Apr 4, 2010

PNG Prime Minister says PNGLNG 'History in the making'


The PNG LNG Project ‘is nation-changing and life-transforming’

Honourable Ministers, Neil Duffin, President of ExxonMobil Development Company, Mark Albers, Senior Vice President ExxonMobil Corporation, other senior executives of  ExxonMobil Corporation, Peter Graham, Managing Director Esso Highlands Limited, project partners and guests, ladies and gentlemen.

I have great pleasure to be here in New York with all of you for this official ceremony to mark the financial close for the PNG LNG Project. It has taken us almost three years to get to a stage where the co-venturers could commence spending US$15 billion to build this grand project.

For my Government and our 6.5 million people, the PNG LNG Project holds so much opportunity and promise. It is a history-making, nation-changing, life-transforming project. Today, we are already seeing so much hope and optimism in Papua New Guinea.

The tide of change has started to grip Papua New Guinea. It is my firm belief that this tide will transform the future landscape of Papua New Guinea forever.

My Government has thoroughly enjoyed the robust engagement we have had in this journey to take one of our most important natural resources from a conceptual stage towards our mutual goal of making it a reality.

The journey has taken us from our remotest villages and electorates to the corporate boardrooms of Brisbane and Sydney in Australia, Beijing, Singapore, Dubai, Tokyo and now here in Manhattan, New York. 

During the journey, the true Papua New Guinean spirit, character and resilience was represented by our State team, led by a core of dedicated and young Cabinet Ministers.

This reminded me of my younger days when I was at the helm of a sovereign Government, after having led a core group of Papua New Guineans in our quest to secure political independence from Australia in 1975.

Today my Ministers are engaged in the task of securing economic independence and national prosperity.

Many Ministers and Members of Parliament gathered here have engaged with some of you on a wide range of issues to move the LNG project forward. I am sure these negotiations were not always easy.

I am certain they have always been frank, open and cordial and, above all, focussed on achieving our national interest objective of ensuring national prosperity. I am sure you on your side have strived to drive the best value for your organisations.

In many instances we began with positions that were far apart. We gradually worked our way to a middle ground that was mutually acceptable to Papua New Guinea and the project partners.  The way forward always represented positive outcomes for all stakeholders.

My Government came half way by providing greater fiscal security while recognising we were in competition with projects from other countries.

Our common resolve produced the joint venture with valuable fiscal stability that made it possible for us to agree on optimal corporate tax arrangements in the win-win spirit I mentioned earlier.
Our Ministerial Economic Committee and State bureaucrats outlined a broad tax structure that ensured that over the medium to long-term any major upside in oil and gas prices would be equitably shared by project participants and the PNG Government.  

This helped to underwrite the long-term security and stability of the PNG LNG Project.
Turning back to the project negotiations, I should note that the conclusion of the initial round of discussions was marked with the signing of the PNG Gas Agreement on 22nd May 2008. That was a landmark that enabled ExxonMobil to commence Front End Engineering and Design (FEED). 

The Benefits Sharing Agreement that my Government negotiated with landowners in the footprint area has been as much of a landmark as the PNG Gas Agreement and the conclusion of FEED. 

I am not aware of any other country that conducts such negotiations. Our project partners tell me the same thing. Some 2,000 landowners gathered in Kokopo to participate in the Umbrella Benefits Sharing Agreement negotiations last May. 

Last December licence-based negotiations were held at the remote gas fields and other project sites. Thousands of landowners heard first-hand details about the Project and actively debated the level of landowner benefits with my Ministers and Members of Parliament. 

The package of direct benefits landowners will reap from the PNG LNG Project is around US$7 billion over the life of the project. 

Landowner participation in resource ventures is unique to PNG – in this case there are some 60,000 landowners involved - and very much a part of the nation’s strategy of generating equitable distribution of wealth from any resource development. 

Providing landowners with a significant stake helps to mitigate risks by making the landowners an important stakeholder in the development. 

ExxonMobil, the world’s biggest oil and gas company, has secured for PNG this remarkable project. In record time, ExxonMobil has concluded the technical, marketing and financing agreements. 

We have gone in just over 18 months from detailed feasibility studies on one of the world’s most complex LNG projects to financial closure.

