social economic report 2007 v12 - oil search · 2017. 3. 18. · social & economic report 2007...

Social & Economic Report 2007

A Report Focusing on Social & Economic Conditions in Areas Affected by Petroleum Operations

March 2008


Oil Search Limited March 2008

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Table of Contents MAP: OSL PROJECT AREAS................................................................... ERROR! BOOKMARK NOT DEFINED. EXECUTIVE SUMMARY.................................................................................................................................. III ACRONYMS ....................................................................................................................................................V 1. INTRODUCTION .................................................................................................................................. 1

1.1 PROJECT AREA................................................................................................................................. 1 1.2 REPORT PURPOSE............................................................................................................................. 1 1.3 METHOD .......................................................................................................................................... 2

2. BASELINE DATA.................................................................................................................................. 3 2.1 DATABASE DESCRIPTION ................................................................................................................. 3 2.2 INFORMATION GAPS......................................................................................................................... 4

3. SOCIAL & ECONOMIC CONDITIONS ............................................................................................ 5 3.1 DEMOGRAPHY.................................................................................................................................. 5 3.2 EDUCATION...................................................................................................................................... 6 3.3 HEALTH ........................................................................................................................................... 9 3.4 ECONOMIC ACTIVITIES .................................................................................................................. 10 3.5 INFRASTRUCTURE .......................................................................................................................... 13 3.6 GOVERNANCE ................................................................................................................................ 14 3.7 DEVELOPMENT PRIORITIES ............................................................................................................ 15

4. CURRENT OSL ACTIVITIES........................................................................................................... 15 4.1 BENEFIT STREAMS.......................................................................................................................... 15 4.2 EMPLOYMENT ................................................................................................................................ 16 4.3 COMMUNITY AFFAIRS.................................................................................................................... 17 4.4 DEVELOPMENT & COMMUNITY SUPPORT ...................................................................................... 17

5. NEXT STEPS........................................................................................................................................ 21

REFERENCES ................................................................................................................................................ 22

Attachments: 1. THE EQUATOR PRINCIPLES AND GRI ..................................................................................... 234

1. THE EQUATOR PRINCIPLES ............................................................................................................. 234 2. THE IFC PERFORMANCE STANDARDS............................................................................................. 234 3. THE GLOBAL REPORTING INITIATIVE ............................................................................................. 245

2. VILLAGE AND HOUSEHOLD QUESTIONNAIRES .................................................................. 256 3. VILLAGE LISTS FOR EACH PROJECT AREA.......................................................................... 289

HIDES.................................................................................................................................................. 289 KUTUBU.............................................................................................................................................. 289 KIKORI ................................................................................................................................................ 299 GOBE .................................................................................................................................................... 29 MORAN ............................................................................................................................................... 290 SOUTH EAST MANANDA ....................................................................................................................... 29

4. SUMMARY BASELINE DATA BY PROJECT AREA ................................................................... 30 5. COMMUNITY AREA PLANNING PROJECTS: 2006 & 2007 ...................................................... 33

CAP PROJECTS: 2006............................................................................................................................ 33 CAP PROJECTS: 2007 (ONGOING).......................................................................................................... 34



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OIL SEARCH PROJECT AREAS



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Executive Summary A. Background & Report Purpose Oil Search Limited (OSL) has interests in and operates all of PNG’s producing oil fields (Kutubu, Gobe and Moran) and PNG’s one producing gas field (Hides). The area affected by petroleum operations is at present approximately 3,000 km2. In line with the requirements of the PNG Environment Act Oil Search has extracted key social and economic information that had been collected from 1998 to 2005 and develop a consolidated baseline of key social and economic indicators across the entire Project Area. This report summarises the process followed in preparing the consolidated social and economic database; it includes an analysis of available baseline data; and it includes a summary of baseline information gaps. It also outlines a program to collect and monitor current social and economic data to enable a detailed comparison of change, which will be presented in future Social & Economic Reports. As such, this report is an interim document, presenting a summary of available historical data, and will be built upon in as additional surveys are completed and other information made available.

B. Consolidated Social & Economic Database The database contains information from 102 villages, 2,726 households and 17,355 individuals, and has been prepared in Microsoft Access and will be available to OSL staff using a menu-driven program that will enable the user to review data for individual villages or villages from particular areas, or generate summary information by province, licence area, project area or LLG (differentiating, if required, by year). Additional survey data will be entered to the database, enabling comparisons of social and economic data over time.

C. Social & Economic Conditions Analysis of the consolidated social and economic database reveals the following:

• Households are relatively large (averaging 6.4 members) and contain a high proportion of young people (38%<15 years of age) and relatively few older people (4%>55 years of age);

• 10% of households have moved to their current location from different villages; • While 45% of people aged 6 years and above have never attended school, evidence

suggests that a higher proportion of females are now going to school than in the past, and for the age group 6 to 14 years, school attendance is similar for males and females;

• However, formal education standards are exceptionally low: only 43% of children surveyed between the ages of 6 and 14 attend school;

• Furthermore, only 17% of females and 25% of males over the age of 6 have completed Grade 6 (compared with 64% of people over the age of 10 for PNG as a whole);

• Not surprisingly, given the above, 60% of women and 45% of men are illiterate; • The main source of drinking water for 64% of villages is rivers or streams, and the

average time to reach the main water source is 12 minutes (each way); • Most villages have pit toilets, other than the Kikori, in which one quarter of villages do not

have toilets; • More than 50% of households reported purchasing tinned fish/meat, rice, biscuits and soft

drink/juices in the previous month; • 70% of households recorded some form of cash income in the past year, with the most

common sources of income being royalties (34% of households), crops (29%), compensation payments (21%), fishing/hunting (19%), dividends (19%) and livestock (18%);



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• 12% of households operated a business in the past year, with the most common types of business being agricultural (livestock, food crops and coffee most frequently cited);

• Approximately 12% of males and 4% of females over the age of 15 (and not attending school) were employed during the previous year, with roughly two thirds of these filling unskilled positions;

• 31% of households had someone with a bank account; • Most villages are remote, with villages located 4.5 hours on average to the nearest road; • 4% of households own a motor vehicle, and 5% own a motorised boat/canoe; • 9% of villages have access to electricity; • 82% of houses were constructed of traditional materials; • The majority of villages have women’s groups (70%), youth groups (82%), church groups

(88%), ILGs (88%), landowner companies (85%) and landowner associations (80%); and • The main development priorities, identified by village leaders, were health, education and

access. Additional information and analysis is presented in the report.

D. Next Steps Following the establishment of a consolidated social and economic database, and presentation of this report, OSL will undertake a program of data collection to (i) establish a baseline in green field areas (that have not previously been surveyed) and (ii) to enable comparisons over time. This will help assess the impact of petroleum operations, and other factors, on the people in the Project Area. Oil Search shall:

1. Collect information from green field areas; 2. Collect current information from a sample of villages within the existing PDL and PL

areas (it may be appropriate to re-survey those villages that were originally surveyed in 1998, as this would enable a comparison of change over a period of approximately 10 years);

3. Undertake analyses to compare social and economic conditions in the relatively remote green field areas with that of the existing PDL and PL areas;

4. Undertake analyses to compare social and economic change in existing PDL and PL areas over a period of up to 10 years; and

5. Present the above findings – and recommendations arising from the analyses – in future Social & Economic Reports.

The village and household questionnaires that will be used to collect information in the future are more concise than in the past, they focus on key development indicators and their simplified format aims to minimise resources required, and reduce errors during data collection, data entry and analysis. These questionnaires also contain additional information on a range of indicators, including:

• Women’s participation in decision making; • Whether babies are delivered at health facilities or not; • Water supply and sanitation (at a household level), including the reliability of the water

source; • Infant mortality; • Food consumption (including a wider range of foods, and foods that are not healthy); and • The main income source over the previous year, and additional information on income

sources (including income from the sale of coffee, sago or vanilla, or from remittances).



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Acronyms CA Community Affairs CAP Community Area Planning CBHC Community Based Health Care CDI Community Development Initiative CTCS Certificate in Tertiary & Community Studies FODE Flexible Open Distance Education (previously CODE: College of Distance Education) ECPNG Evangelical Church of Papua New Guinea GDP Gross Domestic Product GRI Global Reporting Initiative HH Household HIV/AIDS Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome IFC International Finance Corporation (a member of the World Bank Group) ILG Incorporated Land Group LANCO Landowner company LBD Local Business Development LLG Local Level Government MOA Memorandum of Agreement NSO National Statistics Office OSL Oil Search Limited PDL Petroleum Development Licence PL Pipeline Licence PMV Public Motor Vehicle PPL Petroleum Prospecting Licence PRL Petroleum Retention Licence SEIA Social & Economic Impact Assessment SEIS Social & Economic Impact Study SHP Southern Highlands Province SSG Special Support Grant TB Tuberculosis TCS Tax Credit Scheme UNEP United Nations Environment Programme VLO Village Liaison Officer WWF World Wildlife Fund

Currency Aust $ 1.00 = US $ 0.93 = PNG Kina 2.26

(March 2008)



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1. INTRODUCTION

1.1 Project Area Intense exploration for petroleum commenced in Papua New Guinea, and in the Southern Highlands Province in particular, in the late 1980s. The following petroleum development licences (PDL) have subsequently been issued:

• PDL 1: Hides – the Hides Gas Field had been in production since 1991, producing a relatively small amount of gas, which is used to generate electricity that is reticulated to the Porgera gold mine in Enga Province; and

• PDL 2: Kutubu – the discovery of commercial oil in the Iagifu 2X well in 1986 led to the development of the Kutubu oil fields, in which first oil was produced in June 1992. The Kutubu development included the construction of processing facilities (within PDL 2) and the construction of an export pipeline to the Kumul platform in the Gulf of Papua.

