Monthly Archives: February 2020

Oil Search works to revive Exxon, Papua New Guinea talks on LNG expansion

Reuters | 25 February 2020

Oil Search Ltd is pressing to revive talks between Exxon Mobil Corp and the Papua New Guinea government over a $13 billion plan to double the country’s natural gas exports, the company’s new boss said on Tuesday.

Oil Search’s new Chief Executive Officer Keiran Wulff said he hoped negotiations could resume “within weeks” between its partner Exxon and the state.

The government ditched talks in January with Exxon on terms for developing the P’nyang gas field to feed an expansion of Exxon’s PNG liquefied natural gas (LNG) plant, amid a push to reap more benefits from resources projects for the impoverished South Pacific nation.

Oil Search’s veteran boss Peter Botten, who just retired as CEO but is still working for the company, is sounding out the government this week on what it would need to resume talks, Wulff said.

“We would hope to see some sort of formal negotiations recommence between Exxon and the state negotiating team within a reasonable period of time,” Wulff told Reuters in an interview after the company released earnings earlier on Tuesday.

“We’re hopeful that it’s weeks. We don’t think it’ll be months,” he said.

Oil Search reported an 8% fall in annual net profit to $312.4 million, hit by weaker oil and LNG prices, missing analysts’ forecasts of around $339 million, according to Refinitiv IBES estimates.

Oil Search’s growth prospects are largely tied to a combined plan to develop P’nyang and Papua LNG, led by France’s Total SA, to feed three new processing units, called trains, at Exxon’s PNG LNG plant.

All the partners want a three-train development, Oil Search said, as sharing infrastructure would be the most efficient way to develop P’nyang and Papua LNG.

“For us we’re strongly behind the operator to pursue a three-train development, which is as much in the joint venture’s interest as it is in the state’s,” Wulff said.

He said they would only consider a two-train development without P’nyang “after all options were exhausted”.

Exxon Mobil had no immediate comment, but Chief Executive Darren Woods said earlier this month the company hoped to revive talks on P’nyang to get to a “win-win proposition”.

The coronavirus has dampened demand for LNG from China, but Oil Search said it expected that only to be a short term issue.

“We are confident in our ability to secure LNG offtake agreements once we resume discussions with potential Asian buyers, due to the attractiveness of LNG from PNG,” Botten said in a statement.

If an agreement is reached on P’nyang and early engineering work on a three-train development begins in 2020, Oil Search expects its capital spending this year will be in the range of $710 million to $845 million.

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The inside story of a gas deal gone bad

Australian Financial Review | February 15, 2020

Along the Fly River in the remote Western Highlands province of Papua New Guinea, a region best known for coffee plantations and tribal headwear, a gas boom was taking hold.

Chancers and prospectors mixed it with the world’s oil majors, all seeking to transform this region of waterfalls and dense jungle into a new jurisdiction for liquefied natural gas (LNG).

ExxonMobil, France’s Total and Australia’s Oil Search had all staked a claim as the new decade began in 2010. Less well known, but no less ambitious was the ASX-listed Horizon Oil, which was looking to thread together a series of smaller development licences to support a new pipeline and LNG plant.

The pay-off would run to at least eight digits, at a time when natural gas billionaires were being minted from central Queensland to south Texas. For a company like Horizon, which saw its market value hit $550 million as the gas boom peaked, getting to first production in the Pacific nation was always going to be a sizeable task.

Then the politics of PNG intervened.

After early attempts to resist “the bad guys”, as one of its lawyers put it, Horizon chose to engage with the then minister for petroleum and local powerbroker, William Duma – a decision that has come back to bite it nine years later.

The company, which saw its stock price drop 30 per cent this week, is now confronting allegations it repeatedly ignored corruption warnings and paid $US10.3 million ($15.4 million) to a politically exposed shell company.

That company, Elevala Energy Ltd, listed its sole director and shareholder as Simon Ketan, a man with close personal and business links to Duma.

