Category Archives: Exploration

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.

Leave a comment

Filed under Corruption, Exploration, Papua New Guinea

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.

3 Comments

Filed under Bougainville, Exploration

Artisanals allowed to mine ELs

PNG Report | 16 February 2020

COMPANIES with exploration licences do not have the right to stop landowners from doing alluvial mining on their tenements.

This is the word from Mines Minster Johnson Tuke, who said that in accordance with Papua New Guinea’s constitution, a company could obtain an exploration licence but alluvial mining was “confined and reserved for landowners”, The National newspaper reported.

Tuke was responding to East Sepik Governor Allan Bird’s questions relating to landowner groups in Maprik being denied access by a foreign company to do alluvial mining on their land.

Bird said even though the Mineral Resources Authority (MRA) issued a number of alluvial mining licences to landowner groups for the many alluvial prospects there, issues were still faced by those operating under those licences.

He said a foreigner was killed three months ago in his province as a result of issues relating to the MRA alluvial mining licences.

“The MRA and other government departments and agencies do not consult us before allowing foreign companies to operate in our province,” he said. 

Bird said a foreigner operating in Maprik had restricted local landowners from obtaining alluvial mining licences to operate on their land. “What happens to the rights of landowners when the MRA issues exploration licences to foreign companies to operate on their land?” Bird asked.

Tuke said even though alluvial mining was reserved for landowners, the MRA, through its mining advisory council, had the power to determine who was capable of conducting mining activities.

Leave a comment

Filed under Exploration, Papua New Guinea

Bougainville president accuses mining company of lying to Australian stock exchange

Bougainville’s Panguna mine, for which RTG Mining is seeking an exploration licence.

John Momis says his government ‘will not rest’ until Australian-linked miner seeking licence for Panguna mine is banned for life from Bougainville and PNG

Kate Lyons | The Guardian | 24 January 2020

The president of the autonomous Bougainville government has accused an Australian-linked mining company of lying to the Australian Securities Exchange over its plans to reopen one of the world’s largest copper mines.

In a scathing statement, John Momis, the president of the autonomous Bougainville region, accused the Australian-linked RTG Mining of “lies and deceptions” and said his government “will not rest until all RTG and their executives are banned for life from Bougainville and Papua New Guinea”.

Momis was referring to a statement issued by RTG Mining to the ASX on Tuesday in which the company sought to clarify recent press reports, which have alleged that RTG staff are banned from entering Papua New Guinea.

In December, after the results of a referendum that saw almost 98% of Bougainvilleans vote in favour of independence from PNG, Momis issued a warning banning people affiliated with certain foreign mining companies, including six from RTG and one from Kalia Group, from entering Bougainville. Momis said they were creating “disharmony” in the region and that he had sought the assistance of the PNG prime minister and office of immigration and border security to assist with keeping them out of Bougainville.

However, RTG clarified in its statement to the ASX that its executives were “not banned from travel to Papua New Guinea” and emphasised that “the national government currently [have] constitutional authority over border control for the country”.

RTG is seeking to secure an exploration licence at the Panguna mine in Bougainville. The Panguna mine was at the heart of the brutal civil war in the region that saw an estimated 20,000 people killed between 1988 and 1997. The mine, which once provided 45% of Papua New Guinea’s export income, has been mothballed since the conflict began, but there has been talk about reopening it.

Among the companies in talks about resuming mining in Bougainville are RTG, which is listed on the Canadian and Australian stock exchanges, ASX-listed Kalia, Bougainville Copper Limited, a former subsidiary of Rio Tinto that ran the Panguna mine in the 1970s and 1980s, and Caballus Mining.

Andrew “Twiggy” Forrest has also expressed interest in mining in Bougainville, with the Sydney Morning Herald reporting that representatives of his mining company, Fortescue, travelled there in 2019 to explore “potential opportunities”.

There are disputes over land rights at the Panguna mine site, but RTG is the joint venture partner of the Special Mining Lease Osikaiyang Landowners Association (SMLOLA). RTG wrote in their statement to the ASX that the members of the SMLOLA “are the customary landowners who own the minerals at the Panguna Mine under the Bougainville Mining Act”.

However, Momis said the SMLOLA was established under an old system and that the autonomous Bougainville government considered its claims over the mine “illegal, null and void”.

There are concerns that disputes over land rights at the mine site might reignite tensions in the region. The Bougainville government enacted an indefinite moratorium on renewing the licence of BCL, a controversial mining company, in January 2018 over fears it could reignite violent civil conflict. However, since then, the government has shown signs that it was in favour of restarting mining in the region.

Despite voting for independence from PNG, the question of how an independent Bougainville would support itself hangs over the vote, with some experts saying it is impossible for Bougainville to become financially independent without a strong mining industry and that it would take much longer for other mining projects to be established and become profitable than it would take to reopen Panguna.

The autonomous Bougainville government and RTG Mining were contacted for comment.