• PDL 3 & 4: Gobe – oil production commenced in January 1999. • PDL 5 & 6: Moran – oil production commenced in January 1998.

Additional processing facilities have been constructed in the Gobe area. Oil from PDLs 2, 3, 4, 5 and 6 is exported via the Kumul platform. Oil Search Limited acquired the PNG assets of Chevron Texaco in October 2003. From this point on, OSL has been the operator of the above PDLs on behalf of the various joint venture partners (which include AGL Gas Developments (PNG) Ltd, Petroleum Resources Kutubu Ltd, Merlin Petroleum Company, Barracuda Ltd, Cue PNG Oil Company Pty Ltd, Petroleum Resources Gobe Ltd, Esso Highlands Ltd, Eda Oil Ltd, and Petroleum Resources Moran Ltd). As shown in the Location Map, the bulk of the rural population impacted by petroleum development and exploration reside primarily within PDLs 1, 2, 3, 4, 5 and 6 and in the corridor of pipeline licence PL2. OSL has continued exploration for petroleum within existing PDLs and in ‘green field’ (new) locations in a number of petroleum prospecting licences (PPL) and petroleum retention licences (PRL), carrying out seismic and/or drilling activities. Thus, there are some communities outside the petroleum production and pipeline licence (PL) areas, near the drilling locations, who have also been impacted by petroleum related activities. The Project Area now includes communities in the Southern Highlands, Gulf and Western provinces. At present, the Project Area covers approximately 3,000 km2, but will increase as exploration and development activity expands over time. Although only representing a relatively small proportion of PNG’s land surface, the petroleum resource is central to PNG’s economic output, producing around 25% of PNG’s export revenue over the past 15 years, and contributing substantially to employment, government revenue and Gross Domestic Product (GDP).

1.2 Report Purpose Social & Economic Impact Assessments, or SEIAs,1 have been completed as part of the approval process for each PDL. Before the Minister of Petroleum and Energy issues a PDL, the Minister must be satisfied that the development project will, among other things, provide adequately for the welfare of the people of the affected area and be in the best interest of the people of Papua New Guinea. The key document containing the information in which this is determined is the SEIA. Although SEIAs have been completed for each PDL and PL, OSL has not previously attempted to combine the information and present a consolidated baseline of social and economic conditions

1 The terms Social & Economic Impact Assessment (SEIA) and Social & Economic Impact Study (SEIS) are used interchangeably in this report.



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across the entire Project Area. By preparing a consolidated social and economic database, OSL will be able to:

1. Present a social and economic baseline for all Project Areas; 2. Identify baseline information gaps and prepare a program of work to collect information to

minimise these gaps; 3. As required under the PNG Environment Act, develop a regular data collection program

to monitor current social and economic data in all Project Areas, including current development needs and priorities; and

4. Undertake analyses to compare social and economic change over time, and to use this data to help OSL and other development partners (national, provincial & local governments, church groups and aid organisations) to more effectively plan and implement development activities.

This report summarises the process followed in preparing the consolidated social and economic database; it includes an analysis of available baseline data; and it includes a summary of baseline information gaps. It also outlines a program to collect current social and economic data in future years. The first analysis of change, since petroleum operations commenced, will be presented in the next Social & Economic Report. As such, the current report is an interim document, presenting a summary of available historical data, and will be built upon in subsequent years as additional surveys are completed and other information made available. The Social & Economic Reports will enable OSL to meet the requirements of the PNG Environment Act, consistent with the Equator Principles and Global Reporting Initiative (GRI). The Equator Principles and GRI promote development which is socially and environmentally sustainable. An overview of the Equator Principles and GRI is presented as Attachment 1.

1.3 Method OSL and other joint venture partners have conducted a series of quite detailed social and economic surveys over the past decade. Most of these have been done in specific geographic areas as part of the process of seeking a PDL or as part of the PNG-Queensland gas studies:

Year Survey 1998 PNG-Queensland Gas Project SEIA 2002 Kutubu-Gobe SIA 2003 Yarale-Homa-Sisibia SIA 2004 North West Moran and South East Mananda Social Impact Assessment 2005 PNG-Queensland Gas Project SEIA (II)

Although surveys were conducted over a period of 7 years, parts of the village and household data are relatively consistent in terms of the type of information collected. While it is therefore possible to compare much of the information, the surveys have been large and resource intensive. In addition, it is considered timely to review the available data given the increasing emphasis now placed on extractive industries to contribute to social and economic development and to monitor social and economic impacts in the local (affected) communities. In developing a list of key development indicators consideration was given to existing data, and to PNG’s broader development objectives, including the Millennium Development Goals. A final list of indicators was developed, and a more effective and more sustainable approach to data management was discussed with and agreed by OSL management. Thus, future surveys will be more concise and more focused, simplifying the data collection/recording process and reducing the resources required. This will make data management and access far easier, yet enable comparisons of key indicators over time. Revised village and household questionnaires have been



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prepared, and are presented as Attachment 2. The final choice of indicators can be grouped as follows:

• Demography – population, household size and composition (age, sex), origin; • Education – literacy, education levels, school attendance; • Health – infant mortality, food consumption, drinking water, sanitation, child delivery; • Income – occupation, agriculture, business activity, main income source, banking; • Assets – housing, transport, power, public (village) infrastructure; and • Other – village governance, access, women’s participation in decision making,

development priorities. A better understanding of the indicators can be gained through examination of the new village and household questionnaires (refer Attachment 2). Following the finalisation of indicators, a process was undertaken to extract information from previous surveys, and combine them in a new database. The resulting “consolidated social and economic database” contains information at village, household and individual levels.

Report outline This report contains:

Section 2: A brief description of the new (consolidated) social and economic database, and an assessment of any information gaps.

Section 3: A summary of the initial analysis of the database (which represents the social and economic baseline for existing petroleum operations).

Section 4: Additional information relating to employment and other benefits received by those people living in the Project Area as a direct consequence of petroleum operations.

Section 5: A summary of the next steps in terms of collecting, analysing and reporting on social and economic change within the Project Area.

This report has been prepared by Community Affairs staff within OSL, with assistance from Project Design & Management Pty Ltd, including inputs from Mike Finlayson (survey design & analysis) and Barry Maher (database design & management).

2. BASELINE DATA

2.1 Database Description The consolidated social and economic database has been compiled from social and economic surveys which were conducted between 1998 and 2005. The database currently contains information from 6 PDL areas (PDL 1, 2, 3, 4, 5 and 6); 1 PL (PL 2) and 3 PPL areas (PPL 219, 223 and 233). This information is derived from:

• 2 provinces (Southern Highlands and Gulf);2 • 9 local level government (LLG) areas (East and West Kikori in Gulf Province and Erave,

Hayafuga, Hulia, Komo, Komo-Bosavi, Kutubu and North Koroba in the Southern Highlands);

• 102 villages; • 2,726 households and 17,355 individuals.

The number of villages, households and individuals included in the database, across the six main project areas, is summarised in Table 1. 2 Activities in Western Province have only occurred recently. Data will be collected from affected communities in Western Province in 2008.



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Table 1 Villages, Households and Individuals included in the Database, by Project Area

Project Area Villages surveyed

Households surveyed

Individuals surveyed

Hides 14 732 4,626 Kutubu 39 626 3,813 Kikori 27 572 3,823 Gobe 12 263 1,583 Moran 7 418 2,860 South East Mananda 3 115 650 Total 102 2,726 17,355

NB: For purposes of clarification, the Kikori area includes villages from the Kaiam crossing (in the north) to the Kikori delta in the south (including villages such as Bisi and Veiru).

The database has been prepared in Microsoft Access and will be available to OSL staff using a menu-driven program that will enable the user to review data for individual villages or villages from particular areas, or generate summary information by province, licence area, project area or LLG (differentiating, if required, by year). Additional survey data will be entered to the database from 2008 onwards, enabling comparisons of social and economic data over time.

2.2 Information Gaps A list of villages, showing their respective province and local government area, is presented as Attachment 3. All villages (or census units) within the Project Area have been surveyed in the past, and are now included in the database.3 Although 45% of the villages included in the database were surveyed in 2005 (refer Figure 1), over 60% of the villages surveyed have been surveyed on more than one occasion (refer Figure 2).

0

10

20

30

40

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1998 2002 2003 2004 2005

Year Surveyed

Villa

ges

Surv

eyed

0

10

20

30

40

50

60

70

1 2 3 4Number of Years Surveyed

Villa

ges

Surv

eyed

Figure 1: Villages Surveyed, by Year Figure 2: Number of Years in Which Villages have been Surveyed

While the coverage of villages and households is considered to be satisfactory within the areas of existing petroleum operations, OSL has also undertaken petroleum exploration and testing activities in a number of new areas in recent years, including Juha, Korobosea, Kimu, Cobra and Wasuma. As a PDL has not been sought, a detailed social & economic impact assessment has

3 In some Project Areas, particularly those populated by Huli, people do not typically reside in villages, but are scattered through the countryside. For the purposes of data analysis and presentation, clusters of people have been grouped together into what is termed villages, although this is more accurately termed “census units”, following the approach of the National Statistics Office.