The documents, obtained by The Australian Financial Review and which reveal in granular detail how Horizon operated in PNG, are now being examined by the Australian Federal Police, which said it takes “allegations of foreign bribery very seriously”.

See also: WILLIAM DUMA: FROM MANU MANU TO HORIZON OIL

Point of no return

Horizon has also stood aside its chief executive Michael Sheridan, a 17-year veteran of the company, as it conducts an independent investigation.

It has all the makings of a grubby little scandal.

But at the same time, it’s hard to see how it could have played out any differently from the moment Horizon wrote to then petroleum minister Duma, in November 2010, saying it was “open to any suggestion” on how the “current tension might be defused”.

At that point there was no turning back.

The files document in tropical colour the narrow line Horizon was already walking in PNG, with a seemingly endless list of paid political consultants and community affairs managers, who were chasing rumours about shifting power structures, seeking “per diems” for provincial staff and arranging drinks with the then prime minister Sir Michael Somare and his daughter Betha at Port Moresby’s Airways Hotel.

Then came the task of managing warring villagers, joint venture partners, feasibility studies, and chartering helicopters for access to remote locations.

It was high finance and geoscience meets local politics and the everyday challenges of PNG, a country the World Bank ranks as poorer than Sudan.

Into this environment strode the former investment banker Brent Emmett, who had taken over as Horizon chief executive in 2000 and been joined three years later by Michael Sheridan, as chief financial officer.

Together they had refocused the company’s attention on PNG and by mid-2008 were running hard at this emerging LNG jurisdiction with stakes in three prospective oil and gas licences.

Their timing was good.

By 2009 Morgan Stanley was reporting that land under lease in PNG had increased fivefold over the previous seven years and it predicted a rush of deals and ballooning asset values.

But Emmett was unsure how best to play this boom.

Tricky terrain to navigate

In one email he pondered whether he should prove up the resource and commercialise slowly or go for the land grab.

To make such a call, Horizon, which also had assets in China, New Zealand and the United States, needed to better understand the local political terrain, which was notoriously tricky around licence transfers and renewals.

In an attempt to smooth out these wrinkles, Emmett organised to introduce himself to Duma, while Sheridan was charged with meeting Sir Michael Somare and daughter Betha at the Havanaba bar within the Airways Hotel, famous for its leather armchairs and antique cabinets.

“It was a pleasure to meet you and welcome you as yet another investor in our country even though you have been here before,” Betha wrote to Sheridan in June 2008.

From that point, Horizon began to get serious: the company set up an office in Boroko and hired a country manager.

By October 2008, Morgan Stanley’s prediction was already being realised when AGL sold its 3.6 per cent interest in the giant pipeline and processing plant known as PNG LNG for $1.1 billion.

It was a reminder of how much was at stake.

Vulnerable to political pressure

By May the next year, Horizon was also in on the action – selling half of its interests in two licences, PRL4 and PRL5, to Thailand’s P3 Global Energy Co for $US55 million, almost three times more than analysts believed the assets to be worth. The company’s share price soared.

But things weren’t as rosy as they appeared.

Behind the scenes, the Thais were questioning their investment, and Horizon was working overtime to get someone else – Canada’s acquisitive Talisman Energy – on the hook.

At the same time, with increasingly larger amounts at stake, the local politics started to get complicated. And unlike the big diversified players, Horizon couldn’t simply threaten to walk away. Its big bet was in PNG.

The company’s big pay day was contingent on firming up its gas resources to build its own pipeline and LNG-processing plant or tap into one of the existing projects. Even then its resources were on the marginal side, which meant any loss of acreage was potentially fatal for its ambitions.

That left it exposed to political pressure and everyone knew it. Enter PNG’s former petroleum minister and deputy prime minister, Sir Moi Avei, who Horizon hired as an adviser to the board, despite one industry contact warning he may be “implicated in some dubious licence deals etc”.

Those claims were never tested, but the public record shows just a year earlier, Sir Moi was found guilty on three counts of “misconduct in office”. He was fined $1500 and forced out of parliament.

