Marape defends K3.5 billion Kroton equity deal

Prime Minister James Marape has defended a recent National Executive Council [NEC] decision regarding the 4.27 percent Kroton equity option in the PNG LNG project, dismissing allegations of fiscal mismanagement and nepotism from a highly critical Opposition.

Friday's parliamentary debate saw former Justice Minister Kerenga Kua and former Prime Minister Peter O'Neill unite to accuse the government of bypassing established legal contracts and exposing billions of Kina in landowner wealth to political interference.

Sinesine-Yongomugl MP Kerenga Kua ignited the floor during Question Time, demanding to know why the Marape-Rosso government had willfully rejected the original financial parameters established under the 2009 Umbrella Benefits Sharing Agreement [UBSA] signed in Kokopo.

Under Clause 6 of the UBSA, the purchase price for the additional 4.27 percent equity slice in Kumul Petroleum Holdings Limited [KPHL] was contractually fixed at US$240 million per 1 percent, placing the total transaction value at approximately US$1.02 billion [approx. K3.5 billion].

"The NEC decision says they must negotiate the price again," Kua said. "Why does the government reject the contractual agreement which was signed by all parties and stakeholders on the agreed price? The Prime Minister needs to clarify that."

Kua further expressed deep anxiety over the Cabinet’s creation of a Special Purpose Vehicle [SPV] to manage these lucrative assets, raising concern that the entity is currently overseen by politicians rather than corporate professionals.

"The money belongs to the people and it's a concern when such big amounts of money are managed by politicians," Kua said. "Why not put investment analysts and investment managers properly licensed by the Securities Commission instead? We owe the people a bigger fiduciary duty."

Replying to the queries, Prime Minister Marape argued that the equity allocation was originally born out of a 2009 National Alliance government policy rather than a statutory entitlement, claiming that successive administrations had systematically blocked project beneficiaries from exercising their purchase rights.

Marape said since production of first gas in 2014, the PNG LNG project has effectively retired 70 percent of its bank-financed capital expenditure, fundamentally altering the actual valuation of the shares.

"That US$240 million price tag included that 70 percent bank-financed element. If you deduct that 70 percent off, landowners and the five provincial governments would have only paid 30 percent of that valuation," Marape said.

The Prime Minister said between 2014 and 2026, Kumul Petroleum had subsumed the 4.27 percent value, absorbing total revenue distributions exceeding K12 billion. He claimed previous governments failed to give the five beneficiary provinces in Hela, Southern Highlands, Western, Gulf, and Central, the opportunity to raise funds and purchase their shares, opting instead to use Kumul assets as leverage for international transactions, such as the controversial UBS-Oil Search share deal.

The Prime Minister's account drew a furious point of order from Ialibu-Pangia MP Peter O'Neill, who accused Marape of continuously misleading Parliament and the nation on the true nature of the UBSA transaction.

O'Neill clarified that the option to buy was always legally open to the landowners, but the state actively intervened to make it more affordable when local governments faced funding deficits.

"In 2014, we made a decision, realizing that the landowners and the provincial governments could not afford it. We discounted it to US$150 million per share," O'Neill revealed to the house.

"Nobody was stopped from going to raise the money. Today, the Prime Minister is free gifting these five provinces and the landowners at the expense of the entire nation. That was not the intention of the Somare government or our government. You need to tell the truth," O'Neill added.

Marape sought to de-escalate concerns regarding political control, assuring the House that the current asset structure is merely temporary.

"The SPV is an interim structure. Look at the cabinet decision, it says interim structure until the five provincial governors and the landowners themselves sit and decide what to do with it," Marape said.

The Prime Minister extended an open invitation to the five regional governors to review the NEC decision collectively and advise the state on how they wish to structurally transition the wealth out of Kumul Petroleum and into an independent, sustainably run public company.

Marape said a comprehensive, transparent written report detailing KPHL’s lifetime earnings will be officially tabled before Parliament in the coming weeks.