Group wants deep-sea mine permit, licence cancelled

The National aka The Loggers Times | March 16, 2020

A GROUP of people concerned about the implications of deep-sea mining wants the Government to cancel the environment permit and mining licence granted to Nautilus Minerals Niugini Ltd.

The group is led by Jonathan Mesulam of the Alliance of Solwara Warriors, Peter Bosip, the director for the Centre of Environmental Law and Community Rights, Marie Mondu, the development secretary of the Catholic Bishop’s Conference of PNG and the Solomon Islands, and Cardinal Sir John Ribat, the Archbishop of Port Moresby, in association with the Catholic Bishops’ Conference, Coffee Industry support project, Caritas and the Social Communication of CBC PNGSI.

Mesulam said there was a lot of debate and opposition to the project since 2011 and with the project being declared “a failed project” the goal was achieved and asked the Government to go further and cancel its mining and exploration licence.

“The Solwara 1 Project has been declared a failed project in a public statement by the managing director of Mineral Resources Authority Jerry Garry in The National of Jan 24, 2020,” he said.

“The mining licence was given in 2011 and there is no mining, why is the company still holding onto the licence?

“The Government has to cancel the licence before the end of this year,” Mesulam said.

“As stewards of the sea and future, we are now giving notice to the responsible ministers to cancel the seabed mining licence ML154.”

Bosip said the deep-sea mining in PNG was the first of its kind in the world and “we do not know the negative impacts of it”.

“We do not know the best method of mitigating its negative impacts that will arise, we are not prepared to face the negative impact of deep-sea mining.”

Wafi-Golpu Negotiations Have Not Recommenced – Newcrest

Matthew Vari| Post Courier | March 16, 2020

NEGOTIATIONS into Morobe’s Wafi-Golpu project is still pending according to project joint venture partner Newcrest Mining Limited.

Newcrest Mining PNG country manager Mr Stanley Komunt said this in response this paper queries in relation to comments made by Mining Minister Johnson Tuke last month on government’s intention to resumes negotiation following the dismissal of the memorandum of understanding in court case relating to the project.

Mr Komunt said the main reason for uncertainty was the relays [sic] in the proposed revised mining act, which is still yet to be passed by government and  how concerns raised may be factored into the amended act.

“We from the JV’s point of view have not made a commitment as yet to progress any discussions.

“There is a couple of reasons why and number one is more to do with the current discussions on the revised mining bill.

“We really don’t know where that is going to end. Whilst the Prime Minister has given us, the industry and SNT (State Negotiating Team) team to go and back and since our meeting in January 17 in Brisbane.

“He has given us two months and we have been meeting last month now and we are slowly getting there but there is still some major, not so much disagreement, but misalignment I would say,” Mr Komunt pointed out.

Komunt pointed out other particulars also in the air such as benefit sharing, royalty and contracts have all been relayed to the minister responsible for mining.

“Whilst we appreciate, the company, not only us but the industry appreciates that country needs to get a better share and we want to make sure that is realized through the negotiations that we will have.

“We are not quite there yet to start the negotiations for Wafi. We have relayed that to the minister.

“Because if the revised mining act changes it will have an impact on the project economics and how we have done our planning and that is a major concern and we can’t do anything.

Prime Minister Marape has indicated his government is set on delivering the project, a point Komunt added the PM is well aware and supportive of an understanding going forward.

PNG transfers remaining BCL shares

Carmella Gware | Loop PNG | March 13, 2020

The PNG Government has fully transferred its entire 36.4 percent share in the Bougainville Copper Ltd to the Autonomous Bougainville Government.

This was one of the resolutions reached during the first, and possibly the final, post-referendum Joint Supervisory Body meeting held on Thursday, the 12th of March, at Port Moresby’s APEC Haus.

It was the first Joint Supervisory Body, or JSB, meeting to be held since the referendum last year. It is also the last JSB as its name has been changed to Joint Consultative Body, and this body will continue to provide oversight to the post referendum consultation processes.

During the JSB, teams from the PNG and Autonomous Bougainville governments, including President John Momis and Prime Minister James Marape, sat together to decide a future for Bougainville.

The sixth out of the 13 agendas discussed and passed included the transfer of Bougainville Copper Ltd shares.

The JSB noted that in 2017, the National Executive Council made a decision for the National Government to transfer 17.4 percent from its 36.4 percent shares to the landowners of Panguna. Following that, on the 13th of December, 2019, at the joint announcement of the Bougainville Referendum results, Prime Minister Marape further announced that the National Government will transfer to ABG its remaining 19 percent of the BCL shares.

