Tag Archives: Kumul Petroluem

Massive K1.5 Billion Loss For State Owned Kumul Petroleum

Post Courier | January 4, 2019

STATE-owned oil and gas company Kumul Petroleum Holdings Limited made a massive loss of K1.5 billion in the 2017 financial year, according to its annual report.

And when the Government was asked to comment yesterday, there was no response as of late yesterday, over the document that has been made public.

It also showed that after receiving LNG revenue totaling K1.8 billion in 2016, Kumul still recorded a massive K481 million loss for the year.

These figures were yesterday highlighted by the opposition leader Patrick Pruaitch, who described them as “scandalous” citing the O’Neill government’s K3 billion UBS loan as the cause among others. He said that Kumul’s consolidated accounts disclosed that following the 2016 loss, the UBS collar loans were extinguished in 2017 at a cost of US$842,423,000 (K2.8 billion), part of which could have been offset by the prevailing value of the Oil Search shares.

He said this was mismanagement of the country’s economy by the O’Neill government through a series of bad and corrupt decisions, the latest of which included the airlifted importation of the Italian-made Maserati cars.

“More money has been lost in this foolhardy transaction that the entire annual budget for either health or education and yet there has been a zero level of accountability,” he said. He said that K2-3 billion in APEC expenditure has also not been accounted for even though the 2018 Budget accounts had been closed.

“It would take many years to recover from a loss of that scale. Prime Minister Peter O’Neill and Treasurer Charles Abel both promised in September 2017 that Kumul Petroleum would disclose full details of this transaction in Parliament, but this has not happened,” he said.

Mr Pruaitch said he did not believe the losses indicated by the 2017 KPHL annual report represented the total financial losses because it excluded the original transaction costs prior to responsibility for purchase of 149 million Oil Search shares and UBS loan liabilities being passed on the company. There have been suggestions these transaction costs, which had no oversight from either Treasury or the Attorney General’s Department, could have been as much as A$200 million.

“The government wants to hide the truth, and the extraordinary level of losses, caused by these transactions,” Mr Pruaitch said, noting that Kumul Petroleum was the only State-owned enterprise that reported to the PNG Prime Minister.

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Low Tax Revenue From PNG LNG ‘Being Addressed’

Charles Abel

Post Courier | June 8, 2018

Audits into several major resource companies will run parallel with a joint exercise with commercial banks to identify taxpayers, Treasurer and Deputy Prime Minister Charles Abel announced yesterday.

“Audits are also underway by the Bank of Papua New Guinea into foreign currency accounts held by resource companies,” Mr Abel stated in an email.

“This is to ensure compliance with the remittance of proceeds in foreign exchange back to Papua New Guinea.

“Increased expectations for revenue collection at the IRC and Customs have also been factored in the 2018 budget, and collections are on track to date.

“I’ve been assured by the Internal Revenue Commission in writing that Kumul Petroleum is fully meeting its tax obligations.

“The implementation of these measures does not mean that we are relaxed. We have set clear objectives in terms of taxation revenue, as a percentage of GDP, to push up to 14.6 percent in 2018.

“I would like to see this rise to 20 percent eventually.

“Put simply, our revenue to GDP needs to improve, and that means maintaining efforts to grow the economy with a more efficient tax system and smarter project agreements.”

Abel was responding to Opposition leader Patrick Pruaitch’s accusation that PNG LNG partners were evading tax.

Mr Abel said the existing taxation structure was set by Pruaitch when he was in government.

“It is good to see the former longtime treasurer suddenly talk about these issues now,” Mr Abel said.

“The taxation arrangements with the PNG-LNG Project were established under the former National Alliance Government.

“These arrangements have seen relatively little tax paid to the government since production began because of a combination of low gas prices and accelerated depreciation.

“Treasury is now developing a fiscal template to establish a reviewed tax framework that does not impose extra burden on resource projects, but provides smoother and more consistent revenue to the Government and is easier to administer.

“In terms of the Internal Revenue Commission, our Government has invested significantly in capacity building there supported by an additional K19 million funding in this year’s budget.”

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Mayur surges on with nation-build [sic] agenda

Mayur managing director Paul Mulder with Gulf Provincial Governor Chris Haiveta signing the agreement on December 7

PNG Industry News | 2 February 2018 

MAYUR Resources’ ‘PNG nation-building agenda’ featured strongly in the company’s quarterly report for December 2017, which was released yesterday.

Highlights of the quarter included a 22-hole diamond drilling campaign completed at its Port Moresby limestone project and the subsequent announcement of a 382 million tonne resource there.

