Rainfall 1800 - 5000 mm / year

Sunshine min of 2000 h / year

Temperature between 22 – 32o C

Altitudeless than 500 m above SL

Factors that affect growth :

Kimbe

Mt. Hagen

Daru

Port Moresby

Rabaul

Kavieng

Wewak

Vanimo

Lae

Alotau

Popondetta

Gusap

Development of Oil Palm in PNG:

1920’s observation plantings1960’s WB study re recommendation

1967 Hoskins oil palm project

1969 Bialla oil palm project

1976 Popondetta oil palm project

1985 Milne Bay oil palm project

1987 New Ireland oil palm project

2005 Ramu oil palm project

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1976 1980 1984 1988 1992 1996 2000 2004 2008

Exp

ort V

alue

(K'0

00, f

ob)

Year

Value of Major Agricultural Exported from PNG - 1976 to 2009

Coffee

Cocoa

Copra

Palm Oil

Coffee

Palm Oil & Derivatives

Exported Oil Palm Products in 2009 PGK TonnesCrude Palm Oil (CPO) 729,791,292 445,227 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 39,907 70 TOTAL VALUE OF EXPORTS 902,691,791

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1976 1980 1984 1988 1992 1996 2000 2004 2008

% C

hang

e re

lativ

e to

197

6

Year

Change in Quantity of Agricultural Commodities Exported from PNG 2007 to 2009

Coffee

Cocoa

Copra

Oil Palm

Palm Oil & Derivatives

Oil palm production & area in PNG

Area Estimates Dec 2009 (ha)Project Area Plantation Smallholder TotalHoskins (NBPOL, Mosa Group) 32,228 21,902 54,130 41.6% 82.3%Popondetta (NBPOL, Kula Group) 8,994 14,285 23,279 17.9%Milne Bay (NBPOL, Kula Group) 11,629 1,699 13,328 10.2%New Ireland (NBPOL, Kula Group) 5,689 2,613 8,302 6.4%Ramu (NBPOL, RAIL) 7,668 260 7,928 6.1%Bialla (Hargy Oil Palms) 9,906 13,163 23,069 17.7%TOTAL 76,114 53,922 130,035

58.5% 41.5%

FFB Production in 2009 (tonnes)Project Area Plantation Smallholder TotalHoskins 876,497 419,332 1,295,829 53.1% 83.1%Popondetta 196,679 131,481 328,160 13.5%Milne Bay 210,711 10,536 221,247 9.1%New Ireland 108,440 16,203 124,643 5.1%Ramu 56,072 124 56,196 2.3%Bialla 211,416 200,699 412,115 16.9%TOTAL 1,659,815 778,375 2,438,190

68.1% 31.9%

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

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

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

Industry Growth in next 10-15 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!

Industry Growth in next 10-15 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!

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

‘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

--------

Investment Costs: PGKAgricultural

Field development, planting, roads etc (@K9,950/ha) 99,500,000Capex (buildings, vehicles & facilities @ K6,000/ha) 60,000,000General development charges yrs 1-3 (@K600/ha/yr) 12,000,000

Milling & Oil Storage/Handling60t/hr CPO mill 45,000,000Mill tank farm (4x 1,500 tonne tanks)+(pump hse, piplines, boiler etc) 7,000,000Port tank farm (as above) 7,000,000Port/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

Minimum Viable Development: 10,000ha plantation and 60t/hr CPO mill

NBPOL’s LiverpoolPalm Oil Refinery