Tag Archives: LNG

Financial vultures circling PNG LNG expansion

Oil Search is understood to have hosted a number of local project finance bankers to PNG in recent weeks. Rocky Roe

With a Panguna style conflict brewing in Hela over benefits from the first LNG project – a project the Supreme Court has condemned as a fraud – and the Konebada Petroleum Park Authority mired deep in allegations of corruption, how could any reputable financial institution lend money for another LNG project in PNG?

Except, of course, these foreign based financial vultures don’t care a jot about human rights, corruption or violence in PNG – as long as they get their slice of the pie…

Local lenders jostle for mega PNG financing deal

Sarah Thompson Anthony Macdonald Joyce Moullakis | Australian Financial Review | December 3, 2017

Key project debt lenders have been giving their passports and travel insurers a workout as they troop up to Papua New Guinea to get to grips with what could be the region’s biggest financing since the record $US20 billion deal for Ichthys LNG.

While the final configuration of the next stage of LNG expansion in PNG is yet to be settled, those behind the circa $US17 billion project – primarily ExxonMobil, Total and Oil Search – are already well advanced in considering funding.

A large project finance facility is understood to be the favoured option, building on the experience of the $US14 billion funding for the initial PNG LNG project.

Oil Search is understood to have hosted a number of local project finance bankers to PNG in recent weeks, with several testing the lay of the land again last week at a petroleum conference in Port Moresby, which also attracted a host of engineering contractors vying for a piece of the action.

Appetite from the main Australian banks is understood to be strong, although could be tempered by some being close to fully allocated in their exposure to PNG. The country’s sovereign credit rating has slipped a notch since the initial deal amid soft commodity prices, weak governance and ongoing political and security risks.

Still, export credit agencies are again expected to be well in evidence, while the backing of two oil majors and the sheer size of the project count in favour of commercial lender interest. Also supportive is the outperformance of the initial LNG project, and expected robust economics and sturdy customer support for the brownfield expansion despite the oversupply due to plague the LNG market later this decade.

A firmer idea of how the expansion will look, including the split of feedstock supply between the Elk-Antelope, P’nyang and other gas fields, the capacity size and the ownership structure, is expected by early 2018. 

Yet to be figured out is how the cash-strapped PNG government will fund its expected involvement down the track.

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ExxonMobil paid no tax on $18 billion revenue, Australian unions allege

Photo: Michael Nagle

If ExxonMobil can easily avoid tax in Australia what chance does PNG really have of making money from its LNG supplies…

Noel Towell | Sydney Morning Herald | December 3 2017

Energy giant ExxonMobil  has not paid a cent in corporate income tax in Australia in at least two years, despite reaping more than $18 billion from the nation’s natural resources, according to three of the company’s workplace unions.

Tax campaigners accuse the company of cashing in on Australia’s soaring gas prices, but avoiding paying tax on its profits by sending much of its money to a network of offshore companies, some based in notorious tax havens.

The company dismissed the unions’ claims as “misinformation” and said it paid state and federal royalties on its Australian operations as well petroleum resource rent tax and corporate tax.

But in Victoria, where ExxonMobil runs the giant Esso Longford gas plant supplying much of the east coast market, the state government wants an investigation, saying Australians expect a fair return from companies profiting from the nation’s natural resources. 

Three unions fighting a bitter industrial dispute with the energy giant will launch a campaign in Canberra on Monday for the Commonwealth to investigate Exxon’s tax affairs.

The Electrical Trades Union, the Australian Manufacturing Workers’ Union and the Australian Workers Union recruited the Tax Justice Network (TJN) to examine Exxon’s tax affairs and say the network has uncovered tax avoidance on a massive scale.

The TJN says Exxon is more aggressive in minimising its tax than Chevron, which agreed to a settlement believed to be worth more than $1 billion this year, after being taken to court by the Australian Taxation Office

Exxon is the latest large corporate player to be revealed using “related party loans” to its overseas entities to minimise or avoid Australian taxes, the unions and the TJN allege.

The network says it has uncovered a bewildering array of least 575 Exxon-linked companies incorporated in the Bahamas, one of the tax havens recently exposed in the “Paradise Papers” scandal, including at least three with direct links to Australia.

TJN spokesman Jason Ward says Exxon has up to $54 billion “stashed” offshore.

“Exxon could very well prove to be more aggressive than Chevron,” Mr Ward said on Sunday.

“The initial research shows Exxon is just as brazen about bending the rules to the point of being ridiculous and even less transparent. 

“These natural resources belong to the Australian people and we should be getting more.

“Exxon hasn’t paid any corporate tax in two years, while reporting $18 billion in revenue.

