Dead End: Origins of the Solwara JV dispute

QUESTIONS over the more mysterious matters in PNG typically generate a lack of response from those involved, or often at best some “off-record” confirmation of sorts. Our first Dead End opinion piece dives into the joint venture dispute between the government and Nautilus Minerals.
Dead End: Origins of the Solwara JV dispute Dead End: Origins of the Solwara JV dispute Dead End: Origins of the Solwara JV dispute Dead End: Origins of the Solwara JV dispute Dead End: Origins of the Solwara JV dispute

Going by Nautilus chief executive officer Stephen Rogers comments in a conference call in June, it would seem that an underlying concern was that the government had not paid anything towards ongoing project costs since it signed on to earn a 30% stake in March last year.

At that time he said the amount owed was $US47 million.

In any event the matter is in phases of arbitration, with Nautilus saying the government claimed there was a breach of the JV agreement along with a separate matter "concerning certain statements made by the parties" and whether they met the conditions of the JV.

At first glance it would seem that the dispute was between Nautilus and Petromin - which is the state's nominee for handling its stake of the project.

Yet some calling around has revealed this doesn't seem to be the case at all.

The matter is before the courts and no party wants to go on the record. But there are indications that Petromin is not behind the court action as the dispute is over the project's State Equity Option Agreement which Petromin was not a party to.

So what arm of the government is making claims against Nautilus?

Of course there is no absolute confirmation but the talk is that one key official in the Treasury Department has triggered the legal fracas.

The Treasury department, or the Prime Minister's media office, does not have anything to say in response to questions over this possibility while Nautilus cannot confirm or deny due to a confidentiality agreement.

But assuming that the Treasury department is involved, the next question would be how. Is it possible that Petromin was seeking government funds through the Treasury department to honour Solwara JV commitments? And was this move completely turned on its head by a high ranking bureaucrat while senior politicians were busy with the elections?

It's impossible to say for certain but it would be the kind of unexpected hiccup which could trigger the unforeseen arbitration process which is underway.

Perhaps the worst news is that this is a lose-lose situation for PNG. If Nautilus loses the arbitration, it will need to secure another JV partner for its project during a resurgingly difficult financial environment.

However, there is a big probability that Nautilus will win. The fact that the arbitration will be decided in Sydney isn't a good sign, given Nautilus' strong ties in Australia and experience with Australian corporate law.

And a judgement in favour of Nautilus could cost the government millions on top of the purported $47 million owed by June - meaning that signing off on money owed in the first instance would have been a far cheaper option.

Yet this is all purely speculation. After all, no one will go on the record so this is just another dead end until the court outcome emerges - providing that both parties stick to their guns.

Dead End opinion pieces will be run intermittently as they are dependent on journalistic frustration.

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