We are often reminded that ExxonMobil has an excellent record in implementing LNG projects around the world on schedule and within budget. This is exactly the type of credible partnership that PNG seeks.

PNG’s first LNG project represents the largest ever loan finance for any international oil or gas project.

The critical FEED phase was completed in the final quarter of last year. It provided confidence that we had a viable project that could be completed in a set time frame.

However, more parts of the complex puzzle had to be put together before the co-venturers could comfortably give the all-systems-go signal. One of these was finalisation in early March of the last of four 20-year Sales & Purchase Agreements for LNG.

At the same time negotiations were finalised with potential financiers, particularly the Export Credit Agencies. We can appreciate that partly because of the Global Financial Crisis, the Government-backed ECAs were eager to provide financing to underpin potential exports of goods and services from these countries. It was also a difficult time for financial institutions to make big commitments.

ECAs from the United States, Japan, China, Italy and Australia have come together to provide the bulk of the financing, along with 17 commercial banks and a significant slice of co-financing from ExxonMobil itself.

I am glad ExxonMobil has helped PNG to keep such good company in the world of high finance.  

I am extremely proud that today’s ceremony celebrates your ability to have raised for my country a loan of US$14 billion for the PNG LNG Project’s 70 per cent debt financing component. 

This places PNG on the global financial map. I thank the Export Credit Agencies, the commercial banks and ExxonMobil for making this possible. 

In celebrating financial close with all of you, I wish to congratulate Neil Duffin, President of ExxonMobil Development Company, and Mark Albers, Senior Vice President ExxonMobil Corporation, and their respective teams for their tremendous work in tying together every loose end to bring us here to Manhattan tonight. 

The impressive team of individual ExxonMobil executives you have brought together, under Esso Highlands Managing Director Peter Graham, are a clear sign we have many more challenges before the first LNG shipment is made in late 2013. 

I appreciate the efforts ExxonMobil has made to go the extra mile. This is a journey we have undertaken together for almost three years. Some of my key Cabinet Ministers that have made this journey are here with me to enjoy the moment. 

The construction phase offers its own unique issues and challenges. In front of all of you today, I am urging my Ministers that they too need to go that extra mile in the coming four years to make this project come together as smoothly as possible. 

Let me affirm to you Neil Duffin and Mark Albers, my Government will ensure it does all that is necessary to assist you in the challenge of commissioning this LNG plant by the end of 2013. 

I am aware that we must face these challenges together. Any delay in the project schedule would result in cost blowouts that would hurt our overall achievements and goals. Having negotiated such a large loan we will only be able to service this loan once LNG exports commence. 

Success of the PNG LNG Project is closely linked to another recent achievement of my Government in its efforts to improve the living standards of our people. 

We will soon launch our National Development Strategic Plan covering the 20 years to 2030. Revenues that will flow from this project will underpin the ambitious targets laid out in that Plan. 

The success of the PNG LNG Project will represent a country-changing event. It provides the development context and the dimension of the economic and social revolution that our current generation will witness. 

Some of the development goals can only be delivered with smooth completion of the LNG Project. In many ways, this is another journey that the partners in the PNG LNG Project, and my Government, will forge towards a brighter destiny for Papua New Guinea. 

Through the Development Strategic Plan, the Government has made realistic assessments of our current situation. It has laid down practical targets for every segment of the economy, given the resources that will be available to Government. 

As I have noted in that document, our targets are aimed at creating a four-fold increase in per capita incomes in this 20-year period; and to improve the quality of life for all Papua New Guineans. 

This is a highly honourable task that my Government intends to undertake in conjunction with you – our friends and partners in the private sector. 

Once again I express my personal satisfaction and congratulate all stakeholders for this incredible effort in bringing us to financial close.

Telikom PNG partners with Amdocs


STATE-OWNED ENTERPRISE Telikom PNG Ltd has partnered with St. Louis's Amdocs, the leading provider of customer experience systems to deploy Amdocs Compact Convergence - a network-connected, integrated solution for convergent real-time charging, customer care, self care and value-added services (VAS).

In a statement to the New York Stock Exchange (NYSE), Amdocs Compact Convergence said this solution is part of a larger project in which Telrad Networks Ltd., a leading network equipment vendor, is upgrading Telikom PNG's entire network infrastructure.

