PNG rebuffs Gillard's poll push

From AFP

PAPUA New Guinea's Prime Minister Peter O'Neill has rebuffed pressure from Australia to hold elections on time.

Peter O'Neill

Prime Minister Julia Gillard on Friday ratcheted up pressure by contacting Mr O'Neill directly, but he yesterday said the timing of polls was PNG's own business.

Canberra has repeatedly called on PNG to adhere to the June deadline for elections as set out by its constitution.

Ms Gillard's office issued a statement saying the pair "discussed the importance of holding national elections on time" and Ms Gillard had "welcomed Prime Minister O'Neill's statements that he supports the election proceeding on time."

But Mr O'Neill shrugged off the pressure yesterday.

"We appreciate the support of the Australian government, but it is for us to determine where we go with the elections in the coming months," Mr O'Neill told the ABC.

Australia is impoverished PNG's major aid donor and has pledged significant assistance to help the polls proceed, including electoral personnel and aerial capability to help transport ballots across the remote and rugged nation.

The election's timing was thrown into doubt earlier this month when PNG's parliament voted for a six month delay - a decision Mr O'Neill initially supported but later distanced himself from.

There was fresh speculation the June deadline was in doubt on Friday due to an investigation into the electoral commissioner, who is strongly committed to proceeding with the elections on their original date.

Canberra rankled PNG in March by suggesting Australia would "be in the position of having to consider sanctions" if PNG failed to hold elections in June.

In comments he later stepped back from, Foreign Minister Bob Carr said Australia would "have no alternative but to organise the world to condemn and isolate" PNG, leading Port Moresby to caution against threatening its independence.

Politics in PNG have been in turmoil since late 2011, when the Supreme Court ruled Mr O'Neill's rise to power - via a parliamentary vote while then-leader Sir Michael Somare was recovering from illness in Singapore - was illegal.

Mr Somare, who has dominated politics in the country for decades, believes he is still the leader of the nation of 6.6 million people, and fresh elections are viewed as a way of resolving the dispute for good.

PNG: Beyond the boom

Economic update from Oxford Business Group

Asia | 20 Apr 2012

Papua New Guinea’s recent surge in natural resource projects has had a spin-off effect on other sectors, thus giving the country a positive near-term outlook for its economy, which is expected to see GDP growth reach 8% this year.

Work progresses on the LNG processing plant outside Port Moresby.-Picture courtesy of EXXON MOBIL

 However, the government has been advised to tighten its management of revenues from mining and natural gas projects, as well as curtail spending to ensure expansion remains stable moving forward.

In February, the International Monetary Fund (IMF) said Papua New Guinea (PNG) continues to see high growth due to elevated commodity prices and the construction of a liquefied natural gas (LNG) project, with the benefits seen in the construction and transportation sectors.

The IMF noted this was the 10th year of uninterrupted economic growth, but added that by 2013, growth will likely dip to 4%, as construction winds down and output at maturing mines declines.

The IMF’s confidence is mirrored in the latest regional review by the Asian Development Bank (ADB), which noted in March that the economy continued its strong performance during 2011.

“Industry made the largest contribution to growth, boosted by construction of the $16bn, ExxonMobil-led LNG project and high levels of government spending.

"Spillover from this activity also drove growth in the services sector, including wholesale and retail trade and transport,” wrote the ADB.

However, the bank also noted that increasing prices, driven by high government expenditure, large resource project investments and rising international commodity prices, saw the consumer price index (CPI) growth reach double digits in mid-2011.

Indeed, keeping inflation stable will remain key to maintaining economic stability as major mines close in the coming years and the PNG LNG project comes online in 2014.

 However, the Central Bank has been praised for monetary tightening in 2011, which helped see inflation fall to an annual headline rate of about 7% at the end of 2011, from close to 10% in the second quarter.

According to the IMF, the economy’s future also depends on Port Moresby’s commitment to ensuring that revenues from the LNG plant and minerals such as gold benefit the population.

“PNG’s resource sector could make a larger contribution to public revenues,” the IMF said. “Efforts to promote this could include strengthening revenue collection, reinforcing the internal revenue and Customs services, streamlining existing tax concessions, as well as an additional profits tax to mining activities, given that the average effective tax take from resources appears to be on the low side when compared with other fiscal regimes across the world.”