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not been undertaken in these areas. However, as discussed further in Section 5, a new survey program to collect data from these areas will commence in 2008. In the process of identifying key indicators and analysing baseline data, it is apparent that some information has not been collected in the past, or has not been collected in a format that enables comparisons with other data. While sufficient information is available to allow a comparison over time of a reasonable proportion of the key social and economic indicators, there are nevertheless some information gaps. Oil Search will therefore collect additional information on a range of indicators in the future, including:

• Women’s participation in decision making; • Whether babies are delivered at health facilities or not; • Water supply and sanitation (at a household level), including water reliability; • Infant mortality; • Food consumption (including a wider range of foods, and foods that are not healthy); and • The main income source over the previous year, and additional information on income

sources (including income from the sale of coffee, sago or vanilla, or from remittances). Questions to collect this information have been included in the village and household questionnaires that are presented as Attachment 2, and will be used by OSL for subsequent data collection activities.

3. SOCIAL & ECONOMIC CONDITIONS Unless otherwise stated, the information presented in this section of the report has been derived from the consolidated social and economic database. Data are generally presented by Project Area. A baseline summary for each Project Area is presented as Attachment 4.

3.1 Demography As shown in the following table, households are relatively large (averaging 6.4 people) and contain a high proportion of young people (38%<15 years of age) and relatively few older people (4%> 55 years of age). While household size is significantly larger, the age structure is similar to that of PNG as a whole. 4

Table 2 Demographic Characteristics of Survey Villages, by Project Area

Project Area Household size Population <15 years of age

Population >55 years of age

Hides 6.3 35% 7% Kutubu 6.1 42% 2% Kikori 6.7 37% 4% Gobe 6.0 42% 4% Moran 6.8 37% 4% South East Mananda 5.7 43% 2% Total 6.4 38% 4% PNG 5.5 40% 7%

NB: The proportion of the PNG population over 55 years of age is an estimate based on the National Population and Household Census, 2000.

4 Households are generally defined as the group of people living together and typically sharing the resources available to them.



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Survey results indicate more males than females, with a ratio of 111 males per 100 females. This compares with a ratio of 105 for PNG as a whole. The proportion of households that have moved to their current location has been recorded. Overall, 10% of households have moved to their current location from a different village. As shown in Figure 3, the rate of movement is particularly high within the Kikori and Hides areas.

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4

6

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12

14

16

18

20%

of h

ouse

hold

s

Hides

Kutubu

Kikori

Gobe Moran

SE Mananda

Figure 3: Proportion of Households not from their Current Village

3.2 Education School attendance is low throughout the Project Area, with less than half of children aged 6 to 14 years attending school, and even fewer adolescents (aged 15 to 19) attending school. As shown in Table 3, attendance is particularly low in Moran and South East Mananda, and a higher proportion of males attend school than do females, particularly between the age of 15 and 19.

Table 3 School Attendance for Children Aged 6 to 19, by Project Area

Project Area Females 6-14 years attending primary school

Males 6-14 years attending primary school

Females 15-19 years attending

secondary school

Males 15-19 years attending

secondary school

Hides 36% 48% 45% 61% Kutubu 43% 49% 38% 44% Kikori 50% 55% 36% 46% Gobe 58% 57% 42% 61% Moran 18% 20% 21% 28% South East Mananda 38% 37% 25% 30% Total 41% 45% 36% 47%

Given the low levels of school attendance, it is not surprising to find very low numbers of both males and females who complete Grade 6, let alone completing Grade 10 or attaining tertiary qualifications (refer Figures 4 and 5).



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Hid

es

Kutu

bu

Kiko

ri

Gob

e

Mor

an

SE M

anan

daTertiary

Grade 10Grade 60

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15

20

25

30

35

%

Hid

es

Kutu

bu

Kiko

ri

Gob

e

Mor

an

SE M

anan

da

TertiaryGrade 10

Grade 605

101520253035404550

%

Figure 4: Female Education Achievements, by Project Area5 Figure 5: Male Education Achievements, by Project Area5

During the 2000 Census, some 64% of people aged 10 years and above had completed Grade 6 (62% of females and 66% of males). As shown in Figures 4 and 5, far fewer people in the project area have completed Grade 6 (17% of females and 25% of males). Similarly, across PNG 16% of people aged 10 years and above had completed Grade 10 (13% for females and 19% for males). This compares with 10% of females and 18% of males in the project area (aged 20 years and above) who have completed Grade 10. While not entirely comparable, the data indicates that while few children in the project area have reached Grade 6, relative to PNG as a whole, a similar proportion of children have complete Grade 10. However, relatively few students who complete Grade 10 go on to complete tertiary studies (0.8% of females and 1.8% of males in the project area who are aged 20 years and above have tertiary qualifications). Not only have relatively few people in the Project Area completed Grade 6 or higher levels of education, but more than half of all people aged 6 years and above have not attended school. As shown in Table 4, considerably more females have never attended school.

Table 4 Proportion of Population over 6 Years of Age with No Formal Education, by Project Area

Project Area Males with no formal education

Females with no formal education

Hides 37% 50% Kutubu 35% 45% Kikori 31% 38% Gobe 36% 52% Moran 63% 72% South East Mananda 49% 64% Total 40% 50%

5 Completion of Grade 6 based on males and females aged 6 years and above. Completion of Grade 10 and tertiary qualifications based on males and females aged 20 years and above.



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Among the older population (20 years and above), 48% of males and 64% of females have not had any formal schooling. While there is little difference between the proportion of relatively younger and older males that have attended school, there is a difference in the proportion of females who have attended school that are aged 6 to 19 (51%) and those aged 20 years and above (64%). This suggests that a significantly higher proportion of women are now going to school than in the past, and as shown in Table 3 above, male and female attendance rates for children aged 6 to 14 years, is quite similar. As discussed earlier, very few people in the project area have higher levels of formal education. As shown in Table 5, very few people also have alternative training qualifications. Less than 2% of females and approximately 5% of males in the Project Area (over the age of 20) have higher qualifications, including vocational and trade certificates or tertiary studies.

Table 5 Attainment of Higher Education Qualifications in the Project Area

Formal Qualification Males 20 years &

above

Females 20 years &

above Vocational certificate 1.3% 0.3% Trade certificate 1.6% 0.3% Tertiary studies: - Diploma

0.8%

0.6%

- Undergraduate degree 0.5% 0.0% - Post-graduate degree 0.5% 0.2%

Not surprisingly, given the high proportion of people who have never attended school, literacy rates in the Project Area are low, particularly for women (refer Table 6).

Table 6 Literacy for People Aged 15 Years & Above, by Project Area

Project Area Male Literacy

Females Literacy

Hides 54% 36% Kutubu 67% 48% Kikori 62% 51% Gobe 67% 44% Moran 30% 18% South East Mananda 49% 31% Total 55% 40% PNG 61% 51%

While literacy rates are low, they are comparable with, although slightly lower than, results for PNG as a whole.



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3.3 Health Relatively little village and household level information has been collected on health during previous Social & Economic Impact Studies. This is not surprising given the difficulty of quantifying health standards, or accurately identifying health problems. For this reason, health information presented in previous Social & Economic Impact Studies has generally been derived from aid posts or health centres, although this does not necessarily provide information on health standards (as the information is usually restricted to those people who visit the health facility, and they are usually ill), nor does it provide information relating to specific villages or project areas (as the catchment areas for health centres in particular, encompass several villages and are not generally comparable with proposed petroleum licence areas). While the social and economic database does not include specific health information, future surveys will include an attempt to collect information on infant mortality. Effort will also be made to expand the information collected on drinking water, sanitation, food consumption and child birth. These are all health-related indicators, which will help form an assessment of changes in health standards in the future. While Oil Search currently in the process of collecting additional health information, a summary of the information collected during past SEIA surveys is presented below.

Water supply & sanitation As shown in Table 7, 64% of villages source their drinking water from rivers and streams. Some villages have piped water, wells or tanks. While information is not currently available on water quality, households have to walk approximately 12 minutes, on average, in each direction to collect water. Only 2 villages stated that the collection time for water exceeded 30 minutes each way.

Table 7 Drinking Water Supply in Surveyed Villages, by Project Area

Project Area Villages relying on

piped water

Villages relying on

wells

Villages relying on

tanks

Villages relying on

river/stream

Average time to reach source

(minutes) Hides 0% 0% 0% 100% 1 Kutubu 23% 0% 18% 59% 12 Kikori 3% 10% 31% 56% 11 Gobe 18% 0% 0% 82% 10 Moran 0% 0% 0% 100% 23 SE Mananda 0% 0% 0% 100% 27 Total 10% 5% 21% 64% 12

As shown in Table 8, most villages have pit toilets. Some villages in the Kikori area do not have toilets at all, and generally use the bush or river.



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Table 8 Most Common Types of Toilets in Surveyed Villages, by Project Area

Project Area Villages with pit toilets

Villages with flush

toilets

Villages without toilets

Hides 100% 0% 0% Kutubu 95% 0% 5% Kikori 77% 0% 23% Gobe 100% 0% 0% Moran 100% 0% 0% Samberigi 100% 0% 0% Total 87% 0% 13%

Food purchase Previous surveys included questions on the purchase of store products over the previous month. As shown in Table 9, most households in Hides, Kutubu, Kikori and Gobe had purchased a range of store products in the past month. Far fewer households in Moran and South East Mananda had purchased store products.