“This JSB affirmed that the entire shares of Bougainville Copper be passed to Bougainville Mining Ltd – the Bougainville Government and Bougainville people’s subsidiary company,” the PM, flanked by the ABG President and members of their technical teams, told media after a full day of meeting.

Rio Tinto and the ABG both own 36.4 percent each while public shareholders hold the remaining portion of the share capital.

Apart from BCL shares, the PNG Government has made it clear that the constitutional Restoration and Development Grant (RDG) will be given to support the budget on Bougainville while the National Planning Ministry has been directed to clearly define the K100 million commitment and report back in the next Joint Consultative Body meeting this year.

The JSB has also acknowledged and accepted the democratic choice of the Bougainville people for Independence.

Alluvial Sector Revenue at K550m in 2019

Patrick Tom | Post Courier |  March 9, 2020

The country’s alluvial sector production and revenue has climbed to K550 million in 2019, an increase of K140 million from what it earned in 2018.

Mineral Resource Authority regulatory operations manager Roger Gunson revealed during the launching of the Reducing Mercury in PNG ASGM sector last Friday that last year the country’s alluvial sector generates revenue of K550 million, and produced 120,000 OZ (ounces) of gold.

When put that in perspective that’s similar to a medium size mine like Simbari mine in New Ireland.

Mr Gunson said gold represents 70 per cent of mineral revenue, adding that current the gold price as of last Friday was at almost US$1670 an ounce filtering with historic highs.

“The high gold price is beneficial for PNG and the alluvial sector,” he said.

“For every US$100 increase in the gold price, our mineral revenue increases by over K650 million,” said Mr Gunson.

He said that provides some perspective on the significance of gold to our economy.

“From the grassroots miners working the rivers and streams boost their rural household income, through to the national government collecting taxes.”

“The sector is one of the largest small and medium enterprise directly benefits those communities that involve in alluvial gold mining,” said Mr Gunson.

He also pointed out that PNG alluvial sector has a significant component of the overall mining industry of Papua New Guinea.

It has been operating since 1881.

MRA embarks to reduce mercury usage

Alluvial miners at work on Bougainville

Cedric Patjole | Loop PNG | March 8, 2020

The Mineral Resources Authority (MRA) recently launched a project to reduce the use of mercury in small scale mining operations.

The Project aims to identify the extent to which mercury is used in the industry and how it is used and by whom, in a bid to mitigate health risks.

On March 6th, the ‘Reducing Mercury Use in Papua New Guinea’s Alluvial and Small-Scale Gold Mining Sector’ Project was launched in Port Moresby, following a workshop with key stakeholders and project partners.

The Alluvial Mining industry is one of the largest small to medium enterprise sectors in PNG that engages thousands of rural small scale miners.

It is also a sector that is great health risks due to the usage of mercury.

“This project is designed to get a better understanding of our alluvial sector general, and more specifically to identify the extent to which mercury is used how it is used and by whom,” said MRA Executive Manager of Regulatory Operations, Roger Gunson.

“In addition, it will track the supply trial and identify the regions where it is used. The data collected relating to the sector will be entered into a database administered as part of MRA’s land-folio tenement system.

“This will be able to better inform on policy development, resourcing, training and sector needs.”

Gunson, said the Alluvial Mining is one of the biggest revenue earners for the country with K550 million recorded in 2019.

He said this is similar to revenue generated by smaller mines such as Simberi Mine. However, the use of mercury in extracting gold poses major health risks to the miners.

“Unfortunately, in many parts of PNG gold is extracted through the use of mercury. This is a danger to the health of miners, their families and communities as well as we have heard from the workshop today.

“Hence, we have a paradox, we want the gold and we want to be able to seek it, but we also have a health risk that sits alongside it,” said Gunson.

The project is funded by the US Department of State and implemented by Artisanal Gold Council (AGC) in conjunction with the MRA.

Mining in Ok Tedi will end around 2027: Exec

Peter Esila | The National aka The Loggers Times | March 2, 2020

OK Tedi Mining Ltd in Western invests about US$20 million (K66.46 million) annually in drilling for reserves, chief executive and managing director Peter Graham says.

Graham said current exploration was focused near the Mt Fubilan mine and within existing special mining lease (SML).

“The most prospective targets indicate underground rather than open pit mining,” he said.

Graham said the life of the mine, based on current reserves and mining rate, would end around 2027.

“The mine is limited by an agreement with communities on the amount of waste material mined and placed in waste dumps,” he said.

“Without this limitation, mine life would be longer.

“Efforts are therefore being focused on potential stable waste dumps, in-pit waste disposal and a potential tailings storage facility.”

Meanwhile, OTML is a major producer of copper concentrate for the world smelting and refinery market in Germany, India, Japan, South Korea and the Philippines.