Leave a comment

Filed under Bougainville, Exploration, Mine construction

ABG President Momis bans several Foreign Company Executives from Entering Bougainville

President of the autonomous Bougainville government, John Momis. Photo: RNZI

Press Statement | PNG Today | December 22, 2019  

It has been brought to the attention of the ABG that certain foreign company executives and shareholders who have a travel ban imposed on them are still continuing to disrespect our customs and laws, and causing disharmony amongst our people at such a critical time in Bougainville’s history.

As such the ABG has had no choice but request the assistance of the Prime Minister of the National Government, Hon. James Marape MP and the Office of Immigration and Border Security, to impose a travel ban on the below individuals from entering PNG and Bougainville:

Mr Michael J Carrick – Chairman of RTG Mining

Ms Justine A Magee – CEO and Executive Director of RTG Mining

Mr Mark Turner – COO of RTG Mining

Mr Robert N Smith – Non-Executive Director of RTG Mining

Mr Phillip C Lockyer – Non-Executive Director of RTG Mining

Mr Renzie Duncan – Shareholder Central Exploration Pty Ltd.

Mr Nikolajs (Nik) Zuks – Shareholder of Kalia Group

I confirm this travel ban was put in place on 3rd October 2018, and now again on 24th September 2019. This travel ban will not be uplifted under any circumstance.

I hope this clears up any confusion or misunderstanding for anyone currently interacting with these individuals on the false hope of future business partnerships in PNG and Bougainville.

3 Comments

Filed under Bougainville, Exploration

Australian miner admits workers attacked in Bougainville

Radio New Zealand | 20 December 2019 

The Australian-owned miner, Kalia, has revised its account of how its geologist, Terry Wyn Kilya, died in north Bougainville.

Mr Kilya, from Enga Province, was an employee of Kalia/Toremana Joint Venture Ltd, which has been conducting mineral exploration in a disputed area.

Last week, the company announced he had died “in a fall”, but the Bougainville government has said Mr Kilya was killed in a clash with a group it called “criminal thugs.”

However, Kalia yesterday advised the Australian Stock Exchange that Mr Kilya and seven other staff were attacked by “an outside group,” during which the geologist had a fatal fall.

It said the other staff were left with stab wounds, lacerations and soft tissue injuries.

The government in the PNG autonomous region earlier said the company was out of order to be encroaching on disputed land but the company said it had the permission of the landowners.

‘The company has miserably failed’

Bougainville’s President John Momis has linked the death to criminal elements in an area, where tensions exist due to unresolved social problems related to the mining exploration work.

He said it was deeply regrettable that a talented and experienced geologist, who came to the region to share his skills and expertise, had been killed.

“Bougainvilleans have spoken in the referendum vote that we want to be liberated and free to charter our new path ahead, but this sort of unnecessary incident is disheartening,” Mr Momis said in a statement.

Mr Momis extended an apology and his condolences to Mr Kilya’s family and the people of Enga Province on behalf of the people and government of Bougainville.

A reconciliation payment or ‘bel kol’ of $US28,633 has been paid to the victim’s family to help with funeral arrangements.

“In our Melanesian way and culture, we want to truly say sorry to the people of Enga and the family of the late Terry Win Kilya by extending our ‘bel kol’ assistance to late Terry’s family,” he said.

Mr Momis had ordered the indefinite suspension of the company’s exploration licence and called for it to explain why such an avoidable tragedy was allowed to occur.

“The company has miserably failed to address its social issues and to fulfil its corporate social responsibility as a client of the ABG,” he said.

1 Comment

Filed under Exploration, Papua New Guinea

Bougainville mine activities suspended

Autonomous Bougainville Government President John Momis.

The National aka The Loggers Times | 18 December 2019

AUTONOMOUS Bougainville Government President John Momis has announced that all exploration activities on Bougainville are suspended for an indefinite period

Momis said the Bougainville Executive Council (BEC) decided to suspend all exploration activities in Tinputz, Isina and Kokoda due to the killing of a non-Bougainvillean geologist in Tinputz on Friday.

“BEC has now suspended the Toremana Joint Venture Company activities in its tenement areas of EL03/EL04 until further notice.

“The BEC has also summoned Kalia/Toremana to explain why such an avoidable incident was allowed to happen in the first instance.

“The BEC has directed the deputy commissioner of Bougainville police to investigate and bring the perpetrators to justice.”

Meanwhile, Kalia Ltd has passed their condolences in a statement to the late Terry Win Kilya’s family and his friends.

“Terry Kilya received fatal injuries in a fall while undertaking fieldwork on the company’s Mt Tore tenement around midday on Friday. The company is working with local police and officers from the Department of Minerals and Resources Energy to determine the full circumstance related to the incident. The company through Tore Joint Venture Ltd manages two exploration licences on Bougainville.”

Leave a comment

Filed under Bougainville, Exploration