Currently, Telikom PNG's fixed-wireless, wireline and high-speed data offerings, including WiMAX, ADSL and broadband satellite including prepaid voice, data and SMS services is supported by Amdocs Compact Convergence.

Telikom's Chief Executive Officer Peter Loko (above right) reportedly said the move is in the right direction for the company.

"Using a single solution to manage our products, services and pricing offerings, across all our networks, will allow us to focus on expanding and enhancing our core business," said. Given the local environment, it's crucial to remain competitive by providing services that consumers want and by keeping operational costs low. The Amdocs Compact Convergence solution will help us do just that."

According to the statement on NYSE, the Amdocs Compact Convergence solution will be used to introduce new services such as calling cards, top-up vouchers and multi-wallet capabilities that enable subscribers to use a different wallet for a product or service.

In addition, the solution includes a multi-lingual interactive voice response (IVR) for self-care services such as balance query, balance announcements, top-ups and money transfer. With a single solution and low maintenance and operational costs, Telikom PNG will reduce its total cost of ownership. Telikom PNG will also be able to strengthen its competitive position with new services and pricing options and offer customers an enhanced and personalized experience.

Specifically designed for growth markets, new technologies and new business models, Amdocs Compact Convergence is a complete network-connected solution which enables service providers to quickly design, launch, charge for and manage new offerings.

LGL appoints new CEO

LEADING gold miner Lihir Gold Ltd (LGL) has appointed former BHP senior executive Graeme Hunt (pictured left) as Managing Director and Chief Executive Officer (CEO).

LGL Chairman Ross Garnaut said Mr Hunt was the ideal candidate for the CEO role, possessing strong leadership skills, wide mining industry knowledge and extensive experience in strategic development.

A metallurgist by training, Mr Hunt, 53, previously spent 34 years with BHP Billiton. Starting as a metallurgical trainee in 1975 at the Port Kembla Steelworks, he advanced his career through a variety of roles, eventually becoming President of the global Iron Ore division from 1999 to 2006, and then President of the global Aluminium division in 2006 and 2007. His final role at BHP was as President of Uranium, including responsibility for the Olympic Dam Expansion. He left BHP in March last year.

As President of Iron Ore, Graeme presided over a major programme of building and utilizing strategic options for increasing value through expanding production from a huge resource, which continues today.

Mr Hunt will relocate to Brisbane from Melbourne, and will take up his position immediately.

"We are delighted to have an executive of Graeme's calibre in place to lead LGL to the next stage of its development," said Dr Garnaut.

"LGL is well placed to deliver increasing returns to shareholders in the next few years, with major growth projects well advanced in Papua New Guinea and in West Africa.

"Graeme possesses all of the qualities and experience the Board was looking for to ensure that the company delivers on its commitments and builds on its strong asset base to create value for shareholders."

Mr Hunt said he was looking forward to the opportunity to lead LGL into the next stage of its growth strategy.

"LGL has great assets in three countries, a talented management team in place, and significant untapped potential," Mr Hunt said.

"I believe the company has an exciting future ahead of it and I am delighted to be a part of that growth and development," he said. Dr Garnaut also paid tribute to LGL's Chief Financial Officer, Phil Baker, who stepped into the CEO role on a temporary basis in January.

"Phil has done an excellent job in the interim, and was seen in the market as an outstanding leader of the company. We are very fortunate to have him on the senior executive team, and we look forward to his continued contribution," he said.

Mr Hunt's contract is available on the company's web site, at www.lglgold.com, along with a detailed career history.

Local market ends on low note

THE Port Moresby Stock Exchange (POMSoX) reports local market ended the month on a negative note, with light volumes changing hands for BSP, NBO and OSH.

Dual listed stocks, NBO and OSH lost 50t each to land on a negative territory buoyed by a mixed leads from the offshore markets after a disappointing US job data humiliating hopes that global economy recovery will continue.

In this week's markets releases:
  • KAML in its end of year report shows its investment portfolio increased by K4 million, or 9.4 percent in 2009;
  • Credit Corporation recorded Operating Profit of K33.12 million for the year ended 31 December 2009 and;
  • LGL's shares are inserted in the FTSE All World Index as well as FTSE Australia Index, which put the stock on investors' radar screen
The Wednesday market opened flat with businesses closing early for Easter Holiday's. Offers for NGP are queued at K1.45 while bids for HIG continue at K0.68.