The company said that good progress was made on Mayur’s nation-building agenda with the memorandum of understanding signed with the government of Gulf province and another MOU with Kumul Petroleum.

“Gulf Province is situated adjacent to Central Province and is home to extensive mineral and energy resources. Mayur has extensive mineral exploration interests in Gulf Province and intends to leverage the proximity of plentiful, cheap and accessible domestic energy to industrial mineral resources to deliver various development opportunities for the region,” the company said.

The Kumul MOU centred on the sourcing and supply of gas for its proposed vertically integrated lime and cement business at Caution Bay, 25km north of Port Moresby and adjacent to the PNG LNG plant.

Mayur’s maiden diamond drilling campaign began at the Basilaki copper gold project in Milne Bay Province.

Mayur said it was continuing to work with Era Resources towards the development of a power plant to supply Era’s Yandera copper-moly-gold project in Madang Province.

“The company has supplied technical and commercial inputs for the supply of up to 200MW for the Yandera pre-feasibility study and expects to hold further discussions with Era pending the completion of this PFS and advancement to DFS stage.”

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Landholders will still have to wait for LNG dividend payments

lng-australia

No immediate dividend payment, says Sonk

Shirley Mauludu | The National aka The Loggers Times | January 19, 2017 
DIVIDENDS “will not be paid right away” to the beneficiary groups which have signed agreements to acquire Kroton equity in the PNG LNG project, an official says.
Kumul Petroleum Holdings Limited managing director Wapu Sonk made the statement on Tuesday when PDL (petroleum development licence) 4 from Gobe in Southern Highlands signed their unit application form to buy their share of the Kroton equity.
“What we are doing will maybe go through two steps. After the signing, it does not mean that we will release the dividends right away,” he said.
“We will wait for all the green field areas to go through the normal process of clan vetting, ADR (alternative dispute resolution), to properly identify and register all the landowner groups, ILGs (incorporated land groups), landowner representatives of the ILGs.
“We will allow for that to complete and then we will release dividends. That will take some time.”
Ten (10) groups had signed their share transfer documents as well as the vendor finance offered by KPHL.
“After their signing of the PDL, KPHL will work with these beneficiary groups to complete the corporate or statutory aspect of the transaction for their shareholding interest in KPHL to be registered,” Sonk said.
He assured the landowners that KPHL’s board and management were committed to ensuring that all landowners and provincial governments receive their entitlements under the Umbrella Benefits Sharing Agreement which was passed in 2009 at Kokopo, East New Britain.

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PNG seeks IMF advice on how to manage mineral wealth

Radio New Zealand

The Papua New Guinea government is reported to be working with the International Monetary Fund on how to manage the country’s mineral wealth.

EMTV reports that PNG’s Minister for Treasury, Don Polye, has met with IMF consultants to discuss the best practices PNG can adopt in the creation of the sovereign wealth fund.

They also discussed PNG’s new Kumul Holdings Limited structure for managing mining and petroleum assets and other state-owned enterprises.

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PNG PM explains his ambitious plan to reform the economy

Papua New Guinea’s Prime Minister Peter O’Neill has embarked on an ambitious plan transform the standard of living of his people from one of the lowest in the Asia Pacific region to one in the middle ranks.

ABC Radio Australia

So far the high economic growth of PNG’s resources boom has not been translated into better schooling, health services and job opportunities for Papua New Guineans.

Unless this happens soon PNG risks going the way of other developing nations, such as Nigeria, where resource development is a curse rather than a blessing.

This year the O’Neill government has increased spending on health education and law and order by a staggering 50% and he plans to spend 6 Billion US dollars on improving infrastructure over the next five years.

It’s a once in a lifetime opportunity that other Pacific nations may face now they are starting to do business with big mining companies.

In Port Moresby, Prime Minster O’Neill spoke in-depth to Pacific Beat about the changes he is implementing.

Our reporter Jemima Garrett began by asking him if PNG has the capacity to do so much so quickly.

Presenter:Jemima Garrett
Speaker: Papua New Guinea’s Prime Minister Peter O’Neill

O’NEILL: Yes I think we have the capacity but we have not been able to apply ourselves. Many agencies are over-staffed but under-worked, and that is why we are now pushing the leadership of many of these organisations like the Works department, like all the other relevant infrastructure building departments to step up. And of course have to enter into a program in partnership with many contractors and private organisations, private companies that are able to deliver these projects on a timely basis. So there’s a mix of contractors, both international and local, we know that there is no capacity within the country, so many of the projects have been given to international companies to bring in the better technologies and better workmanship on many of the projects.

