O’Neill: Govt can only take 22.5pc

IALIBU-Pangia MP Peter O’Neill says the Government can only take up 22.5 per cent in P’nyang project in Western and not 32.5 per cent.
He said this following Prime Minister James Marape’s recent announcement on the signing of the P’nyang heads of agreement between the State and ExxonMobil.
Marape had said the overall deal reflected a win-win for both sides with the State’s take of 63 per cent, compared to 49 per cent in PNG LNG and 51 per cent in Papua LNG.
This is made possible by an increased production levy of 3 per cent (same as Papua LNG) and the State equity (including the commercial purchase) being 32.5 per cent compared to just 19.6 per cent in the PNG LNG and 22.5 per cent in Papua.
O’Neill yesterday said the State, as announced by Marape, would get 32.5 per cent equity, but under the law, the Government was only entitled to have up to 22.5 per cent.
“That is a right under the Oil and Gas Act,” he said.
“Nobody can negotiate that.
“We only need to exercise that right.
“But the State wants to take up additional 10 per cent.
“For the 10 per cent, we have to pay it through at commercial price meaning that they have to pay what is the market rate today.
“And that means borrowing more billions of kina to go and buy 10 per cent of the equity to develop the P’nyang fields.
“I want to just remind the country, and our people, that the last time we went and borrowed money internationally to invest in equity, the first PNG LNG project, we got into all sorts of drama with the UBS loan, the Arab loan, Goldman Sachs and Oil Search and so forth.
“So we have some experience out of all that, where we were almost blindfolded by people, both officials and advisers who were advising us, we trusted them to do the right thing for our country. Issues like extra equity need to be negotiated on the basis that it comes at the price same as the backing rights costs, those are things that they need to negotiate and agree on before making public announcements, because making public announcements just for the sake of pleasing the public and having political point scoring exercise is not going to help anybody.”
O’Neill said based on previous experience in the sector, the Government needed to negotiate for early revenue starting from the first export and not wait 10 years.
“Better royalties and levies are needed now for the increasing population in our country,” he said.
“We must not push ourselves into a corner like Porgera and Wafi, where we will have no choice but to make a deal with these investors.
“We are dealing with very experienced international businessmen who travel across the world from country to country at ease and at fast pace, and they negotiate this kind of deals on a daily basis and they do that for a living, we don’t.
“Therefore, we must be careful and learn from the mistakes made in the past and come out with a better deal for our people.”