‘You scratch my back …’

That was apparently no obstacle for Horizon as Sir Moi set about working the corridors and securing the company’s licences. In outlining his role to Emmett and Sheridan, he stressed the importance of face-to-face meetings and not stepping on the “turf” of other fixers, managing relationships within the department and at the village level. And when it came to handling Duma, he was clear how the minister operated.

“I’ve been helping Minister Duma out for the past 6 weeks because the LNG project is in my backyard. You know how the system works ???you scratch my back and I’ll scratch yours’,” he wrote.

But Sir Moi, who one source described as the epitome of PNG’s “big man culture”, quickly came to see the political winds shifting against Horizon.

“With regards to the minister [Duma] I can sense he is up to something. He did call me two weeks ago but somehow we have yet to meet in person. I’m still chasing him,” he wrote in November 2009.

He was right. Duma was indeed “up to something”. The trigger for the minister to make his play was a move by Horizon‘s joint venture partner, the South Australian energy giant Santos, to sell out of its interest in one licence. That suddenly became a road-block.

Sir Moi characterised these as “basic” issues, that could be untangled once Horizon understood the “process”. He warned the company’s failure to stay with the “process” would see it become a “political pawn”.

“We need to avoid [this] at all cost. I will elaborate when I see you and Brent,” he said.

Licence in jeopardy

By July, those fears were out in the open, and rumours were swirling. One engineer warned Duma “has done this before”. “[He] rescinded a licence and resold to someone else,” the company was warned. “Duma has a buyer.”

As the reality of losing a licence worth more than $100 million grew, a series of heated emails were exchanged. The Department of Petroleum and Energy accused the operators of failing to keep the site in “good standing” and not having spent the agreed amount.

Horizon and joint venture partner Santos responded with strongly worded legal letters. But on June 28, 2010, Duma served a notice that PRL5 was to be cancelled. Horizon countered by taking the unprecedented step of suing the minister, the department and the Petroleum Advisory Board for an unfair loss of licence. It was taking on a corrupt and broken system.

“I want to convey a message to Minister Duma, that’s he’s got a real dog fight in [sic] his hands,” Sir Moi emailed.

Horizon‘s lawyers at Blake Dawson said the company had strong support in the industry for its stance. “The good guys are all pretty stirred up by these goings on,” the company was told.

Then the company abruptly changed tack with a grovelling letter.

“Minister, we very much regret that this issue [the revoked licence] has led to the current situation [the litigation],” Emmett wrote to Duma. “As always, we remain open to any suggestion from you as how the current tension might be defused.”

The message got through and by March 2011, a sealed settlement had been negotiated and approved by the court. Horizon would keep 70 per cent of PRL5 (now known as PRL21), and the minister would award the other 30 per cent at his discretion.

From the minister’s discretion a 10 per cent stake in PRL21 would be given to the shell company Elevala Energy Ltd, a company without the experience or capital to develop such a complex asset and whose sole shareholder, Simon Ketan, had close personal and professional links to the minister.

In the weeks following this grant, Horizon would ignore repeated corruption warnings and buy out Elevala for $US10.3 million, a price tag which was revealed on Monday by the Financial Review after remaining secret for nine years.

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Thai geologist shot dead in second mining-related killing in Bougainville

Bougainville has a fraught relationship with mining. Disputes over the Panguna mine (pictured) were the catalyst for the decade-long civil war that devastated the region.

Channon Lumpoo, 27, was shot as he conducted exploration activities for a new gold mine in the region

Dickson Sorariba | The Guardian | 25 February 2020

A Thai geologist working at a new gold mine in Bougainville has been shot dead in the second killing at a mining project in the autonomous region of Papua New Guinea in recent months.

Channon Lumpoo, 27, was shot by a high-powered weapon on Monday in the Kokoda constituency of south Bougainville.

Channon was a geologist with Austhai Geophysical Consultants, which is attached to a Philippines-owned company SRMO, and was involved in exploration activities at the time of his death.

Deputy police commissioner and chief of the Bougainville police service, Francis Tokura, said police were conducting investigations around Arawa because they were unable to travel further inland between South and Central Bougainville where the killing took place.