PX goes global for energy support

THE country's flag carrier, Air Niugini and Chapman Freeborn have partnered in support of Papua New Guinea's energy industry.

It will now be able to offer its clients freighter aircraft from third-party operators managed by Chapman Freeborn.

The new venture will also provide shippers and forwarders a one-stop shop for project cargo with main deck charter solutions to Port Moresby and onward connections to smaller airfields and unpaved strips across Papua New Guinea.

An L-100 Hercules will be used to support the development of a major liquefied natural gas project in Southern Highlands as well supplement domestic cargo operations by Air Niugini's Dash-8 freighter aircraft. The two companies are also studying a niche regional freighter for smaller loads.

Air Niugini operates B767s from Port Moresby to Asia and Australasia and F100s and Dash-8s on domestic and regional routes.

Chapman Freeborn also has signed a block space agreement with Safi Airways. The privately-held Afghanistan airline flying to Germany and Belgium has increased its A340 Frankfurt-Kabul service to five flights a week .

The new agreement allows cargo customers to send shipments on the only regular direct service from Europe to the Afghan capital. The first flight carried a record 30 tonnes. Chapman Freeborn says it is currently finalizing plans to open an office in Kabul.

Earlier this year Safi signed interline agreements with Lufthansa, United Airlines, Emirates and Qatar Airways.

Petromin congratulates InterOil and Mitsui Corporation

THE Managing Director and CEO of Papua New Guinea’s national, oil, gas and minerals company Petromin PNG Holdings Limited(Petromin), Joshua Kalinoe has congratulated InterOil and Mitsui Corporation for entering into a Preliminary Commitment Agreement for developing phase one of the Elk/Antelope LNG project, subject to final ratifications.

Phase one of the project includes the extraction of condensate and development of upstream LNG extraction facilities.

Mr. Kalinoe made these remarks on the occasion of the signing ceremony in Tokyo of the Commitment Agreement between InterOil and Mitsui in front of the Prime Minister, Grand Chief Sir Michael Somare on Tuesday 30th March, 2010.

InterOil is the upstream operator for the Elk/Antelope LNG project and Mitsui Corporation is one of the leading Japanese investment and trading companies.

The Preliminary Commitment Agreement allows Mitsui to fund 100 percent cost of the Condensate Stripping Facilities (CSF) which includes a liquid separation plant and pipeline in the project area, and earn tolling fees and various other benefits. Mr. Kalinoe said, under the arrangement Mitsui will also fund Petromin's share of the condensate extraction costs. This means that Petromin and the State will not have to seek separate financing arrangements to fund their share of the equity.

Mr. Kalinoe said that it is one of the best project financing deals for the current partners in the project which includes Petromin, InterOil and Pacific LNG. It also means that early revenue for Petromin and the State from the Condensate Stripping component of Elk/Antelope LNG project where first cargo of condensate is expected by the second half of 2012.

Under the arrangements Mitsui will co-build the extraction facilities and will receive toll fee as well as financing cost from condensate revenue at first production of condensate. The condensate will be sold on a net back basis to the InterOil refinery in Port Moresby at international market and local PNG market prices. 

Mr. Kalinoe said this arrangement adds more value to Papua New Guinea than any other projects where all the LNG products are sold overseas.

Meanwhile, Petromin has entered into a long-term strategic partnership arrangement with Japan Petroleum Exploration Co., Ltd (Japex).

Japex is a publicly listed company and partly owned by the Japanese Government. It is the exploration and Development Company with oil and LNG interests in Japan and other parts of the world.

The Agreement on Principles for a Long-term Strategic Partnership was signed in Tokyo on Tuesday 30th March, 2010 in the presence of the Prime Minister, Grand Chief Sir Michael Somare by the President of Japex, Mr Osamu Watanabe and Managing Director of Petromin, Mr. Joshua Kalinoe.

In the signing ceremony, Mr. Kalinoe said the purpose and intent of the Agreement is significant for Petromin because of the value it will bring to the development efforts of the company in both operational and human resource development.

