Basil refutes Opposition’s claim

Minister and Trustee Delegate for Kumul Petroleum Holdings Limited (KPHL), Sam Basil, has refuted the claim by the Opposition that the State Company has made a K1.5 billion loss.

He said, however, that KPHL made a net profit of K170 million in 2017.

The rebuttal follow claims by Opposition Leader, Patrick Pruaitch, that KPHL made a loss of K1.5 billion, with the UBS K3 billion loan alleged as one of the causes for the loss.

In a statement, Basil said KPHL has not borrowed from any commercial bank since 2014 and there are no operating losses in 2016 as claimed by the Leader of Opposition.

Basil said the comments are misleading at best and unbecoming of a former Treasurer who should know better – given he was in Government - and directly responsible for some of these initiatives.

Pruaitch was quoted in one of the dailies last week stating that KPHL’s consolidated accounts disclosed that following a K481 million loss in 2016, the UBS collar loans were extinguished in 2017 at a cost of US$842,423,000 (K2.8 billion), part of which could have been offset by the prevailing value of the Oil Search shares.

Pruaitch said this was mismanagement of the country’s economy by the O’Neill government through a series of bad and corrupt decisions.

Basil responded saying Pruaitch has misled the people of PNG by saying KPHL had borrowed to pay dividends to the State in 2016 and 2017 and also made a loss of K1.5 billion in the same period.

Basil added that the very annual report that the Opposition Leader refers to says something else. They include:

  • The K451 million BSP loan was taken in 2014 as part of the UBS Loan transaction and not in 2016 or 2017
  • KPHL has not borrowed from any bank since 2014
  • The BSP borrowing was part of the pool of funds put together (collar arrangements from UBS, KPHL’s LNG Revenue, BSP Loan) to serve the multiple purposes during the transaction
  • The 2017 annual report states that the KPHL made a net profit of USD56.6 million (K170 million) in 2017 and not loss

Minister Basil said the 2017 annual report states that KPHL has in fact consistently made profits since 2014 including 2016 and there has been no operating loss in 2016 as claimed.

He said the loss of USD149 million (K481 million) was a book loss that was recorded due to the fall in the share price of the Oil Search shares which reflected the fall in oil price to below $30/bbl in 2016.

“The USD30 million (K100 million) dividend paid in 2016 was not borrowed as claimed but funded from reserves carried forward from 2015, which was a stronger year compared to 2016 due to oil and LNG prices,” Basil said.

“While the company has made USD56.6 million (K170 million) net profit in 2017, the 2018 financials are expected to be even stronger due to recovery of oil and LNG prices.”

KPHL has also invested $60 million in the Port Moresby Power Project which will supply 58MW of cheap, reliable and efficient power into Port Moresby. The company has also invested in Kimu drilling, Muruk drilling and Barikewa drilling where the reserves have almost doubled and will add these fields as part of the PNG LNG Expansion Project.

KPHL has 15 percent stake in Brikewa and 17 percent in Kimu Gas fields before back rights exercise and Muruk will also add additional equity and reserves depending on outcome of Muruk 2 well under drilling currently.

Minister Basil said: “The company is one of our largest and strongest state-owned entities (SOEs) in PNG at the back of what is now our biggest investment in the country, the PNG LNG Project; Hides Gas to electricity project and its interest in the oil fields in Moran and Gobe; and soon to commission Port Moresby 58MW power plant.

“I urge politicians, especially those who should be well-informed, to leave the company alone and allow it to work alongside Total SA and ExxonMobil and other international investors in our oil and gas and energy industries,” he said.

The company has a huge responsibility to finance its share (20.5 percent) in Papua LNG Project and the P’nyang Expansion LNG Project with its current partners.

KPHL has to raise close to $1.5 billion between 2019 and 2020 for both projects’ equity and KPHL will also free carry the landowners and the provincial governments two percent free carry equity in these projects as per the KPHL Authorisation Act 2015.

Cedric Patjole