Bougainville police said the remoteness of the location made it impossible to conduct proper investigations.

Late last year, a Papua New Guinean geologist was killed in a similar manner.

Tokura said the incident continues to overshadow the image of the Autonomous Bougainville Region, which voted overwhelmingly for independence from Papua New Guinea in a referendum late last year.

Mining is a fraught subject in Bougainville, with disputes over the Panguna gold the catalyst for a decade-long civil war in the region, which ended with a peace agreement in 2001.

Tokura blamed the foreign companies operating on the island for not following proper protocols.

“If the companies had followed proper process in talking to the rightful landowners prior to conducting exploration activities, I’m sure we would have avoided such unwarranted deaths,” said Tokura.

The deputy police commissioner has called on all companies intending to enter Bougainville to talk to rightful landowners and report to the Bougainville police and the ABG government before conducting their business.

“Mining is a very sensitive issue and there are various factions who claim ownership of these mines. I appeal to all companies intending to do exploration activities to refrain from such investment until all issues are sorted out,” said Tokura.

He said there are illegal weapons still in the hands of locals and any misunderstanding may result into unnecessary killings.

The body of the Thai national killed is at the morgue in Buka while preparations are done to fly the body to Port Moresby for a postmortem.

The Thai consulate in Port Moresby said it was aware of the death of its citizen. It declined to make further comment when contacted.

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Internal probe shows why ‘World Class’ miners can’t be trusted

The tailings dam failure on Jan. 25, 2019, killed 257 people and left 13 others missing for an assumed death toll of 270. (Image courtesy of Vinícius Mendonça | Ibama.)

Internal probe confirms Vale knew Brumadinho dam was unsafe

Cecilia Jamasmie | Mining dot com | February 21, 2020 | 3:48 am  

Brazilian iron ore miner Vale has published the results of an independent report into the Córrego do Feijão mine’s tailings dam collapse that killed 270 people last year, which reveals the company knew about the facility’s fragile condition since 2003.

According to the document, prepared by a committee formed by Vale last year, concerns about how unstable the main B1 dam was were raised at various points over the course of 16 years, but the miner failed to appropriately deal with them.

Last month, state prosecutors charged Fabio Schvartsman, the chief executive at the time of the burst, and 15 other people with homicide. Schvartsman left his position at the company in March 2019.

They also charged Vale and its German contractor, TUV SUD, with environmental crimes, as the burst unleashed an avalanche of muddy mining waste that polluted the nearby town of Brumadinho, water streams and agricultural land.

The independent committee, led by former Federal Supreme Court minister Ellen Gracie, concluded the tailings storage facility’s rupture was triggered by structural instability caused by liquefaction.

The situation, it says, was worsened by a series of other factors, including inadequate drainage of the reservoir and the fact the dam was not designed to contain liquefied material.

Previous reports

The tragic incident has triggered over the past year several criminal investigations, including a global inquiry into the status of 726 tailing dams.

In mid-December, the company released a long-awaited report from a panel of experts on the technical causes of the dam failure at the mine in Brumadinho. The report found that the failure was “unique” as it occurred “with no apparent signs of distress prior to failure.”

That document acknowledged that parts of the dam were under very high loading due to its steepness, the heavy weight of the tailings and the high internal water level.

“The combination of a steep upstream-constructed dam, high water level, weak fine tailings within the dam, and the brittle nature of the tailings created the conditions for failure,” it concluded.

Destruction caused by spilled tailings from the Córrego do Feijão iron ore mine in January 2019. (Image courtesy of Felipe Werneck | Ibama.)

The investigating team provided recommendations of technical and governance nature, adding that Vale should evaluate the potential risks at other similar dam structures.

The iron ore giant responded by saying it had already addressed most of the issues mentioned in the recommendations, taking steps to improve its internal controls.

The Rio de Janeiro-based miner, which posted this week a loss of $1.68 billion in 2019, said it will announce a timetable for implementing the proposed actions within 30 days.