Table 9 Foods Purchased in the Previous Month, by Project Area

Proportion of Households Purchasing Food in the Past Month Project Area Tinned

fish/meat Store bought

fish/meat Rice Biscuits Soft drinks

or juices Hides 66% 38% 72% 62% 64% Kutubu 67% 58% 67% 65% 62% Kikori 55% 51% 55% 55% 53% Gobe 86% 45% 87% 76% 72% Moran 34% 24% 35% 31% 33% SE Mananda 19% 10% 21% 16% 10% Total 59% 43% 61% 56% 55%

In addition to the above, vegetables and fruit had been purchased during the past month by 52% and 47% of households, respectively. In future years, information will be collected on food consumption in the previous day, including both locally produced and purchased foods, to gain more information on dietary practices and trends.

3.4 Economic Activities As shown in Table 10 below, 70% of households recorded some form of cash income in the past year. This compares with 66% of households for PNG as a whole.



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Table 10 Economic Characteristics of Survey Villages, by Project Area

Households with income from the following sources in the past year Project Area Households with cash income

Business activities

Wages Oil Traditional sources

Hides 80% 18% 11% 45% 64% Kutubu 70% 10% 13% 47% 32% Kikori 89% 17% 17% 58% 71% Gobe 68% 5% 22% 42% 26% Moran 39% 6% 7% 28% 13% SE Mananda 34% 4% 15% 8% 19% Total 70% 12% 13% 44% 45%

NB: Oil income includes royalties, land compensation and dividend payments. Traditional income sources include sales of food, livestock or income from hunting/fishing.

As shown in Table 10:

• Business activities are a common source of income, particularly in Hides and Kikori; • Wages are also an important source of income, particularly in Gobe, Kikori and South

East Mananda; • Oil-related payments provide cash income to some 44% of households in the project

area, although to fewer households in Moran and South East Mananda; and • Traditional sources of income (the sale of food, livestock, fish or wild animals) remain a

common source of cash income, particularly in the Hides and Kikori areas.

0

5

10

15

20

25

30

35

% o

f hou

seho

lds

Employm

ent

Busines

s

Food cro

ps

Livest

ock

Fishing

/huntin

g

Royaltie

s

Compen

sation

Dividend

sOthe

r

The most frequent sources of income recorded over the previous year is summarised in Figure 6. Royalties (received by 34% of households in the previous year) and food crops (29%) are the most common sources of income, followed by land compensation/rental (21%), fishing or hunting (19%), dividends (19%) and livestock (18%). Figure 6: Source of Income Reported over the Previous Year

For PNG as a whole, 55% of households were engaged in selling food (Census 2000). Although food sales remain important in the Project Area (29% of households), a wide range of alternative



12

income sources exist, not only as a result of petroleum operations, but also from livestock, fishing and hunting. A breakdown of income sources by Project Area is presented in Table 11.

Table 11 Income Sources over the Past Year

Households with income source in past year Income source Hides Kutubu Kikori Gobe Moran SE

Mananda Employment 11% 13% 17% 22% 7% 15% Business 18% 10% 17% 5% 6% 4% Crops 49% 17% 37% 22% 9% 17% Livestock 37% 10% 14% 9% 10% 7% Fishing/hunting 7% 17% 63% 0% 1% 0% Royalties 31% 42% 42% 34% 26% 5% Land compensation/rental 23% 20% 31% 21% 8% 5% Dividends 18% 26% 28% 18% 2% 0% Other 13% 14% 33% 2% 2% 4%

NB: Crops include food and cash crops, the latter including coffee, sago and vanilla. The above table highlights a number of important findings:

• Households in South East Mananda, and to a lesser degree, Moran, have relatively few income sources;

• Households in Kikori and Kutubu appear to have a wider range of income sources than in other areas; and

• The most common source of income varies between Project Areas: ο Crops are the most common income source in Hides and South East Mananda; ο Royalties are the most common income source in Kutubu, Gobe and Moran; and ο Fishing/hunting is the most common income source in Kikori.

0

25

50

75

100

% o

f hou

seho

lds

Trade s

tore PMVCoffe

eVani

lla

Food cro

ps

Livest

ock Other

As shown in Table 10, 12% of households were engaged in some form of business activity. As shown in Figure 7, the majority of business activities were primarily agricultural activities (livestock, food crops and coffee in particular). Very few households were involved in non-agricultural businesses. Figure 7: Frequency of Business Activities undertaken in Survey Villages



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Over 40% of households with business income stated they had more than 1 business activity. A micro-enterprise survey was conducted by Oil Search in 2007 in the Kutubu and Kikori areas, providing more recent data on local business activities. This is discussed further in Section 4.4. While 13% of households recorded one or more wage earner, further analysis reveals that around 12% of males over 15 years of age and 4% of females over 15 years of age, earned some income from wage employment in the previous year. As shown in Table 12, employment levels are highest in the Hides and Gobe areas for males, and in the Hides area for females. Around two thirds of all local employees filled unskilled positions. This is not surprising given the low education and literacy levels. While those males who had skilled jobs were primarily involved in various trades, females with skilled jobs were generally in professional positions.

Table 12 Level & Type of Employment in Surveyed Villages, by Project Area

Project Area Males over 15 years with

employment

Females over 15 years with employment

Unskilled employment

(males)

Unskilled employment

(females) Hides 20% 10% 80% 86% Kutubu 9% 1% 64% 33% Kikori 11% 6% 47% 55% Gobe 19% 2% 56% 0% Moran 3% 1% 44% 50% South East Mananda 6% 2% 20% 0% Total 12% 4% 64% 68%

Although 70% of households earned some form of cash income in the previous year, only 31% of households had bank accounts. The proportion of households with bank accounts varied from as low as 15% in South East Mananda to a high of 44% in the Kutubu area.

3.5 Infrastructure The remoteness of the Project Area is one reason for the low level of bank accounts recorded during previous surveys. As shown in Table 13, villages are located, on average, 4.5 hours from the nearest road. The South East Mananda and Gobe areas are particularly remote.

Table 13 Access to Survey Villages, by Project Area

Project Area Average time to reach nearest road

(minutes)

Villages more than 1 hour from

nearest road Hides 49 13% Kutubu 274 16% Kikori 183 37% Gobe 642 86% Moran 225 44% South East Mananda 963 33% Total 273 34%



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Not surprisingly, given the remoteness of the area and the fact that relatively few villages have road access, vehicle ownership is low (averaging 4% of households). A higher number of households actually have motorised boats or motorised canoes, although this is primarily due to the Kikori area, in which the river is an important transport route (refer Table 14).

Table 14 Households with Vehicle Ownership, by Project Area

Project Area Other motor vehicle

Motorised boat or canoe

Hides 3% 2% Kutubu 4% 6% Kikori 9% 14% Gobe 0% 0% Moran 2% 0% South East Mananda 4% 0% Total 4% 5%

As shown in the following table, 82% of houses are made of traditional materials (a slightly higher proportion than for PNG as a whole). The highest proportion of ‘improved’ households is in the Kikori, where there has been far more contact with the outside world, and income-earning opportunities dating back many decades.

Table 15 Housing Construction in Surveyed Villages, by Project Area

Project Area Houses made of traditional materials

Houses made of permanent

materials

Houses made from both traditional &

permanent materials Hides 95% 3% 3% Kutubu 78% 7% 16% Kikori 59% 6% 35% Gobe 79% 4% 17% Moran 95% 1% 5% SE Mananda 100% 0% 0% Total 82% 4% 14% PNG 76% NA NA

Approximately 9% of villages in the Project Area have access to electricity, although this is heavily skewed in favour of those villages in Kikori and to a lower degree, Kutubu. The proportion of households with electricity is 29% for Kikori, 9% for Kutubu, 2% for Hides, Gobe and South East Mananda, and 1% for Moran.

3.6 Governance Governance structures, at a village level, are essentially limited to those that are self-organised (women’s groups, youth groups and church groups) or related to the petroleum operations (ILG,



15

LANCO and Landowner Association). Information has not been collected in the past on the existence (or operation) of ward development committees or village courts.

Table 16 Proportion of Villages with Various Village Organisations

Village organisation Per cent of villages

Women’s Group 70% Youth Group 82% Church Group 88% Incorporated Land Group (ILG) 88% Landowner Company (LANCO) 85% Landowner Association 80%

3.7 Development Priorities Results from the village surveys indicates that health, education and access were the main development priorities identified by village leaders. The main development priority in each area is summarised in Table 18 below.

Table 17 Main Development Priorities, by Project Area

Project Area Priority #1 Priority #2 Priority #3 Hides Education Access Health Kutubu Water supply Access Health Kikori Health Education Access Gobe Water supply Power Health Moran Education Health Access South East Mananda Access Education Health Total Health Education Access

4. CURRENT OSL ACTIVITIES This Section contains a summary of additional information relating to employment and other benefits received by those people living in the Project Area as a direct consequence of petroleum operations.

4.1 Benefit streams Many local people would have gained casual (unskilled) employment and received other land-use and compensation benefits from exploration activities. Information is not generally available from this time. However, detailed records have been maintained by the operator since construction commenced in 1991. Table 18 provides a summary of the direct benefits received by provincial and local governments, and landowners, as a result of petroleum operations from 1991 through to the end of 2006.



