Kumul-Santos deal questioned by EITI

KUMUL Petroleum’s offer to increase its PNG LNG equity through a conditional arrangement between Santos has raised concern over the lack of transparency surrounding the arrangement, according to the PNG Extractive Industries Transparency Initiative.
Kumul-Santos deal questioned by EITI Kumul-Santos deal questioned by EITI Kumul-Santos deal questioned by EITI Kumul-Santos deal questioned by EITI Kumul-Santos deal questioned by EITI

PNGEITI head of national secretariat Lucas Alkan

Staff Reporter

KPHL offered to acquire 5% of Santos' equity in the PNG LNG project valued at $1.4 billion (about K4.9 billion).
PNGEITI head of national secretariat Lucas Alkan said: "While it is understood that the compromise between two major players in the PNG LNG project as purely commercial, PNGEITI is concerned at the opaque nature of the environment in which such arrangements are being made, particularly when a substantial amount of money belonging to the people of PNG entrusted under the stewardship of KPHL is involved."
Alkan said the deal could be likened to the controversial Union Bank of Switzerland (UBS) transaction which is being probed by a Royal Commission of Inquiry costing taxpayers millions of kina, The National newspaper reported.
"We understand Kumul has already made a partial payment of $55 million (about K193.6 million) and subsequent payments to finalise the transaction are expected to be made in December," he said.
"KPHL has a moral and corporate reasonability to be transparent and accountable to Parliament and the people of this country when conducting its business.
"PNGEITI, which is a global best practice standard for the good governance of the extractive sector that PNG is a member of, takes the position that Kumul must inform the public on where financing is being sourced to secure the purchase of the five per cent additional equity for the State.
"The details of this transaction, whether it is being funded from Kumul's budget, any external borrowing by Kumul on behalf of the State, if so, what asset is being used as collateral or through the national budget (this is not in the 2022 supplementary budget).
"Further, it is not clear as to whether the National Executive Council has approved Kumul to execute this transaction to acquire additional equity from Santos."
Alkan said the public had the right to know the details and understand how KPHL would be affected, given that a $300 million (about K1.08 billion) debt would be inherited from Santos.
Alkan said that PNGEITI is not against Kumul's proposal to acquire additional equity from Santos as it was consistent with the government's policy objective of having greater equity interest in resources developments.
But Santos' intention to deal exclusively with KPHL regarding the sale raised a lot of questions.
"We strongly urge Kumul and Santos, who are both active members of the PNGEITI Multi Stakeholder Group, to demonstrate good corporate citizenship and uphold the principles of the EITI Global Standard by disclosing the commercial and economic nature of this transaction for the sake of transparency and accountability in this planned sale of Santo's 5% share in PNG LNG," Alkan said.