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Booting Exxon gives Marape a boost – for now

Western Highlands province in Papua New Guinea, the region of the proposed P’nyang LNG development (ADB/Flickr)

The rejection of the P’nyang LNG deal signals a new way of doing business, and a shifting landscape for US concerns.

Bal Kama | The Interpreter | 19 February 2020

The recent announcement of the Papua New Guinea (PNG) Government to cease all negotiations with one of the United States’ largest oil and gas companies, Exxon Mobil, over the P’nyang LNG project, a new gas field in PNG, has broader implications for the US and Papua New Guinea.

At first glance, the decision against Exxon for allegedly acting in bad faith is part of a wider crackdown by the government of Prime Minister James Marape to ensure greater fairness in the resource sector. Since ousting then–Prime Minister Peter O’Neill in a vote of no-confidence in 2019, Marape has charted a different approach from that of his predecessor, under the banner of “Take Back PNG” – a larger policy objective to reassess PNG’s developmental direction and regain lost opportunities. Marape laid out his vision in his inaugural visit to Australia in 2019 and is gradually applying it in many sectors.

The decision illustrates the growing frustrations of dealing with investors in resource-rich PNG, and it further demonstrates an emerging crop of PNG leaders confident in reassessing the status quo. For the US, Exxon’s alleged conduct, criticised by the PNG government as being “exploitative”, undermines US efforts in the Pacific region as a force for good.

Exxon Mobil has a US$19 billion liquefied natural gas project in PNG (PNG LNG), which made its first shipment in 2014. The PNG LNG project, which remains the largest economic investment by the US in the Pacific, coincided with former US President Barack Obama’s announcement in 2012 of a “pivot to the Pacific” policy. The geopolitical scenario of the day, the excitement of having the US interested in PNG, and the high expectations surrounding a global and reputable company, among other factors, influenced the PNG government’s initial agreement for Exxon to operate the PNG LNG project. It was thought the deal would have a transformational impact on PNG’s economy – an assurance that continues to be projected by some quarters.

However, the overall economy of PNG did not experience the projected windfall. Instead, there were a series of negative outcomes over the years at both a national and a local level – national debts grew, and unfavourable benefit-sharing arrangements and royalties led to conflict among traditional resource landowners. Many have questioned whether the resource boom marked by the PNG LNG project was in fact a “resource curse”.

“Absolute bad faith”

The ousting of Prime Minister Peter O’Neill in 2019 was partly a result of growing grievances over the failure to deliver on the promises of the Exxon-led project and other resource deals. An important issue was the high level of concessions made in those deals. Historically, PNG governments, desperate to become investor-friendly, have made hasty concessions that often disadvantaged the country from having a fair share of the revenue from the development of their resources.

In a 2016 report, the International Monetary Fund (IMF) observed that “the tax arrangements for PNG’s mining and petroleum sectors are very generous compared to other resource-rich countries and do not reflect the maturity of the PNG resource sector”. The World Bank, in a 2017 report, also found particularly for the Exxon-led LNG project that Exxon Mobil and its PNG LNG partners created “a complex web of exemptions and allowances that effectively mean that little revenue is received by government and landowners”.

The PNG government must share some burden of fault for creating this scenario – including, for instance, the failures by previous PNG governments to negotiate a favourable outcome for the country, the misuse of funds by political leaders, a politicised bureaucracy unable to carry out their due diligence, and judicial interventions that at times hinder payments to disgruntled landowners.

This does not, however, excuse Exxon and its partners from the grave unfairness suggested in these reports. This, together with his experience as a minister in previous governments, underpinned Marape’s firm stance on taking a different approach in the current deal on the P’nyang LNG project. In his appeal for Exxon Mobil to act fairly, Marape noted that “the initial terms [in the PNG LNG project] provided by PNG were so generous” and that new “reasonable terms” should be considered for the P’nyang project.

