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Port Moresby pressures
The new PNG government is seeking more from its hydrocarbon industry
COMMENTARY
WHAT:
The new PNG premier had some pointed words for Oil Search during a recent speech.
WHY:
There is a sense that the country has not bene ted as much as had been expected.
WHAT NEXT:
With FID targeted for 2020, both sides of the negotiations are under pressure.
NEW pressure is being brought to bear on Papua New Guinea’s (PNG) LNG industry as political troubles bubble up. PNG Prime Minister James Marape took the opportunity of a party hosted by Oil Search to drive the point home that the country feels it has not benefited sufficiently from the hydrocarbon industry.
“Going into the future we will not be asking much of you in terms of community service obligation, but we will be asking you to pay your fair share of tax,” Marape told Oil Search in Port Moresby last week. He went on to say companies would have to play a greater role in “downstream processing. We’ll be asking you for a clearer, bet- terde nitionofwhatlocalcontentis.”
e prime minister was speaking at a party to celebrate Oil Search’s 90 years of operations. e ExxonMobil-led PNG LNG project, in which Oil Search is a partner, has been extremely suc- cessful, operating above capacity. But locals have repeatedly made it clear that the project has not bene ted them su ciently. Royalties to land- owners have been slow in coming, which has led to sporadic demonstrations – and the interrup- tion of production.
Resignations and loans
Marape became prime minister following the resignation of Peter O’Neill, who bowed out at the end of May. O’Neill had held the top spot since 2011, but le rather than face a no-con- dence vote. Marape had been part of the rul- ing party but le in April. Following O’Neill’s
resignation, Marape – and a number of other parliamentarians – returned to the ruling party, which elected the new premier with an over- whelming majority.
One particular black mark on O’Neill’s record was his decision in March 2014 to take a loan from Switzerland’s UBS bank in order to purchase shares in Oil Search. e country had borrowed A$1.2bn ($830mn) to buy a stake in the company. It was forced to sell o the interest in 2017 for a major loss.
The PNG ombudsman produced a report in December 2018 that was critical of the gov- ernment’s conduct. is was leaked in May and revealedthatthegovernmentmayhavebreached a number of laws through this process. It should have been approved by Parliament and may have breached various lending provisions.
Last week, the leader of the opposition, Pat- rick Pruaitch said the loan had “caused the state to commit the people of [PNG] to an intolerable debt burden, as well as erode and strip signi cant PNG LNG project value and bene ts to the det- riment of the people and the country.”
Marape ordered an inquiry into the UBS loan in June and has pledged to stand down should the inquiry nd him guilty of improper conduct. Marape was the nance minister at the time the loan was taken out, with the ombudsman’s report said to have implicated him in breaking two laws.
Although the terms of the inquiry are unclear, and some have expressed concern that the process will be a long one, Petroleum
Visiting
PNG Prime Minister James Marape is to visit Australia next week. China and Australia are seen as compet- ing for in uence in the region.
Image: EMTV News
Image: InterOil
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w w w . N E W S B A S E . c o m Week 28 17•July•2019