Concerns have been raised that the profits of PNG LNG could be spirited away from the country, with the government admitting in 2011 that only 4.5% of the project’s investment flows will be retained in the local economy between 2011 and 2013, as most project costs will be for imported goods and services.

In this regard, the passing of the new sovereign wealth fund (SWF) law by parliament in February is seen as an important step forward. The fund will be managed onshore and fully integrated into the budget and PNG’s fiscal framework, and will follow strict governance, transparency, disclosure, accountability and asset management rules.

To ensure growth, investment will need to continue to flow into the country. However, controversy has clouded Canadian firm Interoil’s plans for a $6bn LNG plant in the country’s Gulf province, with the plant initially expected to produce 5m tonnes per annum (tpa), ramping up in stages to 7.6m tpa and 10m tpa. The PNG government has shelved the plan, stating that the project was “fragmented” and “deviates from the [government] agreement”.

Also expected to impact foreign investment are political uncertainties, with fallout from last year’s stand-off between Prime Minister Peter O’Neill and former premier, Michael Somare, continuing to negatively influence the decision-making process. As a result, tensions are expected to intensify in the lead up to national elections scheduled for June 2012.

The need to spend to attract voters has also been flagged as a potential source of economic instability. In December 2011, the government passed its largest-ever budget at $4.98bn, an increase of 13% over the previous year. “We recommend moving toward a path of steady and affordable real expenditure increases,” said the IMF.

Improving financial management issues, strengthening procurement systems and creating greater integrity in public financial governance will go a long way to securing positive growth in the near term.

PNG government may sack elections chief

By EOIN BLACKWELL, AAP Papua New Guinea Correspondent

There is growing evidence that Papua New Guinea's government may move to sack the electoral commissioner, removing a steadfast obstacle to parliament's vote to suspend the June election by six months.

Prime Minister Peter O'Neill said on Friday the government appointment's committee was investigating a discrepancy in Andrew Trawen's reappointment as head of the electoral commission in 2010 by the government of Sir Michael Somare.

He told parliament he had received legal advice that Mr Trawen's term as commissioner had been extended beyond the mandatory retirement age of 55 set for certain PNG civil servants without a compelling reason.

"That reasoning was not provided at that meeting," Mr O'Neill said.

"In fact, the meeting took less than three minutes, at least that's what one of the members who was there deliberated to us after that meeting yesterday with my good friend, the leader of the opposition and the other members."

He told parliament the government's chief secretary, Manasupe Zurenuoc, was investigating the matter and had told the PM he needed time to do so, with advice to come in the coming week.

But in what can be interpreted as parliament's determination to have its will heard, Mr O'Neill earlier told the chamber parliament's vote on April 11 to delay the election did not need to be rescinded.

"The motion that we passed on this floor was voted on by many of us on this side of the house. We stood because we believed very strongly then, as we do today, that the electoral commissioner was not ready because of his failure to present the common roll (on time)."

Mr Trawen is a steadfast opponent of parliament's vote two weeks ago to suspend the elections by six months.

The specifics of Mr Trawen's appointment are just the latest volley in a larger, and longer, political game.

Since he took office on August 2 last year, Mr O'Neill has repeatedly said he wants elections to be conducted on time.

Mr O'Neill voted along with 62 other government MPs on April 5 to delay the poll by six months over fears of fraud in the common roll.

Mr Trawen says parliamentary terms - five and a half years - are fixed by the constitution.

Following parliament's vote, Mr Trawen said he was going to Governor-General Sir Michael Ogio to sign off on the issue of writs as scheduled on April 27.

Following a massive public outcry about delaying the polls, Mr O'Neill said parliament's decision was a protest only, and he agreed with Mr Trawen to a three-week delay in the issue of writs with no change in the June 23 polling date.

However, Jeffery Nape, PNG's powerful speaker, told the chamber on April 11 the vote still stood and Mr Trawen should obey it.

Mr O'Neill's coalition partner, Deputy Prime Minister Belden Namah, has frequently been highly critical of Mr Trawen's performance as electoral commissioner, arguing that the rolls are not ready five years after the last election.

Mr Trawen, with the backing of Australian-funded electoral support staff, says the rolls will be fully updated by May 18.

AAP understands that many sitting MPs also fear the odds are stacked against them during PNG's relatively chaotic five-yearly elections because Mr Trawen is an appointment of the former PM.

