LNG project funding audit finds hundreds of millions wasted

Hundreds of millions of kina borrowed for state equity in the LNG project have been squandered, according to Public Enterprises Minister Sir Mekere Morauta, The National reports.

He said yesterday (Thursday) that the national executive council had considered an audit of the International Petroleum Investment Corporation (IPIC loan) that is being used to pay for the state’s equity in the LNG project.

“Independent experts have audited the transaction, under which Papua New Guinea, through IPBC, borrowed $A1.68 billion from the Abu Dhabi Government’s International Petroleum Investment Company,” Sir Mekere said.

“The independent audit has revealed just how bad the transaction is for Papua New Guinea. It was conducted by the former Minister for Public Enterprises, Arthur Somare, and his former Independent Public Business Corporation (IPBC) management.

“The audit found that the transaction was neither transparent nor appropriate, and that other options had not been explored.

“The initial borrowing was enormously wasteful – the funds became available to IPBC eight months before they were needed, resulting in IPBC having to pay interest of $A56 million for absolutely nothing.

“Then the Australian dollars had to be converted to US dollars, leading to another loss of $A300 million.

“The result of this financial incompetence is that the national government has had to borrow a further K900 million to ensure that Papua New Guinea can retain the level of equity that it wants in the LNG project.

“Finally, the audit and other investigations have found that the transaction imposes many restrictions on how the state’s revenues can be managed, and how public enterprises are administered.”

Sir Mekere said NEC had decided to explore the possibility of refinancing the loan.

“This does not mean that it will automatically be refinanced, but this is one option that should be looked at,” he said.

“Refinancing could provide an opportunity to obtain more affordable and fairer finance and remove restrictions on the government’s ability to manage its own revenue and its own public enterprises.

“It is essential that we maintain our level of equity in the LNG project, but at the same time ensure that we get the best deal for the people of PNG.”