Papua New Guinea’s Prime Minister James Marape (C) at Parliament House in Canberra, during a six-day visit to Australia in July 2019 (Mick Tsikas/AFP via Getty Images)

The terms proposed by the PNG government are not publicly available, but they appear to include giving no fiscal concessions in P’nyang, treating it as separate project from the current LNG projects and increasing domestic market obligations, local content participation, and landowner’s royalties from the current rate of two percent. The Prime Minister described Exxon’s refusal to accept the terms as a move to “extract even more profit for themselves”, while Kerenga Kua, the Minister for Petroleum and Energy denounced Exxon as acting in “absolute bad faith” and coming into PNG “with a determination to exploit our vulnerabilities, exploit us for our weak economic position and take advantage of us”.

A principled populist

The firm position taken by the Marape government is historic – no previous government has ever taken such an approach. PNG has had resource deals in the past that have resulted unfavourably for the country, but past governments have been shown to align more closely with investors than with their citizens.

The leaders and the people of PNG appear to be supportive of Marape’s approach. Further, the government is considering amending and tightening the legislative framework to ensure an equitable resource sector.

Marape is unlikely to concede to Exxon Mobil, as he insists: “You win for your shareholders, and I win for my people”. James Donald, a Member of Parliament representing the area where P’nyang LNG site is located, cautioned Exxon against crossing “a line between commercial parity and commercial greed”. Other MPs representing the resource areas have also demonstrated support for Marape’s stance against Exxon.

The PNG government is likely to reconsider its current position if Exxon responds positively to its terms. Unless that happens, however, there appears to be a general distrust for Exxon among the people of PNG – a situation far from the hope Exxon represented when it first entered the country. The distrust for Exxon has broader implications when one considers Exxon not only represents US economic prestige in the Pacific, but a society whose business ideals are expected to reflect the democratic values of fairness and just outcomes. The longer this tussle between Exxon and the PNG Government continues, the greater the distrust is likely to be, not only for Exxon, but for what it represents – the United States – in the Pacific.

As the vote of no-confidence scheme against a sitting government in PNG resumes later this year, those affected by Marape’s firm policies may hope for a change in government. In the fluid political landscape of PNG, a populist and comparatively principled Marape faces a challenge beyond just his immediate political rivals, and inside company boardrooms. However, if anything, his approach to governance so far has been reassuring for the people of Papua New Guinea.

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New report names top British companies responsible for toxic mining legacies

Kalimantan, Indonesia. Coal mining operation. Credit: Daniel Beltrá

BHP and Rio Tinto have a long history of extracting minerals then pulling out, leaving devastation in their wake. Climate justice organisation London Mining Network reveals the extent of this in a new report.

London Mining Network | Feb 19, 2020 

London Mining Network has published a new report entitled ‘Cut and run: How Britain’s top two mining companies have wrecked ecosystems without being held to account’. The report includes examples from Southeast Asia of where the British-Australian multinationals BHP and Rio Tinto have left legacies of conflict and environmental destruction, long after they’ve fled the scene.

Recent examples of mining messes include Brumadinho, the tailings (mining waste) dam owned by Brazilian mining company Vale, which collapsed in January 2019 in Minas Gerais, Brazil. Vale executives, along with its German advisors TUV Sud, were recently charged with the homicide of 272 people; 14 people are still missing. Vale, along with BHP, jointly own the Samarco iron ore mine and tailings dam which also collapsed in 2015, causing Brazil’s worst environmental disaster in history and the deaths of 20 people. The trauma due to loss of life, displacement and job loss and the environmental repercussions of contamination of river systems in both catastrophes will be felt for decades to come. The entire mining industry needs to be held to account for such mining messes, and laws made which demand the cleaning up of messes made by mining companies before they pull out of projects.

Despite the best efforts of the industry, particularly BHP, to greenwash the extraction of fossil fuels and metals, the practice of ‘cutting and running’ when companies close mining operations tells us another story. The harm that extraction causes people and the planet doesn’t end once the companies disappear.

On 10th February, BHP became the world’s top copper producer, but this isn’t good news for the communities affected by their copper mines, and the other metals and minerals it extracts. In 2002, the company walked away from the Ok Tedi copper-gold mine it had controlled since 1982 in Papua New Guinea. For years it had dumped waste straight into the local river system. Eventually the company concluded that it should no longer do that and should not have operated the mine after all. But 18 years later the contamination and mess remains.