The mine exports copper as a concentrate which contains gold and silver.

From start of operations in 1984 to end of 2018, Ok Tedi has produced 4.83 million metric tonnes of copper, 14.8 million ounces of gold and 32.7 million ounces of silver.

In addition to the SML, OTML holds a portfolio of several exploration leases (ELs), other leases for mining purposes (LMPs) under the PNG Land Act.

Apart from its direct monetary contribution, OTML is also involved in Western’s development through tax credit scheme and other infrastructure projects such as health centres, school classrooms, houses, roads, airstrips, jetties, water supply and communication systems for the villages.

Sinivit mine clean up to cost taxpayers K10m

Clean up to cost K10mil

Peter Esila | The National aka The Loggers Times | February 27, 2020

IT may cost up to K10 million to detoxify and clean up cyanide at the abandoned Sinivit mine in East New Britain (ENB), an official says.

Mineral Resources Authority (MRA) managing director Jerry Garry said the Conservation and Environment Protection Authority (Cepa) and MRA officials visited the site last year and had completed monitoring by sampling to test for elevated cyanide content in the soil and water sources.

“There are interim plans to have security guards on site,” he said.

“Cepa advised that it may cost up to K10 million for external experts to detoxicate and clean up the cyanide.”

Last week, ENB Governor Nakikus Konga told Parliament that there were 18 vets, (an outdated way of storing mine wastes at the abandoned mine), which could be disastrous for the people, especially during the flash flood the province was experiencing.

Konga’s concerns were on the effect the mine wastes would have on his 45,000 people along the Warangoi River catchment area.

He said he had been discussing with Mining Minister Johnson Tuke for the last six months regarding the mine.

“He came to my province last weekend to see for himself what is happening with the abandoned Sinivit Gold mine, it will cause a catastrophe to my province.”

Meanwhile, Environment, Conservation and Climate Change Minister Wera Mori said he would be visiting the abandoned mine to assess the wastes.

“I will basically make a visitation to that province, hopefully together with MRA,” he said.

Companies leave communities to grapple with mining’s persistent legacy

John C. Cannon | Mongabay | 28 February 2020

• The destructive legacy of mining often lingers for communities and ecosystems long after the operating companies leave.
• Several large, multinational mining corporations have scrubbed their images — touting their commitments to sustainability, community development and action on climate change — but continue to deny accountability for the persistent impacts of mining that took place on their watch.
• A new report from the London Mining Network, an alliance of environmental and human rights organizations, contends that these companies should be held responsible for restoring ecosystems and the services that once supported communities.

The scale of excavation for copper and gold in the 1970s and 1980s at the Panguna mine, then one of the world’s largest open-pit mines, was massive: It swallowed up surrounding tracts of forest and farmland and wiped out wildlife populations on the island of Bougainville off the coast of Papua New Guinea. The company that operated Panguna, a predecessor of London-based mining giant Rio Tinto, dumped the mine’s contaminant-loaded wastewater into local streams for more than a decade and a half, killing off fish and rendering them too polluted for human use.

A mill at the Panguna mine, Bougainville. Image by Robert Owen Winkler

Neither the Papua New Guinea government nor the company stepped in to protect the environment, even after local communities, reeling from the impacts, sounded the alarm on the mine’s effects on their health, lives and livelihoods. Those tensions festered, and soon a war for Bougainville’s independence began. Fighting throughout the 1990s killed some 20,000 Bougainvilleans, and though a 2001 peace treaty granted Bougainville a measure of autonomy, the effects of the conflict and the mine still linger.

The company abandoned the mine in 1990, leaving it under the control of the Bougainville Revolutionary Army, and in 2016, Rio Tinto officially handed over its shares in the mine to Papua New Guinea and Bougainville.

“There is, in my personal view, an obligation of Rio Tinto to come back and to contribute to cleaning up the mess they left behind,” Volker Boege, who has studied the conflict and co-directs the Peace and Conflict Studies Institute Australia in Brisbane, said in an interview. “The effects of mining will be with the people on the ground long after [the] mining ceased.”

Holding Rio Tinto and other corporations accountable once they’ve relinquished their control of mines remains a difficult task, according to a new report published Feb. 19 by the London Mining Network, a consortium of environmental and human rights groups.

Equipment at the Panguna mine in the early 1970s. Image by Robert Owen Winkler

Rio Tinto said in a 2016 letter written by a company executive that the operation of the Panguna mine “was fully compliant with all regulatory requirements and applicable standards at the time.” But for Boege, who wrote the case study on the Panguna mine included in the London Mining Network report, that assertion doesn’t address the company’s ethical responsibility.