However, PNG traditionally has a high turnover rate of MPs after elections.

Journalists were on Wednesday night sent documents from the Somare camp detailing Mr Trawen's appointment as electoral commissioner.

Mr Trawen could not be contacted for comment

PNG leader pledges to make most of resources

From Sydney Morning Herald

THE Papua New Guinean Prime Minister, Peter O'Neill, launched his election campaign last night, promising to use the country's multiplying natural resource wealth to improve education and health services, roads and provide greater protection against crime.
At a gathering of supporters in Port Moresby, Mr O'Neill pledged to extend free education up to year 12 by 2014, when a $15 billion liquefied natural gas project comes on stream, massively boosting government revenues.
In his short nine months in power since ousting former prime minister Sir Michael Somare in tense parliamentary manoeuvres, Mr O'Neill has already removed school fees up to year 10 and now seeks to emphasise his government's commitment to improving the lives of ordinary citizens.
He also promised to rebuild the country's near derelict system of public hospitals to provide free basic health service, and to rejuvenate the ageing and under-resourced police and defence services to ensure better public safety in PNG's crime-ridden towns.
Australia's assistant foreign affairs minister for the South Pacific, Richard Marles, said last week this was a particularly important election, since it would mark the change from Somare's 1975 generation of independence leaders at the same time as the biggest resources boom ever, setting Papua New Guinea's course for decades.
''There is a lot of excitement about changing the direction in which we are managing the affairs of our country,'' Mr O'Neill said. ''We understand that we have mismanaged our past opportunities. We are committed to making sure we don't make the same mistakes in the future.''
The election has now been set for June 23, after a move to delay it by six months was set aside

Read more: http://www.smh.com.au/world/png-leader-pledges-to-make-most-of-resources-20120420-1xcg1.html#ixzz1sedulaIE

The heartbreak of Daru

By MALUM NALU

These are pictures of  the forgotten backwater of Daru, Western province, which has been left to rot by the PNG government.
Need I say more?
Four years ago, I went to Daru to bury my late wife, Hula, and since then, nothing has changed in this 'Wild West' town of Daru.
For better or worse?
Let these pictures by DAVID WILLIAMS do the talking!

Daru hospital in decline

New Century store and hotel in Daru

Daru child labour

Daru deforestation

Daru foreshore

Daru market, but there is little cash in town

Daru 'refugee corner'

Daru 'refugee' kids

'Stone chairs' of Daru

Living on a boat on the mudflats of Daru

Real life in Daru

Nasfund: Don’t expect ‘something flash’

THE private sector worker’s superannuation fund, Nasfund, has told its contributors not to expect “something flash” in 2011, The National reports. There has been a downturn in business for the superannuation industry as a result of several factors, not the least of which is the appreciation in the value of the kina against most currencies driven by the LNG project.
Chief executive officer, Ian Tarutia said any interest credited to contributors would be in “single digit” figures.

Ian Tarutia...'don't expect something flash'

Nasfund is meeting its auditors this week and the full audit committee will meet on April 26 after which the financial results for 2011 will be announced.
Nasfund’s sister public sector workers’ fund, Nambawan Super earlier this month announced drastic cuts in profit from K263 million in 2010 to K24 million last year.
Tarutia attributed the downturn to a number of factors including the appreciation of the kina, to the property market peaking and a static shares market.
He also said that this was normal for investment cycle which fluctuated all the time.
Tarutia also said the financial results were late this year because the fund has had to sort out the controversial K125 million sovereign loan to the Kokopo district.
It is expected the balance sheet will also be adversely impacted by the loan.

PNG investments drop in value as kina rises

By FRANK SENGE KOLMA
Papua New Guinea investments overseas have dropped in value by as much as 20% as a result of appreciation in the kina, The National reports.

