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Somare advised to hold off on agreement

PORT MORESBY, Papua New Guinea (PNG Post-Courier, April 17, 2009) – The Government has been advised that Papua New Guinea will lose billions of kina if rumours about an InterOil led Liquid Niugini Gas Limited (LNGL) gas agreement and potential discounted sales to a Chinese buyer are correct.

In terms of the gas agreement, should these concessions be given, it will result in a substantial amount of the value of the natural gas that will be given to LNGL, with little left for provincial government, landowners and the rest of the nation.

Treasurer Patrick Pruaitch has raised concerns about the proposed agreement with Prime Minister Sir Michael Somare, advising him to defer the approval or execution of the agreement until all relevant State agencies had vetted it, in a letter dated March 24, 2009.

"Based on these assumptions, Treasury’s preliminary analysis indicates that the total cost of the State of these concessions could exceed $US20 billion over the life of the PNG LNG project," Mr. Pruaitch said in the letter.

Pruaitch is in his Aitape-Lumi electorate and could not be contacted directly for comment. His office and Treasury Secretary Simon Tosali advised he was the only one authorised to comment on this issue.

But Petroleum Minister William Duma when contacted advised that these issues were still being negotiated on and the Government had not made any decision on what was raised in Pruaitch’s letter.

Pruaitch wrote to Sir Michael, advising him that the Department of Treasury and the State Solicitor’s office were concerned that the agreement was being rushed through without its implications to the State being analysed properly. "Treasury believes the State should attempt to offer fewer concessions to projects as we move forward," Pruaitch said. There is an additional and substantive concern as the project agreement also contains a non-binding discrimination clause. The effect of this clause will be that any fiscal concession or incentives that are made available to the LNGL project, even if it was not the State’s intention, at the time it granted the new concessions.

Pruaitch in his letter raised that there were no proven reserves — only contingent resource estimates and that LNGL was refusing to provide a live project model to the State to evaluate the project (unlike the PNG LNG Project, where all parties, including the State, worked off an agreed project model).Pruaitch in his letter also pointed out other concessions being sought from the State (which was dangerous) were as follows:

The letter states that these concessions are already not necessary as the PNG LNG project, led by ExxonMobil has signed a Gas Agreement on substantially more onerous terms. There are also strong rumours that the LNGL are trying to secure sales contracts with the Chinese buyer at a highly discounted gas price that will significantly reduce the amount of revenue that will flow back to PNG. This is potentially a double negative for PNG, less revenue in the first place and then less tax. It is tantamount to giving away the nations’ heritage, according to Pruaitch’s three-page letter.

Acting Prime Minister Dr Puka Temu could not comment on this matter. His office advised yesterday that the matter was before ministerial review committee.

Papua New Guinea Post-Courier:

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