LGL rejects acquisition proposal from Newcrest Mining Ltd

LIHIR GOLD Ltd (LGL) on Wednesday rejected an offer from Newcrest Mining Ltd to acquire 100 percent of LGL's issued ordinary shares through a scheme of arrangement.

The offer, which was received on 29 March 2010, was on the basis of 1 Newcrest share for every 9 LGL shares plus A$0.225 cash per LGL share, less any interim dividend declared for the half year ended June 2010. Based on Newcrest's closing share price as at 31 March 2010, the offer was equivalent to A$3.87 per share and valued the company at approximately A$9.2 billion.

While the Board recognized the strategic merits of the combination of the two companies, following careful review and analysis, directors unanimously determined that the offer did not represent good value for LGL shareholders. This was particularly the case given the conditions and exclusivity arrangements that Newcrest proposed.

LGL Chairman Ross Garnaut said the offer undervalued LGL, both in terms of its existing business, and in terms of the potential value the company expected to deliver to shareholders in the future. "It also did not include a sufficient premium for control," Dr Garnaut said.

"Directors and management made certain that Newcrest was given the opportunity to make an offer that would deliver full value for our shareholders, but the Board's assessment was that the offer ultimately received was inadequate. We felt we had an obligation to shareholders to reject the offer," he said.

In the course of discussions leading to the offer, LGL provided Newcrest with access to limited due diligence items. The due diligence was subject to a confidentiality deed and 9 month standstill agreement and gave Newcrest an opportunity to put forward an offer that LGL's Board may have considered to be in the interests of shareholders.

"LGL has an excellent portfolio of operating mines in three countries and has achieved record production outcomes every year for the last four years, reaching output of 1.124 million ounces in 2009. We have major growth projects currently being developed in PNG and in West Africa, which will deliver increasing returns over the coming years, lifting average annual gold production by approximately 40 percent from current levels to 1.45 million ounces from 2012 to 2016.

"There is considerable option value in the huge gold resource at Lihir Island, which increased 31 percent to 43 million ounces in 2009, and also in the company's assets in West Africa.

"We were keen to ensure that our shareholders capture the full value of that growth," Dr Garnaut said.

"The Board is strongly of the view that LGL is undervalued in the marketplace, and that view has been expressed to us on a number of occasions by shareholders. We have recently made management changes and taken other steps that will assist us in the process of rebuilding market confidence and correcting that valuation shortfall.

"In that context, it was clear to the Board that the Newcrest offer failed to provide full value for the underlying assets with an appropriate takeover premium," Dr Garnaut said.
"The world class, long life nature of LGL's pure gold assets would add a great deal to the value of Newcrest, as it would to some other companies, and the offer price did not provide an appropriate sharing of the potential benefits of the proposed combination," Dr Garnaut said.

LGL's Board remains committed to maximising value for its shareholders and this will continue to be the only criterion by which any further proposals or strategic options will be evaluated.

PNG building boom attracts Fiji firm

THE booming building industry in Papua New Guinea has at least attracted Fiji's leading manufacturer of concrete, masonry blocks Standard Concrete Industries.

Basic Industries Ltd chief executive officer Mosese Volavola said they were aggressively pursuing expansions into these markets to make up for the 20 per cent to 30 per cent drop in revenue in Fiji's 'quiet' construction industry.

He said SCI, a major division of Basic Industries, aimed to penetrate the "promising" PNG market. Mr Volavola said Tahiti and New Caledonia were also in their expansion plans.

"We're now looking outside Fiji to make up for the drop in revenue because while the local market is quiet and subdued, we're picking up on exports," Mr Volavola told the Fiji Times.

"We're currently selling our products to Vanuatu, Samoa, American Samoa, Tonga and Cook Islands and now we're targeting other island nations, particularly Papua New Guinea," Mr Volavola said.

"And this should be good because instead of laying people off and reducing our operations, exports are still keeping us going."

Mr Volavola said the demand for cement and concrete building materials was high given the recent signing of two multi-billion dollar contracts for the extraction of natural gas.