Nasfund property at Harbour City…the property market peaking has contributed to slump in profits.-Nationalpic by MALUM NALU

The PNG kina has appreciated against most currencies by 23% in 2011, resulting in a drop in value of overseas investments by the same percentage point.
The public officers’ superannuation fund, Nambawan Super reported this fact when announcing its financial results for the year ending December 31, 2011.
Nambawan Super reported that its investments overseas had contributed negatively to its end-of-year results as did domestic investments in blue-chip companies such as the Bank of South Pacific, which were open to regional competition.
As a result, the fund reported a dramatic drop in profit after tax for the year, dropping by a massive K239 million from K263 million in 2010 to a mere K24 million.
This was reflected in interest credited to members of only 2% compared to 10% the previous year.
The kina’s appreciation has been driven primarily by the liquefied natural gas project and the high demand for PNG exports including the forward sales.
The LNG project has also had similar inflationary effects right across the business and commercial spectrum including domestic prices of goods and services, salaries and the price for accommodation.
Nasfund’s chief executive officer, Ian Tarutia said yesterday the private sector workers’ fund had also been adversely affected and warned contributors not to expect anything “flash” for last year.
Appreciation in the kina is not solely responsible for the dips in performance, it would appear.
Both Nambawan Super and Nasfund report a slackening off in business on the domestic front as well.
A lot of domestic investment is in property and demand for both residential and commercial property had peaked, Tarutia said.
Investment in stock in blue-chip companies were also static as a result of the global economic downturn as well as the fact that most stocks in these companies were held by institutions so that is not much movement in large chunks of stock to be able to determine price movements, Taurutia said.
Nambawan Super’s public statement concurs in part with Taurutia in that “…domestic investments in Bank of South Pacific also contributed negatively”.
Nambawan Super did gain from its investment in Paradise Foods Ltd, South Pacific Brewery Ltd and government bonds, a fact which underlines its commitment to a “diversified portfolio of investments” as the “best long term strategy” to mitigate risks.

Exxon, Oil Search happy With Papua New Guinea gas find

By Ross Kelly
The lush jungles of Papua New Guinea are proving to be a fertile hunting ground for ExxonMobil and its Australian partner Oil Search.
The two have enjoyed more success from their exploration campaign up in the PNG highlands, which is being undertaken to support a possible expansion of the US$15.7 billion PNG LNG gas-export project down on the coast near Port Moresby.
The giant terminal is on track to ship LNG cargoes from its foundation stage comprising two LNG production units to customers in China, Japan and Taiwan in 2014.
An expansion to three production units could precede another string of multibillion dollar offtake deals that would improve the project’s economics substantially, especially since extra bits bolted onto existing LNG developments are always cheaper to build than the foundation stage.
All that’s needed is more gas and Exxon and Oil Search are coming up with the goods. In the latest development, Oil Search told the Australian Securities Exchange that what’s known as a “sidetrack well” to the recent P’nyang South-1 well has found the original gas zone extends about 200 meters deeper, indicating an increase in the total gas column to about 380 meters.
A gas column of that magnitude is big by any standards. What’s more, Oil Search said early testing such as seismic interpretation and structural mapping indicates their could be more gas further up the geological structure, indicating a potential vertical gas column in the P’nyang field of over 650 meters.
Given the company-transforming nature of PNG LNG to Oil Search, it’s not surprising its shares had jumped 4.6% in early trade in Sydney Friday. Shares in Santos, which has a minority stake in PNG LNG, tacked on 0.6% in a wider market down 0.1%.
James P. Bullen, an analyst at Merrill Lynch, reckons the Greater P’nyang area could hold over 3 trillion cubic feet of gas. It’s widely recognized in LNG circles that about 4 trillion feet is needed to support a single LNG processing unit, also known as a train.
Exxon and Oil Search still have more ground to test including the Trapia and Hides prospects, while Oil Search individually is sitting on vast untested acreage in the Gulf of Papua that could underpin a another LNG development in PNG.
Given the rate of discoveries so far, the idea of a fourth train at PNG LNG will be moving to the front of investors’ heads, regardless of what Oil Search may do with its Gulf of Papua assets.
Any expansion will have significant implications for the likes of Chevron, Shell and Woodside, which are mulling expansions to their LNG projects nearby in Australia that will have to compete with Exxon and partners for customers and funding.

Chamber: Lae road project in ‘limbo’

By MALUM NALU
Lae Chamber of Commerce and Industry has expressed great concern at the way the city’s roads are being constructed, despite more than K100 million being allocated for this purpose.
The six major contractors, despite being paid millions, had done a “half-baked job”, it says.