GARRETT: How will you keep corruption out of the picture?

O’NEILL: Corruption as you know it’s a battle that’s not going to be resolved in one year or one single day for that matter. It is a state’s program and we are now focussed on prioritising the way we conduct our business in the most transparent way. So all the projects have been advertised and have gone through a rigorous procurement process that will enable some level of transparency in itself. We are also now focussing on corruption being with special taskforce like the taskforce sweep, we have now expanded on their support, including budgetary support, we put 20 million extra to go out there and recruit more people and recruit more investigators that will help them prosecute offenders. Of course Attorney General’s office is working on a much stronger ICAC, Independent Commission Against Corruption, and then we are going to present this year, we’re committed to presenting that this year to parliament. And we will then transfer all the agencies and functions of corruption into that organisation so it becomes truly independent and I’m certain that that will deter the practice of corruption in the country.

GARRETT: Where will you be looking for loan funds for all these projects?

O’NEILL: There are mixed sources in which we are looking for funding. Our traditional partners including AusAid and of course the two international institutions like IMF, World Bank and ADB. But the processes take a number of years to finalise and that is the only setback that we see. We have an increasing population, growing economy, some of the major projects going towards the end of their construction phase and which will cause a lot of people to be out of jobs. And there’s an urgency on our part to ensure that the infrastructure work starts now so some of these people who are skilled are not leaving the country to look for jobs elsewhere, but will return to build the country. And that is why we believe that sourcing funds from places like China, NZ Bank is one of them, we’re going to the international market for loans on raising bonds, that is a prospect opportunity that we are working with Treasury to look into. And of course there’s enough liquidity within our own financial systems here in Papua New Guinea that can be able to also fund the deficit that we are proposing to carry.

GARRETT: You’re looking to reorganise Papua New Guinea’s mineral and petroleum and gas assets, and also to change the way the Sovereign Wealth Fund is structured. What do you say to people who are concerned about the transparency and accountability involved with these changes?

O’NEILL: I think people are unnecessarily concerned and expressing views without any proper facts before them. In fact where we are structuring will enhance transparency and accountability. We don’t believe that it will diminish that at all. I understand people require that of any our governments to do that. People forget that we are the ones who passed the legislation to establish Sovereign Wealth Fund for the first time in this country. We are trying to restructure all these organisations so they are responsive to making sure that state-owned are run in a commercially viable proposition, and that it provides the returns through the state and ultimately the people who are the shareholders of these enterprises. And that these businesses conduct themselves and report themselves to parliament and publicly in a timely manner, so the reporting structure is not there. So we are improving on the processes of management of these companies. So I don’t see why people are jumping to conclusions that it will not be transparent and accountable. I think the legislative structure that we are proposing will be very good for the country and good for the state-owned enterprises.

GARRETT: What consultation will there be on the legislation for the Kumul Holdings, Kumul Mining and Kumul Petroleum?

O’NEILL: There will be public consultations and we want to encourage that and when we put it through parliament there will be a debate on the issues and we’ll encourage it. In fact we are encouraging people to debate but debate on facts, don’t make assumptions that are not true. We have to learn from our mistakes from the past. We’ve had all these organisations and state-owned entities parking funds in some strange accounts all around the world where none of our citizens ever visited. We don’t know what has happened to those funds. Now we are saying that it must be managed in the country publicly, but reporting must be done on a regular basis so people are aware where their assets are, where their funds are and they report through a structure that we are proposing.

GARRETT: We’re talking here about 20 billion dollars worth of funds and many developing countries have seen leaders pillage national assets in the past. How are PNG’s assets protected from future leaders who might take a sort of Mr 10 per cent approach?