Rio Tinto was the majority owner of the Panguna mine in Bougainville, operated by Bougainville Copper Ltd (BCL), for 45 years. It dumped toxic mining waste the copper-gold mine in Bougainville (an island off the coast of Papua New Guinea) straight into the local river system between 1972 and 1988. This caused such outrage that it sparked a war for independence from Papua New Guinea, a war in which thousands were killed and independence was not won. The mine was abandoned. In 2016 Rio Tinto gave the mine to the authorities in Bougainville and Papua New Guinea but they do not have the financial or technical means to clean up the waste.

For shareholders in Rio Tinto and BHP, the deadly legacies of these mines make for risky investments, as the report illustrates.

Co-author of the report, Hal Rhoades, from The Gaia Foundation, said:

“This report shows how British multinationals have profited from destroying ecosystems and people’s livelihoods on vast scales in the Global South, while leaving their mess behind for communities to deal with. These are the same companies who are now trying to convince us that they hold the answers to the climate emergency. We cannot continue to pay lip service to tackling climate change while allowing the world’s largest corporations to devastate ecosystems that help regulate the climate and the communities that care for them. Holding these companies accountable and calling out their greenwashing is a crucial part of climate justice.”

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PNG Prime Minister officially takes on Horizon Oil

  • A saga of corruption and bribery allegations continue for Australian company, Horizon Oil
  • Papua New Guinea’s (PNG) Prime Minister, James Marape, has now publicly taken aim at the scandal — making the issue a priority
  • The scandal involves a AU$15.4 million transaction to a small shell company, reportedly linked to former PNG Petroleum and Energy Minister, William Duma
  • Duma continues to work in the PNG Government and James Marape has denied calls for an immediate sacking
  • Marape and Duma are expected to make a formal statement on the scandal
  • Shares in Horizon Oil continue to devalue on the Australian market, falling 3.61 per cent on Tuesday for a worth of eight cents each

Fraser Palamara | The Market Herald | 19 February 2020

Prime Minister of Papua New Guinea (PNG), James Marape, has publicly taken aim at Australian company Horizon Oil (HZN).

The pacific island leader is backing an investigation into the Australian explorer — spiralling from reports of ‘missed corruption warnings’ and a suspicious multi-million-dollar payment.

News of the saga first reached headlines earlier this month, including allegations of bribery.

Now the investigation has reached all the way to the top order of Papua New Guinea’s Prime Minister, James Marape.

“If there is corruption involved, then find the evidence and due action will take its course,” James Marape said publicly on Tuesday.

“I have sent a request to the highest levels in Australia. I am interested in this matter.”

“The Ombudsman and the police have every right to establish a file on this matter.”

Marape was elected as Prime Minister last year, running a campaign on promises to clean up corruption and hold foreign companies more accountable. He has commented that domestic investigations into Horizon Oil could begin.

The Horizon Oil allegations of corruption spawn from a payment made in 2011, following a denied petroleum licence application in 2009.

Horizon Oil then made a AU$15.4 million payment to an ‘unknown shell company’ — reportedly linked to PNG’s Minister for Petroleum and Energy at the time, William Duma.

Duma’s department was shown in documents to award a 10 per cent stake in a development licence to the same shell company. This company was listed in ownership under Duma’s personal lawyer at the time.

William Duma still works within the PNG Government, but Prime Minister Marape has denied calls for an immediate sacking.

However, Horizon Oil’s Chief Executive Michael Sheridan has faced fallout — being suspended as of last week.

Share prices in the publicly traded Australian explorer also fell 30.8 per cent at the time, lowering to a valuation of 8.3 cents each.

James Marape said on Tuesday that he and William Duma will make a formal statement on the matter in the very near future.

Shares in Horizon Oil continue to shrink, lowering an additional 3.61 per cent on Tuesday. They last closed at eight cents each.

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