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Table 18 Summary of Benefits Paid to Local Stakeholders up until 31 December 2006

Benefit Description Total Benefit (Kina) Provincial Governments: Special Support Grants (SSG) 166.8 million Infrastructure Grants 11.3 million Royalties 166 million Equity Dividends 77 million MOA grants 42.6 million Development Levies (PDL 5 only) 65 million Sub-total 528.7 million Local Level Governments (LLG) Royalties (PDL 5 only) 8.7 million Equity Dividends (PDL 5 only) 180,000 Sub-total 8.9 million Landowners (cash) Royalties 115.4 million Land compensation 7.4 million Land rentals 2.9 million Equity dividends 99.4 million Sub-total 225.1 million Landowners (non-cash) Lanco loan guarantees 20 million Seed capital grants 5.5 million Tax credit funded infrastructure 253 million MOA grants 55.1 million Royalty future generations & infrastructure trusts

49.7 million

Equity dividends future generations & community investment trusts

26.4 million

Sub-total 409.9 million Total 1,172.6 million

NB: Some additional payments made to LLG have not yet been included in the above data.

As shown in Table 18, some K1.2 billion has been provided in benefits in the local area over a period of 16 years. This includes both cash and in-kind benefits, and includes payments made to community investment and future generation trusts. In addition to the above, the operator and contractors have awarded a total of K 695 million in contracts to landowner companies up to the end of 2006.

4.2 Employment Oil Search and its contractors provide employment for a large number of people from the local area and from elsewhere in Papua New Guinea. Although employment numbers, particularly for contractors, vary from time to time dependent on the level of drilling or construction activity, the quantum of this is illustrated in the following table.



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Table 19 Current Employment by Origin & Language Group

(30 September 2007)

Classification OSL % Contractor % Total % Non-citizen (foreign) 143 14 224 10 367 11 Project Area: - Huli/Mananda/Onabasalu 21 2 290 13 311 9 - Fasu 5 1 72 3 77 2 - Foe 35 3 128 6 163 5 - Gobe 34 3 220 10 254 8 Sub-total (Project Area) 95 9 710 31 805 24 Other SHP 148 15 606 26 754 23 Gulf Province 31 3 104 5 135 4 Other parts of PNG 601 59 660 29 1,261 38 Total 1,018 100 2,304 100 3,322 100

NB: Minor arithmetic errors in the calculation of percentages are due to rounding.

As shown in Table 19, OSL and its contractors currently employ over 3,300 employees. Of these, approximately 89% are from PNG, and around 24% are from within the Project Area. In 2007 the total net wages paid to Oil Search employees was K23.785 million. Also the company operated the Oil Search Academy to provide mandatory safety, soft & technical skills training and upgrade training to direct and contractor employees, at a cost of approximately K5.4 million

4.3 Community Affairs OSL’s Community Affairs (CA) department has 90 staff who interact with Project Area communities on a regular basis. Operations CA staff are based at Nogoli (Hides), Iagifu Ridge, Moro, Gobe and Kopi camps, whilst Exploration & Development support CA staff are based at Moro and in the various drilling, seismic or construction camp locations wherever and whenever this work is being carried out. In addition to staff members Community Affairs employs 24 village based village liaison officers (VLOs) to assist in the two-way exchange of information between the community and the Operator. A summary of the development activities supported by CA staff is presented below.

4.4 Development & Community Support OSL supports a range of developmental programs, each of which are summarised below. Further details are available on the OSL website and in Annual Reports (refer www.oilsearch.com).

NGO Support OSL works closely with a number of NGOs that are active in the Project Area. These include:

• Community Based Health Care (CBHC), a Nazarene based community development organisation operating primarily in the Hides area;

• The ECPNG Health Service in the Southern Highlands; and • Gulf Christian Services, which provides staff and other resources for rural village health

facilities. OSL provides annual grants to WWF’s Kikori River Program (K1.5 million) and the CDI Foundation (K3 million). Whilst WWF are primarily concerned with catchment management and species



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diversity studies it also works at a village level with various micro-enterprises including harvesting and husbandry of crocodiles, vanilla, orchids, butterflies/insects, mushrooms and eco-tourism. The CDI Foundation manages a community radio station (CDI-FM) and manages distance education (FODE, CTCS), community health, agricultural and community capacity building programs.

Tax Credit Projects Oil Search manages infrastructure construction and maintenance funded under the Tax Credit Scheme, under which a small percentage of joint venture partners’ assessable income is applied to approved projects in lieu of tax. The quantum of tax credit funding varies dependent on world oil prices and in 2007 exceeded K50 million. During 2007 tax credit funded projects undertaken included refurbishment of Mendi Hospital and Puril Technical College, continuation of the construction of the Samberigi and Homa-Tari roads, re-decking of bridges, emergency repairs to the Highlands Highway and feasibility studies into possible future projects such as redevelopment of Kikori airport and rebuilding of district offices in Kikori and Kerema.

Community Health Oil Search administers a comprehensive Community Health Program, allocating K3 million annually. The Program provides various forms of support to existing government health services, staff and infrastructure including transport of medicines from base stores, maintenance of cold chain vaccine storage, communications, buildings, equipment and staff training. The Program also includes malaria prevalence and incidence surveys to determine the timing and methodology of disease control measures. Oil Search has initiated pre-packaging of anti-malarial drugs in ‘dose for weight’ blister packs and an associated social marketing campaign in order to improve the malaria treatment regime. In conjunction with the CDI health program, intense HIV/AIDS awareness, counselling and testing activities are carried out in the Project Area to complement those of the National Department of Health initiative (supported by the Asian Development Bank).

Above: Blood sample being taken by OSL Community Health Unit worker during a malaria prevalence survey



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Education Sponsorship OSL provides annual funding, linked to the level of oil production in support of tertiary training in the Project Area. Preference is given to those people attending trade courses, or undertake training in health or education. This focus is thought to help build skills that can be applied within the Project Area. A summary of education sponsorship for 2007 is presented in Table 20.

Table 20 Summary of Education Sponsorship in 2007, student numbers by Project Area

Ongoing students New students Project Area Male Female Male Female

Total

Hides 15 3 10 0 28 Kutubu 5 0 9 3 17 SE Mananda 5 0 2 1 8 Gobe 10 1 6 7 24 Moran 9 4 20 1 34 Pipeline 3 0 6 3 12 Total 47 8 53 15 123

A total of 489 education sponsorship applications were received for 2007 (20% from females). Of these, 123 have been approved (19% female). Through its support of the CDI managed Certificate of Tertiary & Community Studies (CTCS), Oil Search provides Grade 10 school leavers with the ability to gain a university entrance level qualification. In 2007 there were 35 students in Semester 1 and 44 students in Semester 2 of their CTCS studies. To date 3 students have successfully completed their CTCS programme. In addition to tertiary education sponsorship, Oil Search supports enrolment in the Flexible Open Distance Education (FODE) Program, which is managed by CDI. As of the end of December 2007, 786 students were supported by Oil Search, as shown in Table 21 below.

Table 21 Summary of FODE Program Support in 2007, Student numbers by Project Area

Grade 7 8 9 10 Sub-total Sex Male Female Male Female Male Female Male Female Male Female

Total

Kutubu 113 36 81 14 56 27 88 57 258 134 392 Kikori 13 1 20 4 22 4 61 20 191 29 220 Gobe 9 1 24 10 18 6 25 9 76 26 102 Total 135 38 125 28 96 37 174 86 566 189 714

Donations Oil Search’s Community Affairs department administers a donations programme for Project Area communities. Annual support in line with oil production is allocated, from which relatively small strategically targeted donations are made to local institutions, primarily health and education institutions, to assist in their operations. Examples of donations include school stationery, desks, books, sports equipment, medical supplies and water tanks.



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Community Area Planning Oil Search administers a Community Area Planning (CAP) Program, which matches material inputs from the community on a one to one basis. The projects are identified and implemented by the communities, and in recent years have included the construction or maintenance of churches, sports facilities, water supplies, and education and health facilities. A list of CAP projects for 2006 (completed) and 2007 (ongoing) is presented as Attachment 5.

Local Business Development (LBD) OSL actively promotes and supports the development of local business opportunities. Many service and other contracts are awarded by Oil Search to local landowner companies in the various licence areas. The services provided include the provision of security services, road transport, civil construction, catering, camp management, camp maintenance and road maintenance. As can be seen in the following table, gross contract incomes of Project Area landowner companies have risen over recent years and represent a significant input into the local economy.

Table 22 Summary of Landowner Company Gross Contact Incomes: 2002-7

2002 2003 2004 2005 2006 2007 55,799,534 65,173,991 61,543,451 121,961,848 130,853,723 171,098,742

Many of the representative landowner companies contracted by Oil Search employ significant numbers of local people; regularly pay dividends to their individual or land group shareholders; and award sub-contracts to smaller local business groups. A number of the Project Area landowner companies have retained profits and made investments, primarily in real estate in Port Moresby, which inturn generates income for shareholders.

