Commission of inquiry into UBS loan welcomed

OIL Search Ltd has welcomed the announcement by Prime Minister James Marape last month to establish a Commission of Inquiry (COI) into the Union Bank of Switzerland (UBS) loan deal.
Commenting on the company’s quarterly report released yesterday, managing director Peter Botten said the announcement by Marape to form a COI was to investigate all aspects of the loan that was made by the Government to acquire Oil Search shares in 2014.
“While Oil Search was not involved in, or a party to, the UBS loan, and no allegations have been made against Oil Search or Oil Search officers, we welcome the inquiry,” Botten said.
Meanwhile, Botten said the gas agreement signed between the Petroleum Retention License (PRL) 15 Joint Venture and the government in April, culminating from months of negotiations with the government, delivered a range of new benefits to the government and landowners and ensured that the Papua LNG Project remained competitive in an increasingly crowded global LNG market.
Key features of the agreement included:

• An additional two per cent tax on production;
• a domestic market obligation of up to five per cent, ensuring that a significant volume of competitive, fixed-price gas was available for local use, particularly to improve the availability and cost of electricity in PNG;
• an enhanced national content Plan, which would build local workforce and business participation in a material way during the construction and future operation of the project; and,
• A deferred payment mechanism for the government’s share of past costs, which would now be paid from production, easing the up-front financial contribution associated with its equity back-in to the project.

Botten said the contractor selection and engineering contracting process for the upstream development started following the execution of the Gas agreement.
He also noted that during the quarter, pre-front-end engineering design (Feed) work continued on the integrated downstream facilities.
Key areas of focus included: finalising the design basis, progressing permitting and regulatory approval strategies and moving towards completing the National Content Plan.
l More on Oil Search, Page 45