PNG eager on debt deal

Main Stories, National

The National, Monday November 11th, 2013


PAPUA New Guinea wants to buy back a US$1.6 billion (K4.18 billion) convertible debt deal before it becomes equity for Abu Dhabi, which confirms what the business community has been saying.

Prime Minister Peter O’Neill last month denied speculation that his government intended to use Ok Tedi Mining Ltd (OTML) as collateral for a loan to buy back shares in Oil Search Ltd (OSL).

He said this when asked about speculation among the business community that the government had used OTML as collateral for a US$1.9 billion loan from UBS AG Switzerland to keep control of the OSL shares that were used as collateral for the original US$1.6 billion Abu Dhabi-owned International Petroleum Investment Co (IPIC) loan for the State to acquire its shares in the PNG LNG project.

The OSL shares now belong to the Arabs and word is that the government wants to get them back.

Bloomberg News, however, reported last Friday that IPIC, which completed the purchase of the US$1.6 billion of exchangeable bonds in 2009, wants to oversee a swap of that debt for a 14.7% stake in OSL, owner of almost a third of the project. 

“The March conversion date is sparking speculation that producers including Exxon, the world’s biggest energy company, may seek the holding,” it reported.

“The coming swap has spurred talks between Abu Dhabi, home to the first gold-bar vending machine, and Papua New Guinea, the Pacific nation near Australia whose gross domestic product is less than 5% of Exxon’s US$410 billion market value. 

“The PNG government already has a 17% interest in the project. 

“It wants to hold on to the stock in the company, and IPIC recognises Oil Search’s potential.

“Citigroup Inc, UBS AG and Barclays are among banks seeking to provide more than A$1.5 billion in financing to help Papua New Guinea maintain its holding in Oil Search,” people with knowledge of the matter said last month. 

O’Neill said:  “To use Ok Tedi as collateral is absolute nonsense.

“If there was any arrangement, it will be that, the collateral will be the Oil Search shares itself.

“There’s no need for any collateral by any financier.

“Why that is necessary is because the LNG project itself is a certainty, Oil Search shares are worth something, so you don’t need any other security to borrow any money.”