2007 micro-enterprise survey A local micro-enterprise survey carried out by Community Affairs business development staff has in 2007 covered villages in the Lake Kutubu and Kikori areas. This survey will be continued in 2008 and the results used to determine the most appropriate form of general business development assistance, training and advice that should be provided in the Project Area to further promote small-scale village level enterprises. In the 17 villages visited along the banks of the Kikori river and its delta near Kikori station there were found to be 55 small-scale enterprises almost all owned by unregistered, unincorporated family units. These consisted of 41 trade stores, 7 fuel retailers and one crocodile marketing, fishing, recycling, chicken, vanilla, guest house and sawmill projects respectively. In the Lake Kutubu area 27 villages were visited. Here there were 138 small enterprises, only 14 of which were formally incorporated bodies. The remainder were principally unincorporated sole traders, many of whom carried out more than one activity. The Kutubu enterprises include 47 trade stores, 47 chicken projects, 18 vanilla projects, 4 ‘wokabaut’ sawmilling operations, 5 fuel retailers, 7 transport/PMV operators, 8 coffee growers, 3 vegetable growers, 2 fish farmers, 2 cocoa farmers, 3 automotive workshops as well as individuals involved in wholesaling, chicken feed marketing, duck husbandry, piggeries and liquor retailing. In the Hides area 78 villages were surveyed and found to contain a total of 190 small scale businesses – some carrying out one activity others a variety of activities. These included 104 trade stores, 3 guest houses, 26 chicken projects, 6 fish pond projects, 29 coffee gardens, 18 vegetable



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production projects, 8 small bakeries, 20 piggeries, 14 sewing businesses, 8 PMV operators, 3 cattle projects, 1 sawmill and 1 goat rearing project.

5. NEXT STEPS Following the establishment of a consolidated social and economic database, and presentation of this report to the relevant Government authorities, OSL will undertake a program of data collection to (i) establish a baseline in green field areas (that have not previously been surveyed) and (ii) to enable comparisons over time. This will help assess the impact of petroleum operations, and other factors, on the people in the Project Area. Oil Search shall:

1. Collect information from green field areas; 2. Collect current information from a sample of villages within the existing PDL and PL

areas (it may be appropriate to re-survey those villages that were originally surveyed in 1998, as this would enable a comparison of change over a period of approximately 10 years);

3. Undertake analyses to compare social and economic conditions in the relatively remote green field areas with that of the existing PDL and PL areas;

4. Undertake analyses to compare social and economic change in existing PDL and PL areas over a period of up to 10 years (between 1998 and 2008); and

5. Present the above findings – and recommendations arising from the analyses – in future Social & Economic Reports.

The village and household questionnaires that will be used to collect information in the future are presented as Attachment 2. While more concise than in the past, they focus on key development indicators and their simplified format aims to minimise resources required, and reduce errors during data collection, data entry and analysis. As discussed in Section 2, these questionnaires also contain additional information on a range of additional indicators to ensure OSL has information on a broad range of social and economic indicators in the future.



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References

Documents presented in chronological order, showing author, date, name of report or article (in bold), then the organisation or website in which to access the document.

1. National Statistics Office, 2001. National Population and Household Census: 2000 (data presented in the Community Profile System). National Statistics Office, Waigani.

2. IFC, April 2006. Performance Standards on Social & Environmental Sustainability. International Finance Corporation, Washington DC.

3. GRI, September 2006. Sustainability Reporting Guidelines, Version 3.0. Global Reporting Initiative (www.globalreporting.org).



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Attachment 1 THE EQUATOR PRINCIPLES AND GRI

1. The Equator Principles The Equator Principles were developed in response to a meeting of the world’s leading financial institutions in October 2002. Initiated by the International Finance Corporation (IFC),6 the Equator Principles are a set of social and environmental principles that member financial institutions will follow to ensure projects they fund will promote responsible environmental stewardship and socially responsible development. The principles were revised in 2006 to ensure consistency with the IFC’s environmental and social performance standards. The Equator Principles are applied to all project financing that exceeds US$10 million, across all industries. In 2003, 21 banks who had signed up to the Equator Principles lent US$54 billion in project financing, which accounted for approximately 80% of project loans globally. The Equator Principles have become the market standard in the banking industry for project lending. By 2007, some 50 institutions had signed on to the Equator Principles, including ANZ, Bank of America, Barclays, Citigroup, Credit Suisse, HSBC, JP Morgan Chase and Westpac.7 The increasing number of institutions adopting the Equator Principles has applied pressure on mining and petroleum companies and representative bodies, world wide, to increase their focus on, and contribute to, sustainable development.

2. The IFC Performance Standards The IFC has performance standards relating to the following:

1. Social and Environmental Assessment and Management Systems 2. Labour and Working Conditions 3. Pollution Prevention and Abatement 4. Community Health, Safety and Security 5. Land Acquisition and Involuntary Resettlement 6. Biodiversity Conservation and Sustainable Natural Resource Management 7. Indigenous Peoples 8. Cultural Heritage

Performance Standard 1 establishes the importance of (i) integrated assessment to identify the social and environmental impacts, risks, and opportunities of projects; (ii) effective community engagement through disclosure of project-related information and consultation with local communities on matters that directly affect them; and (iii) the management of social and environmental performance through the life of the project. Performance Standards 2 through 8 establish requirements to avoid, reduce, mitigate or compensate for impacts on people and the environment, and to improve conditions where appropriate. Performance Standard 1 aims to:

• Identify and assess social and environmental impacts, both adverse and beneficial, in the project’s area of influence;

• Avoid, or where avoidance is not possible, minimise, mitigate or compensate for adverse impacts on workers, affected communities, and the environment;

6 The IFC is a member of the World Bank Group and promotes sustainable private sector investment in developing countries as a way to reduce poverty and improve people’s lives. 7 Refer www.equator-principles.com



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• Ensure that affected communities are properly engaged on issues that could potentially affect them; and

• Promote improved social and environmental performance of companies through the effective use of management systems.

According to the IFC performance standards, an effective management system shall incorporate the following elements: (i) social and environmental assessment; (ii) a management program; (iii) organisational capacity; (iv) training; (v) community engagement; (vi) monitoring; and (vii) reporting. Further details of the IFC performance standards can be found at the IFC website (www.ifc.org).

3. The Global Reporting Initiative The Global Reporting Initiative was introduced in 1997 by CERES, a US non-profit organisation. The United Nations Environment Programme (UNEP) joined as a partner in 1999 and the GRI became an independent organisation in 2002. GRI’s vision is that reporting on economic, environmental, and social performance by all organisations becomes as routine and comparable as financial reporting. This vision will be accomplished by developing, continually improving, and building capacity around the use of its Sustainability Reporting Framework. This Sustainability Reporting Framework is applicable to organisations of any size, constituency or location, and by 2006 had been used by more than 800 organisations worldwide. The Sustainability Reporting Guidelines were updated in September 2006 and consist of:

Part 1 – Reporting Principles and Guidance To help determine what to report on, this section covers the Reporting Principles of materiality, stakeholder inclusiveness, sustainability context, and completeness, along with a brief set of tests for each Principle. Application of these Principles with the Standard Disclosures determines the topics and indicators to be reported. This is followed by principles of balance, comparability, accuracy, timeliness, reliability, and clarity, along with tests that can be used to help achieve the appropriate quality of the reported information. This section concludes with guidance for reporting organisations on how to define the range of entities represented by the report (also called the ‘Report Boundary’).

Part 2 – Standard Disclosures and Performance Indicators Part 2 contains the Standard Disclosures that should be included in sustainability reports. The Guidelines identify information that is relevant and material to most organisations and of interest to most stakeholders for reporting the three types of Standard Disclosures: Profile: Disclosures that set the overall context for understanding organisational performance such as its strategy, profile, and governance. Management Approach: Disclosures that cover how an organisation addresses a given set of topics in order to provide context for understanding performance in a specific area. Performance Indicators: Indicators that elicit comparable information on the economic, environmental, and social performance of the organisation.

Further information on the Sustainability Reporting Guidelines can be attained by referring to the GRI website (www.globalreporting.org/Services/ResearchLibrary/GRIPublications/). The GRI has also established links with a range of other organisations and initiatives to improve corporate responsibility and promote sustainability, including for example, the International Council on Mining & Metals (refer www.icmm.com) and the United Nations Global Compact (refer www.globalreporting.org/ReportingFramework/CRAlliance).



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Attachment 2 VILLAGE AND HOUSEHOLD QUESTIONNAIRES

Enumerator Village LLG

__________________ __________________

Date ____/_____/______ day month year

# Households Power How many HHs have access to power (generators)?

How many HHs have solar power? ________ ________

Communications Does the village have a communication system? (1=public phone/radio, 2=emergency radio, 3=none) ________ (1-3)

Water supply How many months/year does the village have good quality water? What is the village’s main source of drinking water? (1=piped, 2=tank, 3=well, 4=river/spring, etc)

________ (1-12)

________ (1-4) How long does it take to reach the source (one way)? ________ minutes Sanitation What is the most common type of toilet in the village?

(1=flush, 2=pit, 3=none/bush) ________ (1-3)

Access How long does it take to reach the nearest road from this village? (minutes one way) __________________

Governance Has the village a functioning: Ward Development Committee Women’s Group Youth Group Church Group Village Court

Is the village part of a functioning: ILG LANCO Landowner Association

______ (Yes/No) ______ (Yes/No) ______ (Yes/No) ______ (Yes/No) ______ (Yes/No)

______ (Yes/No) ______ (Yes/No) ______ (Yes/No)

If yes (for ILG, LANCO or Landowner Association) record details below: ____________________________________________________________________

Village facilities For villages with the following public buildings, describe their general construction: Primary/community school: ________

Aid post: ________

Church: ________

Community or meeting hall: ________

1 = permanent materials 2 = traditional materials 3 = combination of the above 4 = none (doesn’t exist)

Development priorities

What are the main development needs and priorities for this village (in order)? 1. ____________________________________________________ 2. ____________________________________________________ 3. ____________________________________________________ 4. ____________________________________________________ 5. ____________________________________________________

Women’s participation

Are women involved in community decision making in this village? Rank 1=equally with men, 2=partly, 3=no/very little ________ (1-3)



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Date: ____/____/___ Village: ______________ Enumerator: ____________ Household: __ /___ Computer reference: _________ Complete for each person that generally lives in this house, including children attending school elsewhere.