Lae's new-look concrete roads as pictured along Markham Road…the entire K100 million project is now in limbo.-Picture by MALUM NALU

Chamber president Alan McLay gave this blunt assessment when asked by The National to comment on the state of Lae roads
“The Lae city roads rehabilitation project sits in limbo,” he said.
“For the last 16 months, we have seen six contracting companies complete a large number of the busiest roads in the city, mostly with concrete.
“This is great and has seen the city return to have a steady flow of traffic again, for the first time for years.
“The problem is that these contractors have only completed about 60 % of the jobs that they were contracted to do – 40% remains unfinished, most with gaping holes where the roads have been prepared for concreting but left unfinished as the project has run out of funds.”
McLay said when the new government took last August, it commissioned an investigation into the road project.
He said the investigation came up with many irregularities, including the fact that the finances had been poorly managed, leading to a significant overspending on the project.
“Hence, there is no money to pay contractors for the work they have already done, let alone the work that is required to finish off the contracts,” McLay said.
“The problem as always when dealing with Lae roads, is that the rainy season is now upon us.
“The sections that have been prepared for concreting will deteriorate rapidly, so that when funds are found to finish the road works off, the work will have to start from scratch again.
“In the meantime the free flowing traffic will slow down to a snail’s pace once again as the uncompleted sections break up.”
McLay said the Morobe provincial government continued to believe that the roads project was the answer to the city’s problems.
“The Morobe provincial government - in the mistaken belief that the Lae roads project will fix up all the Lae roads - budgeted insufficiently for the maintenance needs of the ‘other’ Lae roads,” he said.
“Many of these roads have already been under stress after having been used as alternate routes when the concrete roads have been constructed.
“Without maintenance these roads will collapse.”

'Crisis' in Port Moresby affects business

By MALUM NALU
Port Moresby Chamber of Commerce and Industry says there is a crisis in the city which is greatly affecting business in the city.
Chamber president Ron Seddon made an urgent appeal to parties to sort out the current uncertainty and unease in the capital, which he said had left businesses and their staff “nervous, feeling frustrated and threatened by the current situation” .
“Those causing this nervousness need to realise they are adversely affecting the lives of ordinary Papua New Guineans to a significant extent, where it hurts: in their pockets,” he said.
“The prices of goods and services to the average family will inevitably rise as the cost of doing business is forced up by the loss of days of trading and having to fill gaps left by staff who cannot or are too scared to get to work.
“We should call this ‘self-induced inflation’ by the people and leaders of Papua New Guinea.
“Couple this with the fact that it is already expensive to do business in our country along with significant upward pressure on costs - which is never properly reflected by the inadequate measurement of CPI - and we have an extremely worrying scenario developing.
“Businesses cannot operate properly, costs rise.
“Staff cannot perform, costs rise.
“Public servants take advantage of the ‘unrest’ to close office, causing more delays, costs rise.”
Seddon said this week, while business got on with the job at hand as best they could, it was noticeable Customs, “already a source of costly delays for business”, and the Labour Department closed up shop because of the “unrest”.
“There was no ‘unrest’ in the CBD,” he said.
“Not even a size 7 earthquake on the Richter Scale stopped most businesses from operating.
“Crumbling infrastructure such as our roads and the severed freeway means it takes longer to get jobs done, costs rise.
“We urge NCDC to ramp up work to 24/7 to fix the freeway and not just accept that the one lane quick fix is sufficient.

“The freeway issue is a crisis: get it fixed!”.-Picture by MALUM NALU

“At peak hours, traffic going into town at peak hours is backed up to Waigani Drive in both lanes
“Some trucking companies are now only delivering at night as it takes too long to make a delivery during the day.
“Once again costs go up.
“With some container storage moved to 8-Mile, truck cartage rates have risen considerably.
“Business is grinding to a halt and authorities are taking almost a lackadaisical approach to fixing the problem.
“The freeway issue is a crisis: get it fixed!”
Seddon said there was a crisis in confidence which was only exacerbated when “our politicised and factionalised police are sorting out internal issues and not attending to the needs of the city residents”.
“The police commissioner initially admitted he was powerless to do anything about the political issues.
“We are, however, pleased to see firm action at last with the arrest of five policemen on assault charges and the announcement that the riot squads will be sent packing from our city and back to the Highlands.”

UPNG mourns passing of senior lecturer Dr Regis Stella

By KAIRU LAHO, UPNG Public Relations
On the eve of the launch of his latest book, Unfolding Petals: Readings in Modern PNG Literature, senior lecturer in Literature and English Communication at the University of Papua New Guinea, Dr Regis Stella passed away on Wednesday this week (April 18).