“Now we know how they did it; by using notorious tax havens such as the Netherlands and the Bahamas, high-interest loans and other related party transactions.”

The tax avoidance claims mark an escalation in the industrial dispute at Longford in Gippsland where 230 employees have been battling the company for six months over a new workplace agreement that unions say slashes wages and conditions.

The union will bus workers and their families to federal Parliament on Monday to pressure MPs and senators for a full investigation of Exxon’s record of paying taxes in Australia.

But the company said on Sunday that the unions were engaged in a campaign of misinformation.

“ExxonMobil Australia’s entities have made a significant contribution to the Australian economy through the reliable supply of energy to fuel economic growth, as well as through direct tax and royalty payments to state and federal governments,” a spokesman said.

“Esso has paid more than $12 billion in Petroleum Resources Rent Tax to the federal government.

“When combined with corporate income tax during the past decade, this equates to more than 50 cents in the dollar tax paid.”

The company says it is not a party to the ongoing dispute in Victoria, which it says is between its contractor UGL and the unions.

Victorian Treasurer Tim Pallas said on Sunday that allegations of tax avoidance needed to be fully investigated.

“Victorians and Australians alike deserve fair compensation for our resources, in particular those that are exported overseas,” Mr Pallas said.

“Any allegations of tax avoidance should be fully investigated.”

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O’Neill tells Papua New Guinea resources sector there will be no new taxes

Prime Minister Peter O’Neill announced no new resources sector taxes.  Source: Business Advantage International

David James | Business Advantage | 29 November 2017

Papua New Guinea’s Prime Minister, Peter O’Neill, told the PNG Mining and Petroleum Conference yesterday that there would be no new taxes for the resources sector. Meanwhile, presentations by the major industry players suggest the next 12 months will be critical in determining the future growth of the sector.

‘I believe we have emerged stronger,’ he said. ‘The global economy has turned the corner. We have maintained the faith and we can see light at the end of the tunnel.’

O’Neill claimed ‘it is time to invest in Papua New Guinea,’ pointing to the anticipated Total-run Papua LNG project, and the proposed Wafi Golpu and Frieda River mines.

‘This is not a time for us to make many changes but to maintain discipline.’

O’Neill said there is an upswing in the global economy and the commodity cycle, but he warned that the country cannot depend on it.

‘We cannot continue to over-rely on the mineral and petroleum sector to advance our goals,’ he said.

Cautious optimism

Business leaders presenting at the conference expressed cautious optimism about the prospects.

Andrew Barry, Managing Director of ExxonMobil PNG said the existing PNG LNG project is running above expectations. ‘We are on track to produce a total of 8.2 million tonnes of LNG this year, which is about 20 per cent beyond what we first thought the plant could achieve when the facilities were designed.

He said drilling at the Muruk field led to a new discovery near the Hides field. A K1 billion kina investment will be made next year ‘to tie the Angore field into the production system at Hides,’ he said.

Philippe Blanchard, Managing Director of Total E&P PNG said the company is well advanced in its engineering studies, field surveys and appraisals program for Papua LNG. He said the company has also begun to assess commercial viability, looking at the project structure, financing and the LNG market.

‘The environment is changing a lot,’ he said, adding that the company will need to see how to take advantage to get the best project.

Blanchard said integrating with established infrastructure is a complex task. ‘Our gas is very different from the gas in PNG LNG. We need to find the right elements between what is existing and what we want to build.’

Critical time

Peter Botten, Managing Director of Oil Search, observed that the ‘next 12 months is the most critical in all the years I have been here.’

‘The LNG market has never been more dynamic. We are also seeing some of the best exploration opportunities I have seen in PNG.

‘PNG LNG is a stellar world class project but there are legacy issues.’

Botten said the number of LNG-importing countries is expected to rise by 100 by 2020. He said there is strong demand in Asia, with demand in the first quarter of this year up by 37 per cent in China on the previous corresponding period, by 14 per cent in South Korea, by 12 per cent in Taiwan and by 9 per cent in Japan.

He said LNG is increasingly preferred to nuclear and coal.

Botten noted that there is a five-to-seven year investment horizon for new projects, and current planned activities are only likely to produce ‘about half of what is needed’.

‘The window is opening for new demand.’

New Mining Act

Botten added that about 30-35 per cent of LNG is now traded in the spot market, with large companies like ExxonMobil and Total building their own positions. He said it ‘changes the financing’ and the types of alliances that are formed.

Johnson Tuke, Minister for Mining, told the conference that a revised Mining Act is ‘now before the National Executive Council.’