"There is no direct shipping to PNG at the moment and that is what we are looking at right now. Hopefully, by the second quarter of 2010, we should achieve the PNG market and the other option is to establish our operation there," he said. "That of course will depend on the size of the market to determine the viability of our operation but in PNG, the market is there, it's big with a population of around six million the PNG market is very promising."

Mr Volavola said many of Fiji's neighbours did not have good quality sand, gravel or rocks available locally and Fiji was a cheaper option for quality over Australia and New Zealand, complemented by a regular shipping service.

SCI national manager masonry and export Umesh Kumar said their increase in exports over the last five years was attributed to the quality of products manufactured locally.

Harmony continues growth despite challenges

 HARMONY Gold Mining Company Limited (Harmony) with operations in PNG has announced that the past quarter saw continued focus on safety and disciplined mining, but was not without its challenges.

The South African based company in releasing the production update for third quarter 2010 financial year (FY2010) based on preliminary estimates, gold production for the quarter decreased between 1,000kg and 1,300kg compared with the previous quarter.

Loss-making shafts that were closed during the quarter resulted in a reduction of approximately 620kg of gold, as compared with the previous quarter. Restructuring costs in respect of these closures amount to approximately R120 million. Going forward, only care and maintenance costs for the closed shafts will be incurred. "Longer term the effect of this decision will be shown to have been the correct one, lowering the cash costs and eliminating losses, however, the first 3 to 6 months of these decisions are always painful", said Harmony's Chief Executive Officer, Graham Briggs.

The remaining loss in kilograms was from South African operations, of which the main contributing operations to this decrease include Tshepong, Masimong, Joel and Kusasalethu (previously known as Elandsrand). Tshepong and Masimong had a slow start-up after the Christmas break. Joel saw lower grades, mainly as a result of the commissioning of the plant and Kusasalethu faced ore-pass problems during the quarter, which are being investigated.

Hidden Valley continued its commissioning process, with the silver flotation circuit being commissioned in the March quarter. As mentioned in the previous quarter, we expect the Hidden Valley mine and processing plant to reach its original design capacity and throughput in the June 2010 quarter. The mine`s March quarter results will be capitalised.

"This has been a difficult quarter. Shortly after having recorded 99 days fatality-free, a fatal accident occurred at Evander. Slow start ups following the Christmas break and the closure of shafts resulted in a decrease in forecasted production and Kusasalethu, in particular, had a disappointing quarter. Our management team is working hard to try and understand the ore pass situation better and aims to find a solution as soon as possible. Having just visited Hidden Valley, good progress is being made in dealing with the commissioning phase. In general, we expect to see improved results during the June 2010 quarter, with all of our management teams dedicated to meeting production targets," Briggs said.

Harmony`s results for the third quarter of FY2010 ending 31 March 2010 will be announced on Monday, 10 May 2010 at 09h00 and 15h00 SA time.

InterOil responds to allegations

INTEROIL CORPORATION (NYSE: IOC) (POMSoX: IOC) believes that allegations made in an article concerning certain litigation which has been ongoing in Texas since 2005, have been raised now in an attempt to divert attention from the successful operations of the company. 

Operations conducted by the company which were evaluated by independent engineering evaluations consultants, GLJ Petroleum Consultants Ltd., resulted in an increase in our gross best case contingent resources estimate by 889 million barrels of oil equivalent resources, to a revised total of 8.2 tcf of natural gas and 156 million barrels of condensate, in the past fiscal year.  The article was timed to benefit recent short selling activities.  The "short" interest in InterOil increased to 3,548,056 shares in mid-March.

InterOil's policy is to not provide commentary on ongoing litigation beyond the description of it appropriately and consistently set forth in our Annual Information Statement and Form 40-F available on our website or from the SEC.

In our Annual Information Form (AIF), filed on March 1, 2010 the Company continued to disclose that Company's Chief Executive Officer, Phil Mulacek, and his controlled entities Petroleum Independent & Exploration Corporation and P.I.E. Group, LLC, together with the Company and certain of its subsidiaries, are defendants in Todd Peters, et. al. v. Phil Mulacek et. al.; Cause No. 05-040-03592-CV; pending in the 284th District Court of Montgomery County, Texas.  Appropriate details concerning this long running action are provided.

InterOil and its subsidiaries were not party to, nor otherwise involved in, the Nikiski Partners filing referenced in the article.