Dr Regis Stella

This book, his third, since his first novel Gutsini Posa (1999) and was set for launching today (Friday April 20) at the Waigani Campus.
Gutsini Posa in his local Banoni dialect means rough seas.
And this is how he and other PNG writers entered PNG’s literature scene.
His demise, however, was quite the opposite – quieter and most peaceful on the petals of his book.
Dr Stella was born in Bougainville.
He holds a PhD from the University of New South Wales and has been teaching at UPNG since he came on board as a teaching fellow in 1988.
According to his colleague and fellow writer Dr Steven Winduo, Dr Stella’s PhD thesis on re-emerging PNG through literary publications was one of the best ever written and had the rare opportunity to be converted to a book which is now a recommended text in universities.
He had been a deputy dean of the School of Humanities and Social Sciences and formerly the director of the Melanesian Institute of Arts and Communications (MIAC).
DrWinduo, described him as reserved but an intelligent person and hard working.
He had two titles to his name, prior to his most recent book and edited three others.
Dr Winduo wrote of his first novel which was launched at the University of South Pacific… “My colleague Dr Regis Stella, first wrote the novel Gutsini Posa (1999) for the National Literature Competition.
"He won a prize that year.
" Since then he has re-worked the manuscript through a writer’s fellowship at the University of Iowa writing school.
"The novel is centred around the Bougainville crisis and the experiences of that conflict.
" Far from its existential value, Gutsini Posa is a novel that has two achievements: First, it is an important literary representation of the struggle of the Bougainville people to come to terms with the crisis that had completely devastated their moral and physical strength.
"Dr Stella represents precisely this experience by the use of a volcano metaphor, a force mightier and devastating to both the oppressed and the oppressor.
"The relationship between human’s ability to destroy themselves and yet can also be destroyed by a force greater, in the form of natural disasters, is an inevitable reality that Dr Stella impresses upon the reader in Gutsini Posa."
Second, despite the differences in the characters of the book, they all have ideological strengths, which keep them intact from fragmentation
Dr Stella’s voice is stunning, yet controlled and provocative.
Though a first novel for Dr. Stella, he secures a new place in the literary culture of PNG.
Late Dr Stella journeys back home next Wednesday to his final resting place.

Lae port construction beings on May 8

Work will start on the Lae port on May 8 after a meeting held in Lae on Wednesday set the scene for construction work to start on the K700 million project.

The Lae port...a very significant project.-Picture by PETER BOYD of Riback Stevedores

Independent Public Business Corporation managing director Thomas Abe said the meeting was very successful and agreed on a number of important ground rules for construction.
“Clarification of a range of issues and commitments, including employing local workers, was achieved, allowing us to set the date for the start of construction,” he said.
“The start of this project, worth more than K700 million, is very significant.
“It will make a big contribution to the development of the Momase region, particularly in the resources, industrial and agricultural sectors.”
Present at the meeting were representatives of the executing agency (IPBC), contractor (China Harbour Engineering), and consultant engineers (Korean Engineering Consultant Corporation), Asian Development Bank, and PNG Ports Corporation Ltd.
The meeting was chaired by Mr Abe.
Construction work, expected to be completed in 2015, includes a tidal basin, a berth and a terminal.
Lae port is the most-important port in the country, and has become one of the busiest in the south-western Pacific as major resource projects start producing and construction of new ones begins.
It cannot meet current demand and would have become become an even greater obstacle to regional and national development without the project.
Abe said construction would create many hundreds of jobs and would provide work for local firms and sub-contractors.
“An important aspect of the pre-construction meeting was agreement by the contractor to try to maximise the use of local labor, local skills, local professionals and local companies and sub-contractors,” he said.
“This is something IPBC has been pushing very strongly, and I am happy to say that our position was viewed positively at the meeting.”

Interoil: gigantic con or deadset bargain?