1 2 3 4 5 6 7 8 9 10 Name

Sex (Male/Female) Age (years) Education level (see code) Currently at school (Y/N) Literate (Yes/No)

Main occupation (see code)

Employer (see code)

NB: For age – use whole numbers only. Anything less than 1 year should be recorded as 0.

Education code 0 None completed 1-12 Highest grade completed 13 Vocational certificate 14 Trade certificate 15 Diploma 16 University degree 17 Post graduate qualifications

Occupation code 1 Self employed (business or cash crops) 2 Employed (professional) 3 Employed (clerical) 4 Employed (trade) 5 Employed (unskilled) 6 Subsistence 7 Can’t work (too old or too sick)

Employer code 1 Government 2 Church/mission 3 Private

Additional Questions:

A. Health: In the last two years where were children in this household born?

B. What is the household’s

main source of drinking water?

C. What is the type of toilet in the household?

1 – In the village

2- Aid Post/Health Centre

________ (1-4)

(1=piped, 2=tank, 3=well, 4=river/spring, etc)

________ (1-3)

(1=flush, 2=pit, 3=none/bush)



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Origin Has this family moved to this village from somewhere else?

1 From same clan area _____ 2 From further afield 3 Has not moved

Cash income What was the main source of cash income for this household in the past year?

______________________

Banking Does anyone in the house have a savings account?

_______ (Y/N)

Housing What is the house built of? 1 Permanent materials 2 Traditional materials 3 Combination

_______ (use code)

Motorised vehicles

Does anyone in the household own any of the following? (Y/N)

PMV ______ Other motor vehicle ______ Motorised boat/canoe _____

Business Does anyone in the family operate any of the following businesses:

If other, specify

Trade store ______ Y/N PMV (vehicle or boat) ______ Y/N Fuel sales ______ Y/N Sawmill ______ Y/N Clothes/sewing/baking ______ Y/N Coffee ______ Y/N Vanilla ______ Y/N Food crops ______ Y/N Livestock ______ Y/N Other ______ Y/N _________________________

Infant mortality

In the past year, has a child died from this household who was < 5 yrs of age (including during birth)?

If yes, _______ (number)

Income Over the past year has anyone in the household received income from the following sources:

If other, specify

Employment ______ Y/N Business (as above) ______ Y/N Coffee ______ Y/N Sago ______ Y/N Vanilla ______ Y/N Other food crops ______ Y/N Livestock ______ Y/N Fishing/hunting ______ Y/N Royalties ______ Y/N Land comp/rental ______ Y/N Dividends (LANCO/MRDC) ______ Y/N Other ______ Y/N _________________________

Food recall

Did anyone in the household eat any of the following foods yesterday? (Y/N)

Tinned fish/meat _____ Store bought fish or meat _____ Fresh fish/meat _____ Rice or noodles _____ Biscuits _____ Cheezpops/other snack foods _____ Coke, juice, etc _____ Sago _____ Vegetables _____ Fruit _____



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Attachment 3 VILLAGE LISTS FOR EACH PROJECT AREA

Hides VILLAGE Popn 2000 Census LLG PROVINCE EANDA 533 KOMO SHP HABONO 970 HAYAFUGA SHP HIDES 4 217 KOMO SHP HOKAMBE 490 HULIA SHP IDAUWI 1074 HAYAFUGA SHP JUNI 461 KOMO SHP KULU 468 KOMO SHP LAITE 309 KOMO SHP LAYAGO 420 KOMO SHP MBELOPA 385 KOMO SHP NOGOLI 686 KOMO SHP PARA 735 KOMO SHP PUBA n.a. NORTH KOROBA SHP TANI 553 HAYAFUGA SHP UNDUPI 711 HAYAFUGA SHP

Kutubu

VILLAGE LLG PROVINCE AI'IO 104 KUTUBU SHP BARUTAGE 398 KUTUBU SHP BUGI 272 KUTUBU SHP BUNU 138 KUTUBU SHP DAMAIYU 646 KUTUBU SHP FIWAGA 620 KUTUBU SHP GENABO 170 KUTUBU SHP GESEGE 368 KUTUBU SHP GOBE 52 KUTUBU SHP HEBAIYA 152 KUTUBU SHP HEDINIA 312 KUTUBU SHP HEGESO 395 KUTUBU SHP HEREBO 342 KUTUBU SHP HUMANE 25 KUTUBU SHP IBUTABA 298 KUTUBU SHP INU 137 KUTUBU SHP IOROGOBAIYU 287 KUTUBU SHP IRIKAI 53 KUTUBU SHP KAFA 176 KUTUBU SHP KAIPU 347 KUTUBU SHP KAIPUTAGE 92 KUTUBU SHP KANTOBO 110 KUTUBU SHP KEI POINT n.a. KUTUBU SHP KOKEABO 122 KUTUBU SHP KUNIFALU 133 KUTUBU SHP MAGI 178 KUTUBU SHP MANO 259 KUTUBU SHP SISIBIA 435 KUTUBU SHP SOKAI 111 KUTUBU SHP SOROGA 92 KUTUBU SHP SOROTAGE 85 KUTUBU SHP TAMADIGI 114 KUTUBU SHP TUBAGE 132 KUTUBU SHP TUGIRI 267 KUTUBU SHP UBOGO 97 KUTUBU SHP WARO STATION 92 KUTUBU SHP



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WASEMI 204 KUTUBU SHP YAMASI 89 KUTUBU SHP YO'OBO 208 KUTUBU SHP

Kikori

VILLAGE LLG PROVINCE AI'IDIO 47 WEST KIKORI Gulf APEAWA 244 WEST KIKORI Gulf BABAGUINA 180 WEST KIKORI Gulf BABEIO 133 WEST KIKORI Gulf BAINA 211 WEST KIKORI Gulf BISI 219 WEST KIKORI Gulf DOHUMO n.a. WEST KIKORI Gulf DOIBO 72 WEST KIKORI Gulf DOPIMA 39 WEST KIKORI Gulf ERO 753 EAST KIKORI Gulf GOARE 62 WEST KIKORI Gulf IRIMUKU n.a. WEST KIKORI Gulf KEKEA n.a. WEST KIKORI Gulf KEMEI 50 WEST KIKORI Gulf KOPI 314 WEST KIKORI Gulf LALAU n.a. WEST KIKORI Gulf OGOMABU 161 WEST KIKORI Gulf SAMOA 251 EAST KIKORI Gulf SIAWITI 44 WEST KIKORI Gulf VEIRU 74 WEST KIKORI Gulf WAIRA n.a. WEST KIKORI Gulf BOIO n.a. WEST KIKORI Gulf KABARAU n.a. WEST KIKORI Gulf KAIAM 1& 2 245 WEST KIKORI Gulf KIKORI STATION 2686 WEST KIKORI Gulf

Gobe

VILLAGE LLG PROVINCE BISIPALE 119 ERAVE SHP DAKIRI 225 ERAVE SHP HAWERE 165 ERAVE SHP HOKI 114 ERAVE SHP KATI (KADI) 104 ERAVE SHP KIRAWEI 94 ERAVE SHP MASIKI 133 ERAVE SHP NIAE 240 ERAVE SHP PAWABI 286 ERAVE SHP PAWALE 315 ERAVE SHP PUKUHAPEKE 119 ERAVE SHP SAMBERIGI STATION 104 ERAVE SHP SAO 148 ERAVE SHP

Moran

VILLAGE LLG PROVINCE BAGUALE 201 KUTUBU SHP BENARIA n.a. HULIA SHP HOMA 91 HULIA SHP HONAGA 154 HULIA SHP PAUA n.a. HULIA SHP YARALE 205 HULIA SHP

South East Mananda

VILLAGE LLG PROVINCE AJAKAIBA 322 KOMO SHP ATARE 673 KOMO SHP WALAGU 205 MT BOSAVI SHP



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Attachment 4 SUMMARY BASELINE DATA BY PROJECT AREA

Village Unit Hides Kutubu Kikori Gobe Moran SEM TotalVillage population 1 People 7655 8112 5785 2523 651 1200 25926 Households surveyed Households 732 626 572 263 418 115 2,726 Household size People 6.3 6.1 6.7 6.0 6.8 5.7 6.4

