for Kutubu pipeline

New turn in battle for Kutubu pipeline

MOVES to reduce the influence of foreign companies in Papua New Guinea has taken a new turn with the country’s top lawyer now campaigning to have a planned pipeline taken out of oil company hands. Papua New Guinea Law Society president Peter Donigi is standing by his campaign urging that the 270 km pipeline to be built for the Kutubu oil development be tween lagifu and the Gulf of Papua should be controlled by national interests in the form of a local equity venture.

The significance of the Donigi interven tion is that it followed just weeks after the then deputy Prime Minister Akoka Doi came out publicly for nationalisation

of large foreign companies operating in

Papua New Guinea.

Doi has since been demoted, but in his new role as Minister of State he has sig nalled publicly he supports local own ership of the pipeline, and was joined by two other junior ministers, Fisheries and Marine Resources Minister Allan Ebu and Lands Minister Kala Swokin; together with MP Alfred Kaiabe, these two ministers released a statement asking the Government to consider allowing a local company to make a bid for pipeline ownership, adding: “We will not allow benefits from our resources to go to a very few members of the elite class.”

Their support appears to be more for landowner and provincial government ownership rather than a national equity and venture company. Trade and Indus try Minister John Giheno is also believed to support the local ownership proposal.

While the Cabinet is expected to reject the plan, the involvement of such prom inent local people can only further shake already battered investor confidence among foreign firms operating in the country. Local resource companies have also pressed the government to stick by the current deals, pointing out that fore ign investors cannot be expected to put millions of kina into projects and have the rules changed on them halfway

through.

Energy Minister Patterson Lowa and acting Finance Minister Karl Stack have said the Donigi proposal was made too late to be considered, and there is no doubt that Prime Minister Rabbie Nama liu will be anxious to put a quick finish to any further talk about nationalisation or localisation. Lowa and Stack said the country was already getting a 22.5 per cent share of the Kutubu project (includ

ing the pipeline) through state equity,

and that additional equity was available to interested national investors by means

Ok Tedi’s record result OK Tedi Mining Ltd recordedan increased profit of K 24.2 million U 5524.2 million) for the year to December 31, 1989,its biggest ever.

The company said the healthy financial results a high production rate in the second half of the year after problems in the first six months with the failure of the copper and gold mine’s ore

delivery system.

ON palm growers’ plea OIL palm growers in West New Britain Province are demanding K 46 million (U 5547.3 million) in compensation for hardships resulting from low commodity prices over the past four years. Grower

representatives told Agriculture Minister

Galen Lang that New Britain Palm Oil

Development Pty Ltd, the only buyer

and exporter in the province, had failed to pay smallholders proper prices for their produce. The minister offered K 350,000 as an interim compensation payment and promised to investigate the

complaints.

of purchasing shares in the participating companies several of which are listed on the Australian stock exchange.

Consortium leader Chevron Niugini Pty Ltd is meanwhile proceeding with its plans and hopes to have Papua New Guinea Government approval within four months for the development of the Kutubu field, which has proven reserves of more than 120 million barrels. It is planned that the pipeline will run from the lagifu/Hedinia field southwards across the South Highland and Gulf pro vinces to Pa’ia Inlet in the Gulf of Papua, where it will connect with an offshore ship loading terminal.

Chevron, on behalf of partners BP Petroleum Development Ltd, Oil Search Ltd, Merlin Petroleum/Bond Energy, Ampol Exploration Ltd and BHP Pet roleum of PNG, has now applied to the government for a petroleum develop ment licence (PDL) and, under the country’s Petroleum Act, this allows the consortium priority to operate any associated pipeline.

Donigi, a prominent constitutional lawyer, wants the law changed. He said the law was drafted before Independ ence and offer greater protection to foreign companies than local commercial interest. The pipeline should, he argues, have a maximum 30 per cent participa tion level by any investor and be oper

ated as a common carrier that is, the pipeline would be available to more than one oil producer.

He is urging that private firm to be called PNG Pipeline Co Control 51 per cent of the pipeline, raising the esti mated K4OO million (U 55407.9 million) needed for construction from local shareholders and foreign borrowing. He said ownership of the oil and of the pipeline were separate issues, with the latter being of strategic importance to the country. Donigi is one of the princip als behind a company, Monticello Enter prises Pty Ltd; this company itself would not be involved in the pipeline own ership but would promote such a com pany and local ventures for other ma jor projects as well.

Chevron Niugini managing director

Morley Dupre said he was confident the pipeline project would remain in the hands of the consortium. “The Papua New Guinea Government wants stabil ity,” he said. “We’ll sit and wait, and take the challenges as they come.”

The move to throw open the pipeline ownership question could not have come a worse time for the consortium. They have just submitted their request for a PDL and now want to fast-track the

whole project.

The basic flaw in the Donigi proposal is the problem of a Papua New Guinea owned company raising anything like the money needed. His own estimate of local equity capital of about KBO million (US$Bl.5 million) would be an extraordi narily difficult task, given the history of floats in Papua New Guinea. Oil industry officials also believe it would be impossi ble to raise the rest of the money through loans without a Government guarantee, and this would mean that the Namaliu administration would have to forgo borrowing powers for other pro jects in the country. The consortium de veloping Papua New Guinea’s first com mercial oilfield has also ad to fight off continuing demands from local politi cians that they build a full-scale oil refin ery near the Kutubu project, the recently coined title to cover the lagifu/Hedinia and Agogo oil fields.

Last week Southern Highlands pre mier Yaungtine Korombe, on hearing the consortium had decided to proceed with the pipeline and not build a large refinery, demanded te foreign oil ven ture “pack up its equipment and helicop ter and leave the province.” Korombe, who faces the electors later tis year, has predicted Kutubu will become “another Bougainville” unless local demands are met. “I want to also tell the Minerals and Energy Minister not to play around with the people of Southern Highlands be cause, put together with the people of Gulf (Province), we are bigger tan the Bougainvilleans.”