By  MICHAEL WEST of Sydney Morning Herald


The rope is stretched more tautly than ever in the tug-o-war between the true believers and the sceptics in tearaway oil stock Interoil.
For some, especially the short-sellers on its share register, Interoil appears a gigantic con. Look no further than its connections with colourful Vancouver stock promoter Carlo Civelli, they say, and its perennial penchant for over-promising and under-delivering.
For others, Interoil is deadset cheap. It claims to have discovered an "elephant", as they say in the industry parlance; a gas field called Antelope 1 with a flow rate of 382 million cubic feet of gas and 5000 barrels of condensate a day - a world record no less. And that's just Antelope 1. Antelope 2, they claim, is even bigger.
Internet chat forums lit up again a few weeks ago when George Soros lodged a notice showing he had been selling down. Soros is savvy. What could that mean?
Only Interoil knows. The real key to oil and gas plays, particularly in remote climes like PNG, is complex technical data. Yes, Interoil has drilled a couple of wells in the jungle and lit up a massive gas flare or two, but how long would it burn for? How much gas was really there and was it technically feasible to extract it?
Critical information about the likes of on-gas flow rates is known only to a few – but it means the difference between a multi-billion dollar project and an expensive hole in the jungle.
Such are the costs and the technical challenges of developing a major gas project that the PNG government has insisted Interoil – which has a market cap of $2.7 billion – team up with a multinational player to develop its project. To that end, Interoil boss Phil Mulacek has brought aboard UBS, Morgan Stanley and Macquarie as advisors to find this partner and the capital.
Besides the purportedly humungous gas field Interoil also promises to build an LNG plant to process the gas at a cost of $6 billion to $8 billion. It is one hell of a project to pull off.
The problem is … which project?
It has been a week of comedy and confusion in Papua New Guinea. Government officials have chided Interoil for trying to develop another project – a project not even “envisaged” by the contractual agreement which Interoil had signed with the PNG government in 2009.
Displaying a monumentally thick skin, Interoil announced on Tuesday that its Gulf LNG Project was “on schedule”. This was despite it failing to meet the deadline for Final Investment Decision (FID) approval for at least the third time.
The next day, however, the chairman of the government oil company Petromin, Brown Bai, publicly reminded Interoil that it had no contract to deliver the Gulf LNG project. The project for which Interoil had been approved happened to be situated in another part of the country.
“They cannot change the goal post and disregard their contractual obligations.
“I urge IOC and LNGL (Liquid Nuigini Gas Limited) to respect Papua New Guinea's laws, systems and processes, including accepting that the NEC has rejected the Gulf LNG project as proposed by them,” said Mr Bai.
The Prime Minister's office – despite a mysterious press release citing approval, but later retracted – had also rejected the Gulf project earlier this week.
Strangely – and this could only happen it PNG – the office of PM Peter O'Neill had issued a release confirming its support for the Gulf Project. Though it was quickly disavowed. Apparently, Interoil enjoys some high level contacts close to the Prime Minister.
The company will now have to find another excuse for not delivering on its contract. Its market commentary has continually emphasised the robust support it enjoyed from the government of PNG for the Gulf project – in stark contrast to the actual project agreement signed by Prime Minister O'Neill.
In an investor briefing last month, Interoil chief Phil Mulecek and his top brass again claimed government support for the Gulf project. It would proceed pending the clarification of a few minor matters, they told a conference call with analysts.
These details included the location of all the plant, an international proven operator partner with proven technology to joint venture in a 7.6mtpa LNG plant.
The government has insisted that Interoil find a big operator to develop its LNG facilities. Oil Search, for instance, is developing its $15 billion LNG project in PNG with oil giant Exxon.
BusinessDay understands that at least one major oil company which has sought admission to the Interoil data room to evaluate its gas project has been refused entry.
Interoil's sceptics believe the claims to a resource of 3 trillion cubic feet of gas are overblown. That's why, they say, the project remains undeveloped.
But the other leg to the project - the requirement to deliver a 7.6mtpa-10.6mtpa LNG facility based on its Elk and Antelope gas reserves - is required to be delivered using internationally recognized technology and operators.
LNG plants do not come cheaply.
Nonetheless, Interoil has been pushing ahead with its plan to build a 3mtpa LNG plant in the Gulf with Energy World Corporation (EWC), a company run out of Hong Kong but listed on the ASX.
EWC claims it has “modular” LNG technology which it can deploy to process the gas far more cheaply than existing plants run by the likes of Woodside, Chevron, BP and Exxon.
Its stock price though has been under pressure over the past two weeks after a story in BusinessDay highlighting its failure to deliver an LNG plant to Indonesia. EWC is yet to notify the ASX of its response to the latest demands from the PNG government and the government's insistence that Interoil sign up with an oil major.
The issue is material to investors. Since an LNG plant would cost, even on EWC's reckonings, many billion dollars, it would need to be funded. There is little guidance on how Interoil and EWC plan to fund their plant.
The Oil Search plant, at 2.5 million tonnes, is slated to cost $15 billion while InterOil claims its 2 million tonne plant will cost $6 billion to $8 billion.
Interoil has now extended the Final Investment Decision on its project agreement with EWC until December this year.
In the meantime, the market awaits with baited breath for Interoil, its joint venture partners such as EWC and its investment bankers Morgan Stanley, Macquarie and UBS (whose mandate is to find development partners) to clarify which project they are proceeding with – the one stipulated by their Project Agreement with the PNG government or another one.
mwest@fairfax-media.com.au
Read more: http://www.smh.com.au/business/interoil-gigantic-con-or-deadset-bargain-20120419-1x8y9.html#ixzz1sSLq71wU