O’NEILL: That is why we are putting it through a legislative structure so that no government, no single politician, no single leader will individually control these assets. It will be done through parliament, the entire parliament will be responsible through the nation.  These people are mandated and trusted people and that is the reason why they get into parliament in the first instance. If we cannot trust them, who can we trust? We cannot place all these assets in unmandated people to run it for us thinking that they are the only ones who are the honest citizens of the world. So I think it is important that we give due respect to the people’s decisions, in fact our electorate’s decision, that they’ve given us leaders to set a direction for how we manage their assets on their behalf. And as I said we are learning from the past, it’s no different from how Temasek, which is a Singapore investment company for Singapore government, how successful that has been with no resources whatsoever. We’ve got a lot of resources and we’ve got nothing to show for it. So I think all in all everyone is on the right track, we’re all trying to protect the interests of our country. But I think there must be some genuineness, some honesty in the manner in which we debate this issue, rather than an emotional one because there’s a pursued view that something will go wrong because politicians are in charge. In fact politicians are not going to be in charge. In fact the board of trustees will be the senior leaders of our country that at one time or another has been entrusted by the people to run this country. And I’m certain they’re concerned about their legacy, they’re concerned about their own standing with respect that they are countrymen and women and they will do the right thing and they will do it within the legal structures that we set on how their behaviour should be in managing that trust. The management and the respective boards will be all independent. We are going to get the best talent that is available to manage our petroleum and gas resources, we are going to get the best talent as available to manage our mining interests and all the other companies. These are technical fields that we leaders don’t have expertise in but we must employ the right people and independent people to do so

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Le Grande Heist: Why Kumul Holdings aint Temasek?

Martyn Namorong | The Namorong Report

Some of my friends have described the distribution of shares in Kumul Holdings into the hands of several former Prime Ministers as a Grand Heist. Others have described Kumul Holdings as being modelled around the Singapore Government’s business arm –Temasek. Temasek owns various Singapore government assets including SingTel and Singapore Airlines.

Whilst Temasek has projected Singaporean economic power beyond its boundaries, Kumul Holdings is bound to be an oversize failure like the Independent Public Business Commission (IPBC) and its sorry cousin Petromin. Both IPBC and Petromin are chronic sufferers of the scourge of political interference that has prevented them from making sound business decisions. Whilst they both have served their political masters well, this has been at great loss to their commercial interests.

Petromin’s acquisition of Tolukuma was a political decision and not a commercial one. Today Tolukuma has halted production for a couple of weeks and still carries significant litigation risks associated with environmental damages caused by its previous operator. You can draw your conclusions about how the government will run Ok Tedi if it takes over that mine.

It amazes me that many people have been taken by surprise with regard to the announcement of Kumul Holdings. So let me set some context for all you mere mortals.
When O’Neill began threatening to take-over Ok Tedi, the obvious question that arouse was –how? Firstly, he could “nationalize” the mine (which is unlikely because of the spill over effects on those who have invested big or intend too). Secondly, he could ask BHP to hand over PNGSDP (BHP aint handing over its interest). Finally, he could get a Chinese loan to buy out PNGSDP’s interest in Ok Tedi.

If O’Neill were to buy Ok Tedi, he’d need a massive loan. Ok Tedi Mining Limited (OTML) is worth about K3 billion and PNGSDP’s interest in the mine is around 63.4 %. Whilst current mine life is extended for 10 years (2015-2025), the mine could potentially operate for another 50 years with ore brought in from nearby sources.

What O’Neill had good fortune of is that the some of the creators of IPBC and Petromin are Ministers in his cabinet. It was only a matter of time before they re-arrange state assets into the IPBC-Petromin model aka the creation of Kumul Holdings.

With the consolidation of state assets, those which aren’t already mortgaged for the PNG Liquefied Natural Gas (LNG) project will now perhaps be mortgaged to buy out Ok Tedi.

The Big Winners out of this little adventure by the boys in Parliament is that the Banks will end up owning every PNG Government asset and perhaps own the country.
So what have Papua New Guinea’s predatory elite have to gain from fiddling around with state assets?

If they’re not directly dipping their sticky fingers into these State-owned honey-pots, the predatory elite are laughing all the way to the bank with fat supply contracts. I suspect that many would love to get their hands on the services contracts from Ok Tedi, once they buy out the mine.

It would be interesting to find out if any current politician has an interest in the services contracts at the unprofitable state-owned Tolukuma mine.

A Marxist friend of mine, who disagreed with me over my opposition to PNG politicians controlling Ok Tedi, said that it was okay for a National Bourgeois to control such economic assets. Some people and blogs have framed this as economic independence.

But let’s face it, when Telikom and BMobile had a monopoly, we had some form of economic independence during which many ordinary Papua New Guineans suffered from the high cost of communications. PNG’s predatory elite have shown themselves to be self-serving since independence in 1975.

Unlike Temasek, Kumul Holdings and the take-over of Ok Tedi, aren’t as a result of some ideal or national interest matter rather, the current moves are engineered by PNG’s predatory elite for their own self gain.

The other obvious question that now hangs in the air is that what becomes of PNG’s Sovereign Wealth Fund. Board appointments for the SWF are due later this year and it seems unclear what impacts Kumul Holdings will have on the SWF.

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