“I think it’s not good enough to just say, ‘We followed the legal obligations of the early 1970s or late 1960s,’” Boege said, “because everybody knows that this enables this kind of environmental destruction that people are suffering from even today.”

The report details lays out similar stories throughout Oceania and Southeast Asia. In western Papua New Guinea, BHP, a mining company with headquarters in Melbourne and London, elected to go with riverine tailings disposal — the same waste management strategy that polluted waterways around Panguna — for the Ok Tedi mine, a gold and copper deposit that BHP excavated until 2002. Situated amid forested mountains, the mine has been blamed for a 95% drop in fish numbers in the Ok Tedi River and degrading 2,000 square kilometers (772 square miles) of forest. Researchers figure that Ok Tedi has affected the livelihoods of around 40,000 people who depend on fishing, hunting and gardening.

Hannibal Rhoades, head of communications for the London-based NGO Gaia Foundation, said that companies like BHP often lobby governments for less stringent regulations. In Ok Tedi’s case, BHP persuaded the government to go along with riverine tailings disposal in the early 1980s.

The Ok Tedi mine in western Papua New Guinea. Image by Ok Tedi Mine CMCA Review

Papua New Guinea, like many resource-rich countries, has struggled to develop economically. As a result, leaders are often amenable to legal conditions favored by the company so they don’t lose a possible source of revenue.

While that’s a familiar pattern, said Rhoades, who wrote the Ok Tedi case study, it shows that governments too must be held accountable for protecting their citizens and the environment.

In addition to the companies’ role, he said, “It’s a game of power influence at the state level.”

Across the border in Indonesia’s half of New Guinea Island, the massive Grasberg gold and copper mine sidles up to the flanks of some of the region’s tallest mountains. Nearby, rare (and shrinking) equatorial glaciers cling to the summit of Puncak Jaya, towering 4,884 meters (16,024 feet) above sea level.

Still in operation today, the mine pumps an estimated 200,000 metric tons of waste into the Ajkwa River every day, contaminating a source of drinking water for local communities. Rio Tinto had been involved in the mine from 1996 until 2018, when it sold its stake to Indonesia’s state mining company, PT Indonesia Asahan Aluminium.

The Grasberg mine as seen from space. Image by ISS Crew Earth Observations Experiment and the Image Science & Analysis Group, Johnson Space Center

An investigation by The New York Times in 2005 found that Rio Tinto’s partner, U.S.-based mining company Freeport-McMoRan, had been paying tens of millions of dollars for Indonesian military and police to protect the operation’s employees. Local residents, such as Yosepha Alomang of the indigenous Amungme people, say that these government security forces in fact were there to deter local communities through intimidation from voicing their concerns.

But Rio Tinto says that when it sold its stake for $3.5 billion in 2018, its responsibility to address the problems for the local environment and communities that the mine has created ended as well, according to a case study written by Andrew Hickman, a researcher with the London Mining Network.

Hickman, Boege and Rhoades agree that challenging such contentions by companies that were once involved is an uphill battle. The success of using the courts varies. Several lawsuits against BHP for its operations of Ok Tedi yielded a settlement with the company, but BHP didn’t stop dumping waste in the river. In 1996, Alomang and other leaders sued Freeport unsuccessfully in the United States.

The London Mining Network advocates for the continued development of a United Nations treaty on transnational corporations that would codify protections for human rights.

Boege said that such “globally applicable guidelines” were necessary. But “they are not a panacea,” he said. “The problems can only be solved in the specific local context.”

Another tactic has been to bring local leaders like Alomang to the annual general meetings of companies such as BHP and Rio Tinto so they can speak with executives and shareholders about the problems their communities face.

Requests for comment from Mongabay to BHP and Rio Tinto went unanswered.

The Grasberg mine in 2007. Image by Alfindra Primaldhi

Companies have responded in their approach, however — at least as far as changing the narrative around the impacts of resource extraction. Rio Tinto, for example, says that a future “low-carbon economy” will rely on the minerals it produces, and touts its moves toward carbon neutrality in its operations.

Hickman calls such moves to scrub a company’s image “window dressing.” He also said that, when confronted with the testimony of leaders such as Alomang, these companies “have learned to be polite, but underneath the politeness is a fist of steel.”

That’s because the changes to operations, whether to make them more environmentally friendly or to ensure that communities are better informed, often lag behind the rhetoric put forth, the Gaia Foundation’s Rhoades said.

“It’s great that there’s that narrative and the investors are more active,” he said. But across much of their operations, he said, “their PR still far outstrips the genuine efforts on the ground to change practices.”

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.

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.