Tuke said the mining sector has made ‘an impressive turnaround.’ The Wafi Golpu and Frieda River proposals remain a priority for the government, he said.

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PNG landowners block access to gas wells over royalty disputes

PHOTO: Landowners in PNG’s highlands cut down trees to block roads near gas wells in Hela Province. (Supplied)

Eric Tlozek and Bethanie Harriman | ABC News | 29 November 2017

Armed landowners in the Papua New Guinea highlands say they have blocked access to gas wells because of an ongoing dispute with the Government over the payment of royalties.

The landowners in PNG’s Hela province have cut down trees and blocked roads and say they have stopped police from taking back control of the area.

They are demanding the PNG Government pay them outstanding royalties, which are the subject of a protracted legal dispute.

“They have cut down trees from wellhead B to G, blocking the roads,” said Dickson Ango, the chairman of one of the petroleum development licence areas.

“The security personnel have withdrawn and landowners have taken control of that area.”

Mr Ango said the landowners were protesting the PNG Government’s failure to pay a promised 20 million kina ($AUD8 million) in royalties for the gas.

“They promised to pay to the landowners — they even wrote a dummy cheque and gave it to the landowners — but that money was not in the account,” Mr Ango said.

“They showed us the cheque and they said, you see it, you feel it, you touch it and then they withdraw it and they never pay it to us.”

PHOTO: Landowners in PNG’s highlands cut down trees to block roads near gas wells in Hela Province. (Supplied)

The PNG Government has previously said it cannot pay royalties to some landowner groups because of disputes over clan vetting and an ongoing legal case.

It has been negotiating with landowners in an attempt to resolve the disputes and prevent unrest at the project and along the pipeline.

The operator of the PNG Liquefied Natural Gas project, ExxonMobil, said its production was continuing at normal levels, but it has withdrawn all non-essential staff from the area.

“ExxonMobil PNG is continuing to monitor ongoing tension in the Highlands (Hides, Angore, Komo) areas,” a spokeswoman said.

“Staffing at the Hides Gas Conditioning Plant remains at essential personnel only.

“The Hides Gas Conditioning Plant is operating safely at normal production levels.”

Police in Hela Province were not able to be reached for comment.

A spokesman in Port Moresby said officers there were trying to resolve an unrelated dispute involving the hijacking of trucks as part of a compensation claim over the death of a young man in a traffic accident.

Hela Province has been the scene of some of PNG’s worst tribal fighting over the past four years, with provincial authorities estimating at least 200 people have been killed.

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Supreme Court condemns PNG LNG as one of many ’large-scale frauds’

The Supreme Court has issued a stunning indictment of large-scale resource extraction projects in PNG, labelling them as ‘large scale frauds committed against the true and correct landowners’ in a judgement delivered on September 25.

The Court singled out the PNG LNG project for special mention as one where the State and the ‘developers’ have failed to obtain free and informed consent and a social licence for their operations.

The case before the Court concerned trespass and illegal use of customary land by logging giant Rimbunan Hijau, and the court endorsed an earlier award of damages of more than K6 million against the company.

But the Supreme Court decision goes much further in its examination of the issues of social licence and consent and concludes that many landowners around PNG are entitled to compensation from mining, logging and oil and gas companies for the ‘illegal entry, occupation and conduct of their businesses’ :

What happened here is in fact a sad story that is repeated throughout the country over a long period of time from the colonial administration in the name of opening up wild frontiers for various so called developments and projects. The so called projects and development covers from logging, prospecting for minerals and oil and gas to actual mining, to oil and gas developments to other customary land base developments like the famous or infamous Special Agriculture Business Development Leases (SABLs). What is happening in most cases is that, developers and the State alike are failing to either deliberately or by inadvertence to first ascertain, then properly organise, empower and deal with the properly identified and confirmed customary land owners. Rather than taking this most important first critical step, the State and the developers are entering customary land and are proceeding with their activities and in so doing, choosing to and are indeed dealing with persons who claim to be landowners when in fact they may not be the true and correct landowners… The State to the extent that it is doing nothing about this practice is encouraging this improper and illegal approach by so called developers which in fact is a large scale fraud committed against the true and correct landowners by the so called developers with the support of the State and in collaboration with persons claiming to be owners when they are not.

