines, boiler etc) 7,000,000 Port tank farm (as above) 7,000,000 Port/harbour modification (assumes deep water port already exists) 3,000,000 TOTAL INVESTMENT COST 233,500,000 Notes: Estimates based on 2009 actuals at a favorable location From first field activity (nursery) all above incurred within 4-years Would employ ~1,300 people (management & professional salaries not included above) If smallholder are part of this development, the planted area (& cost) needs to be increased - ref s/h yields ~50% of plantation) Emerging indications suggest CPO mill cost could to be higher (approach K50 million) Assumes adequate road & bridge infrastructure existsi in development area

14 NBPOL s Liverpool Palm Oil Refinery