InterOil provides Gulf LNG project update

InterOil Corporation reiterated its ongoing bid process to select an internationally recognised LNG operator to join the InterOil Gulf LNG project is on schedule, in a press release today.

The bid process is being led by investment banks, Morgan Stanley & Co LLC, Macquarie Capital (USA) Inc.and UBS AG.

The company is pleased with the process being conducted by the investment banks and the number of bidders involved in the process.

Selection of the preferred LNG operator is targeted for the second quarter of 2012.

The Project Agreement stipulates that FID be reached by June 2013 for the 7.6 million tonnes per annum Gulf LNG Project.

 The FEED packages for the project facilities are mostly completed.

"We understand the PNG Government's desire to have an internationally recognised LNG operator join the project and we trust that our LNG bid process will fully satisfy that requirement," said Phil Mulacek, InterOil's CEO.

 "We welcome the continued support of both the Prime Minister and the Minister for Petroleum who endorse an LNG project in the Gulf which complies with the LNG Project Agreement."

Lae chamber welcomes port project

By MALUM NALU

LAE Chamber of Commerce and Industry has welcomed the K700 million Lae port expansion and redevelopment project.
The contract, approved by the national executive council, has been awarded to China Harbor Engineering, the lowest bidder for the contract, worth K734, 343,882.

An aerial view of Lae port.-Picture by PETER BOYD of Riback Stevedores

The project is being funded 70% by the Asian Development Bank and 30% by the national government.
The NEC decision requires China Harbor Engineering Company to agree to have a significant proportion of national labour in its workforce and to employ PNG sub-contractors.
The main element of the project is the construction of new port facilities including a tidal basin, a berth and a terminal.
Work is expected to start in the middle of this year and finish towards the end of 2015.
"The tidal basin project is just about to start, which will see 250m more wharf space for Lae," Lae Chamber of Commerce and Industry president Alan McLay said.
"The current project, which is extending berth three, will add a further 140m to give Lae the chance of coping with the demand.
"Some of the dredged soil will also fill swampy areas, which will add to the port area, and hopefully be used wisely to decrease congestion.
"Without this development, Lae would be too hard to ship goods and shippers would look at other alternative ports."
McLay said Lae port had become the largest in the Pacific, due to the increase in imported goods mainly for manufacturing, but also for mining infrastructure.
"First the Porgera, then Lihir and now Morobe Mining Joint Ventures and Ramu, where Lae port brought in the construction and infrastructural materials," he said.
"Of course we see the port absolutely stretched to its limits by the infrastructural needs of the LNG project.
"There are always four or five ships anchored offshore, waiting for berth at the port.
"Shipping companies are now charging a 'congestion fee' to importers to try to recover some of the expenses caused by the delays whilst waiting for a berth.
"The imported goods experience further delays while customs clear the goods, which normally end up as storage charges.
"All of these extra costs are either consumed by the importer, or passed onto the customer and adds to the inflationary prices of goods."
Public Enterprises Minister Sir Mekere Morauta said this was a very significant contract for the nation, especially for the Momase-Highlands region.
"Lae port cannot meet current demand, and is becoming an impediment to the economic development of the region," he said earlier.
"Redevelopment and expansion of the port is urgently required so that many large regional projects, including the LNG project, can be built on time and at a competitive cost."