Gulf alleges flaws in InterOil deal

THE Gulf provincial government has raised serious allegations against InterOil Ltd, claiming the oil refining firm is seeking wholesale tax exemption for the development of the Elk and Antelope gas wells.
It also claimed InterOil Ltd’s subsidiary Liquid Niugini Gas Ltd (LNGL) was not a legitimate party to any contract that would be signed with the State. 
“The Gulf provincial government is concerned that the content of the project agreement contains serious fundamental flaws both legally and morally,” Gulf Governor Havila Kavo said in letter to Prime Minister Sir Michael Somare.
The primary concern was that InterOil Ltd was seeking wholesale tax exemption from tax regimes across the board, including 20 years of loss carried forward.
“This means while InterOil and LNGL indicated to pay tax of 30% on declared profits, they intend otherwise, by seeking 20-year loss carried forward,” Mr Kavo said.
He was firm that “InterOil Ltd and LNGL will be running losses for the next 20 years without any deterred tax liabilities”.
“This will be done through deliberate act of price transferring mechanism under non-integrated project development scheme,” Mr Kavo claimed.
The other worry was that the “LNGL is not a licensee under the Gas and Oil Act”, therefore, it was not a legitimate party to enter an agreement with the State, as such any dealings would be rendered illegal and void. 
InterOil Ltd was also accused of not disclosing its “net effect on the cash-flow projection to demonstrate tax implications” and by doing so, it was being deceptive.  
The letter went on to claim InterOil Ltd wanted to introduce a scheme called “non-integrated project” that will result in price transferring which was an unfair trade practice.
The final claim was that InterOil Ltd was not complying with the parts of Oil and Gas Act relating to development forums and research on site, and that it breached other laws by ex-communicating the provincial government.  
“These practices amount to collusion, curtailing, price transferring, racketing and corporate fraud and we will not support this project in its present form,” Mr Kavo said candidly.
The a three-page letter, dated Sept 22, was copied to the ministers for Petroleum and Energy, Finance and Treasury, State Enterprise, National Planning, Inter-Government Relations, Labour and Industrial Relations, Public Service and Commerce and Industry.   
InterOil Ltd, after being posed with these concerns by The National, a week ago, said it will give a comprehensive response but did not at the time this article was set for the press.
But it is understood, InterOil was happy with its project agreement for the construction of a proposed liquefied natural gas (LNG) plant that has been given to the Government.
InterOil posted on its website that it was pleased that Sir Michael and Petroleum and Energy Minister William Duma had assured their support.