Kandakasi J., in his decision in the P’Nyang and Kanga Kawira cases correctly calls them “fraudsters and thieves.” As was noted by his honour in his judgments, the PNG LNG project presents a clear case on point. In this project, despite s. 47 of the Oil and Gas Act, both the State and the developers have failed to properly identify the true and correct landowners, properly organising them into ILGs, enable the landowners to fairly and meaningfully enter into negotiations with the developers and the State and for the developers and the State to seek and secure from the true and correct landowners through their duly elected or appointed leaders the landowners free and informed consent and approval and ultimately, their social license to operate. The contracts or agreements and the deals the State and developers enter into with persons not properly identified and appointed by the landowning clans, or groups, remain null and void ab initio or void and of no effect from the very beginning. Given that, when the true and correct owners eventually assert their ownership rights and exercise their rights, challenging the contracts or deals with the fraudsters and or thieves, they must give way. Such contracts do not bind the true and correct landowners. If need be, the State and or the developer concerned need to enter into completely new contracts with the true and correct landowners on terms that are fair and reasonable with reasonable compensation being paid for the earlier illegal entry, occupation and conduct of their businesses. 

Read the full Supreme Court decision – Rimbunan Hijau (PNG) Limited and Ina Enai (2017)

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Law and order at LNG site needs attention

Dug up highway near PNG LNG project gas plant

The National aka The Loggers Times | November 28, 2017

THE law and order issue at the LNG project site in Hela needs to be urgently addressed by the landowners, the Government and ExxonMobil, according to former Nipa-Kutubu district administrator Robin Pip.
It follows a roadblock set up by landowners from PDL1 (Petroleum Development Licence 1) in the Komo-Margarima district.
They want the Government to pay their outstanding K20 million.
Pip, also a former community affairs officer with ExxonMobil, said these issues should have been addressed before the gas production.
He said the government should have identified the genuine landowners and pay their royalties and equity accordingly.
Meanwhile, Komo-Margarima MP Manasseh Makiba presented a petition to parliament last Friday from the landowners reminding it to start the clan-vetting project and pay out the K35 million promised to them.
Makiba said the landowners of PDL 1, 7 and 8 wanted the government to address clan-vetting urgently and pay the K35m that was agreed to be paid to the landowners in a Memorandum of Understanding in August, 2006.
“The K35m and the clan-vetting was later approved in an NEC 2010/2016 decision allowing for the K35m to be paid out to the landowners and the clan-vetting to begin a week after,” he said.
“The NEC decision also tasked the Attorney-General to file applications at the National Court to set aside restraining orders. However, since then nothing has eventuated,” he said.

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Non-Payment Of K35 Million Irks LNG Landowners

Melisha Yafoi | Post Courier | November 22, 2017

THE symbolic dummy cheque for K35 million presented to Hides gasfield landowners last year has aggravated threats to totally shutdown the Hides gas conditioning plant.

This follows nonpayment of the money which was promised by former minister for petroleum and energy Nixon Duban who officially handed over the cheque to leaders in August.

Already Angore, the tie in PNG LNG Project has been shut down for an indefinite period since last week and an expatriate worker was also held hostage as processing facilities were damaged and employees evacuated as villagers expressed their frustration for their nonpayment of funds.

Hides Gas Development Company chairman Tuguyawini Libe Parindali confirmed this yesterday.

Mr Parindali said the landowners were frustrated because the Government had failed to honour its commitments, need to fast-track on its clan vetting exercise as result as threatened to shut down LNG operations.

He said the issues for Hides, Angore and Komo is at two fronts, one is government’s absence on the ground to listen to the people’s grievances and second is continuous tribal fights in Tari and Komo in Hela Province.

“Government should fast track clan vetting exercise and releases the money that they currently have, development levies released to the LLGs and special purposes authority and the K35 million promised to them.

“They are frustrated because of the K35 million valueless cheque for PDL1 and PDL7, and has not received any shares due to the prolonged clan vetting exercise.

Businesses and individuals are now facing serious security issues, as a company we are concerned when the safety of our employees are threatened, we are unable to deliver the output of the project day in and day out,” he said.

“We as businesses are hurt, our machines, employees are under threat and there is serious law and order issue that needs to be looked at.”

Mr Parindali said they have taken precaution measures by evacuating their non-essential staff out of the province and has kept only the essential workers.

“We will not touch the developer, they have our undivided support. All we want is for the Government to fix its outstanding issues.

“Whilst on that, we need more police and defense personnel have to be deployed to both Southern Highlands and Hela because so many lives are now at risk, “he said.

Meanwhile a spokesperson for ExxonMobil confirmed that the Hides Gas Conditioning Plant is continuing to operate.

“ExxonMobil PNG continues to monitor the situation in Hela Province.

“The safety and security of our employees, contractors and the local community is a top priority.

Due to recent community tension in the Highlands (Hides, Angore, Komo), ExxonMobil PNG has suspended non-essential work. Non-essential personnel are being re-deployed to other areas,” the spokesperson said.

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