Marape government to rule soon on K47 billion gas deal

By LISA MURRAY & ANGUS GRIGG | The Australian Financial Review

SYDNEY - Papua New Guinea's new government will make a decision within weeks on whether to amend a multibillion-dollar gas agreement involving Oil Search, according to the country's Petroleum Minister Kerenga Kua.

In his first interview with the foreign media since being appointed to the key ministry last month, Mr Kua said the government's internal review of the Papua LNG agreement –a project that is being led by France's Total and also involves ExxonMobil – will be completed within two to three weeks.

Uncertainty about the project has been weighing on the Oil Search share price, which has fallen almost 15% since late April, when former prime minister Peter O'Neill came under mounting pressure to step down.

His replacement, James Marape, and Mr Kua had both been critical of the Papua LNG project leading up to the change of government. Together with the PNG LNG Project, it forms part of a K47 billion liquefied natural gas expansion in the Pacific nation.

Mr Kua told The Australian Financial Review the internal inquiry into the Papua LNG project was focusing on two areas.

"Number one is to ensure that all the legal requirements have been fully satisfied and secondly that the potential revenue for the state has been maximised in the agreement," he said.

“These are simple processes and we expect to complete it quite quickly. The state will evaluate what position it will take and if the matter is to progress, it will progress and we will put all our weight behind it.

"If there are going to be other options, then those options will be considered."

Mr Kua is meeting with key executives from the companies involved this week.

He said once the government had made a decision on the gas deal, it would then move to review the "entire legislative framework" for the mining and petroleum sector.

"There is a commonly held belief in this country that Papua New Guinea’s people are not getting enough out of these massive resource investment projects," he said.

"Part of the reason why the last government was changed and this government was put into place was for this very reason.

"We want to create a fair and balanced, level playing field for investors and the local people as well."

Mr Kua, who was also one of the key opposition voices calling for stronger action over the so-called UBS loan affair, said he expected the commission of inquiry to be established this month and he hoped Australian companies and regulators would co-operate.

The commission will look into the circumstances in which PNG borrowed K2.8 billion from UBS to finance its purchase of a 10.1% stake in Oil Search. As the oil price dropped in 2015, PNG was forced to sell shares in the ASX-listed company, losing an estimated K990 million.

"We hope they will help establish the truth in this matter," Mr Kua said.

"The commission of inquiry is capable of subpoenaing people to appear before the inquiry and give evidence. Whether that power extends extra-territorially, like to Australia, I am not sure. But I am hoping in the interests of international relations and good faith that any party that is resident in Australia will voluntarily come in to support the inquiry.

"Once the inquiry is completed, our government will send a copy of the report to all of the important regulators in Australia and Switzerland and wherever else."

Oil Search and UBS have both said they welcome the inquiry.

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