Sex ratio 2 Ratio 121 99 109 93 126 124 111 Population < 15 % 35 42 37 42 37 43 38 Population > 55 % 7 2 4 4 4 2 4 HHs from other villages % 14 7 16 4 3 0 10 Girls aged 6-14 attending primary school % 36 43 50 58 18 38 41 Boys aged 6-14 attending primary school % 48 49 55 57 20 37 45 Girls aged 15-19 attending high school % 45 38 36 42 21 25 36 Boys aged 15-19 attending high school % 61 44 46 61 28 30 47 Females 6 & above with no schooling % 50 45 38 52 72 64 50 Males 6 & above with no schooling % 37 35 31 36 63 49 40 Females 6 & above completing Grade 6 % 8 17 26 33 10 7 17 Males 6 & above completing Grade 6 % 17 26 36 47 15 13 25 Females 20 & above completing Grade 10 % 6 9 14 19 8 2 10 Males 20 & above completing Grade 10 % 14 18 23 37 12 8 18 Females 20 & above with Voc Cert. % 0.2 0.1 0.5 1.4 0.0 0.0 0.3 Females 20 & above with Trade Cert. % 0.3 0.1 0.5 1.4 0.0 0.0 0.3 Females 20 & above with tertiary qualifications % 0.5 0.8 1.3 1.1 0.5 0.0 0.8 Males 20 & above with Voc Cert. % 1.1 0.7 1.4 6.2 0.0 1.2 1.3 Males 20 & above with Trade Cert. % 1.6 1.3 2.1 4.7 0.0 1.2 1.6 Males 20 & above with tertiary qualifications % 1.4 2.1 1.8 5.6 1.0 0.6 1.8 Female literacy (15 & above) % 36 48 51 44 18 31 40 Male literacy (15 & above) % 54 67 62 67 30 49 55

Villages with piped water % 0 23 3

18

0 0 10

Villages with wells % 0 0 10 0 0 0 5 Villages with tanks % 0 18 31 0 0 0 21

Villages with rivers/streams % 100 59 56

82

100 100 64

Time to reach water Minutes 1 12 11 10 23 27 12 Villages with pit toilets % 100 95 77 100 100 100 87 Villages with flush toilets % 0 0 0 0 0 0 0



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Village Unit Hides Kutubu Kikori Gobe Moran SEM TotalVillages with no toilets % 0 5 23 0 0 0 13 Food purchased in previous month:

Tinned fish/meat % 66 67 55 86 34 19 59 Fresh/frozen meat/fish % 38 58 51 45 24 10 43 Rice % 72 67 55 87 35 21 61 Biscuits % 62 65 55 76 31 15 56 Soft drinks or juices % 64 62 53 72 33 10 55 Vegetables % 86 47 21 47 49 35 52 Fruit % 78 41 22 43 45 30 47 HHs with cash income % 80 70 89 68 39 34 70 Income sources: Employment % 11 13 17 22 7 15 13 Business % 18 10 17 5 6 4 12 Crops % 49 17 37 22 9 17 29 Livestock % 37 10 14 9 10 7 18 Fishing/hunting % 7 17 63 0 1 0 19 Royalties % 31 42 42 34 26 5 34 Compensation % 23 20 31 21 8 5 21 Dividends % 18 26 28 18 2 0 19 Other % 13 14 33 2 2 4 14 HHs with businesses % 98 77 63 92 95 83 84 Types of businesses: Trade store % 9 12 13 9 6 2 10 Fuel sales % 0 0 0 0 0 0 0 Coffee % 57 5 5 20 32 7 25 Vanilla % 1 19 12 37 4 3 11 Food crops % 72 42 39 59 67 37 55 Livestock % 95 62 36 74 89 71 71 Other % 16 7 12 3 5 4 10 Female employment (15+) % 10 1 6 2 1 2 4 Male employment (15+) % 20 9 11 19 3 6 12 Female employment: Professional % 1.1 0.3 0.8 1.5 0.3 1.6 0.8 Clerical % 0.1 0.1 0.7 0.8 0.2 0.0 0.3 Trade % 0.2 0.0 1.1 0.0 0.0 0.8 0.3 Unskilled % 8.3 0.2 3.1 0.0 0.4 0.0 3.0 Male employment: Professional % 1.3 0.7 0.8 2.1 0.4 3.8 1.1 Clerical % 0.5 0.2 1.7 1.8 0.4 0.6 0.8 Trade % 2.3 2.2 3.3 4.6 1.0 0.0 2.3 Unskilled % 16.3 5.7 5.0 10.7 1.4 1.1 7.7 HHs with a savings A/C % 23 44 40 23 26 15 31 Housing: Permanent materials % 3 7 6 4 1 0 4 Traditional materials % 95 78 59 79 95 100 82 Combination of above % 3 16 35 17 5 0 14 HHs with motor vehicles % 3 4 9 0 2 4 4 HHs with motorised boat % 2 6 14 0 0 0 5 HHs with electricity % 2 9 29 2 1 2 9 HHs with solar power % NA NA NA NA NA NA NA



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Village Unit Hides Kutubu Kikori Gobe Moran SEM TotalVillage governance: Ward Dev Committee % NA NA NA NA NA NA NA Women's Group % 93 70 63 48 100 100 70 Youth Group % 93 81 86 52 100 100 82 Church Group % 93 86 95 67 100 100 88 ILG % 87 90 93 71 89 100 88 Landowner company % 100 81 90 67 89 100 85 Landowner association % 93 91 68 67 89 100 80 Village Court % NA NA NA NA NA NA NA Development priorities: #1 Issue Education Water Health Water Education Access Education #2 Issue Access Access Education Power Health Education #3 Issue Health Health Access Health Access Health

Health & Access

Footnotes:

1. To be ascertained following analysis of the 2000 Census. 2. Number of males divided by number of females.



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Attachment 5 COMMUNITY AREA PLANNING PROJECTS: 2006 & 2007

CAP Projects: 2006 Area Project Description Actual Cost Kutubu Waro Christian Academy K1,219.35 Kutubu Huhubaiyu Community Hall K20,991.99 Kutubu Tools for Trade Assistants K5,902.98 Moran Bagale Elementary School K2,419.37 Moran Paua ECPNG Church K2,333.08 Moran Homa Aid Post Staff House K15,602.89 Moran Paua Community School Fencing K21,569.45 Moran Paua SDA Church Building K8,127.48 Moran Tools for Trade Assistants K5,902.98 Gobe Pakuri Com School K13,471.39 Gobe Pawale Elementary School K1,071.71 Gobe Wemi Com School Fencing K11,053.29 Gobe Baina Community School K1,842.62 Gobe Wemi Elementary Classroom K9,491.73 Gobe Gobe Agro Technical School K18,586.11 Gobe Dagiri Elementary Classroom K9,491.73 Gobe Masiki Elementary Classroom K6,032.55 Gobe Niae Aid Post Building K6,303.25 Gobe Tools for Trade Assistants K4,625.19 Kikori Kopi Elementary School Classroom K5,714.66 Kikori Kopi Basket Ball Court K27,100.22 Kikori Apeava Elementary School Classroom K397.44 Kikori Ogomabu Church Building K2,571.48 Kikori Ero Elementary School Classroom K6,605.94 Kikori Veiru Primary School Classroom K6,388.16 Kikori Kaiam Elementary Classroom K2,717.20 Kikori Tools for Trade Assistants K4,625.19 Kikori Delta Boat Hire - Delivery of CAP Materials K3,215.00 Project Wide Freight & Warehouse Uplifts K82,799.90

Total (2006) K308,174.33



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CAP Projects: 2007 (ongoing) Area Project Description YTD Cost Kutubu Hebaiya ECPNG Pastor's Church K2,504.72 Kutubu Hebaiya Water Catchment K2,335.44 Kutubu Waro Christian Academy K6,898.46 Kutubu Mano Church Building K7,892.88 Kutubu Aiio Water Source Repair/Maintenance K6,422.07 Moran Sisbia 1 ECPNG Church K38,439.46 Kutubu Kei-Point Fencing K10,000.00 Kutubu Seraga Fencing K2,000.00 Kutubu Aiio Elementary School K1,000.00 Kutubu Hedinia Church Building K1,000.00 SEM Walagu Building Materials Freight Cost K59,701.49 Kikori Kopi Elementary Classroom K14,099.00 Kikori Ero Elementary Classroom K13,758.61 Kikori Apeava Elementary Classroom K11,503.11 Kikori Ogomabu Church Building K3,764.07 Kikori Veiru Primary School Classroon K14,029.92 Gobe Gobe Agro Tech Building K20,989.34 Gobe Masiki Elementary Building K10,883.74 Gobe Dagiri/Sao Elementary School K10,883.74 Gobe Pawale Elementary Building K10,883.74 Gobe Niae Aid Post K22,732.17 Project Wide Freight & Warehouse Uplifts K0.00

YTD total (2007) K271,721.96



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CORPORATE DIRECTORY REGISTERED OFFICE 7th Floor Credit House Cuthbertson Street Port Moresby Papua New Guinea PO Box 842 Port Moresby Papua New Guinea Telephone: (675) 322 5599 Facsimile : (675) 322 5566 AUSTRALIAN OFFICES Sydney office Level 27 Angel Place 123 Pitt Street Sydney NSW 2000 GPO Box 2442 Sydney NSW 2001 Telephone : (61 2) 8207 8400 Facsimile : (61 2) 8207 8500 Brisbane Office 555 Coronation Drive Cnr Landsborough Terrace Toowong QLD 4066 PO Box 2177 Toowong QLD 4066 Telephone : (61 7) 3114 1799 Facsimile : (61 7) 3114 1750 OIL SEARCH WEBSITE A wide range of information on Oil Search is available in the Company’s website, at www.oilsearch.com. As well as reviews of Oil Search’s Board and senior management team, corporate governance practices and activities, the following information is available – Annual Reports, Profit Announcements, Press Releases, Quarterly Updates, Drilling Updates, Presentations and Archived Webcasts. Investor information, other than about shareholdings and dividends, can be obtained by sending an email to : [email protected]