Sonk explains landowners’ 2pc stake in LNG project

  • Apr 18, 2019
  • The National

THE key difference between the Kroton Equity and the landowners’ 2 per cent equity is that the 2 per cent equity is a free carried equity for the landowners, says Kumul Petroleum Holdings Ltd managing director Wapu Sonk in response to queries from The National.

He said KPHL provides the free carry for 2 per cent direct project interest for the landowners.

“KPHL also pays for all the Capex (capital expenditure) and all financing cost, etc, during construction and hands over this equity to Mineral Resources Development Company to manage, starting from the first gas or LNG production,” Sonk said.

“This benefit is provided for in the Oil and Gas Act and it’s fixed,” he said.

“The Kroton Equity benefit was a one-off negotiated outcome during the PNG LNG project UBSA negotiations in Kokopo in 2009.

“It is a commercial option whereby the landowners and the provincial governments affected by the PNG LNG project agreed to pay the State a fixed price of US$240 million (K810 mil) per percentage share for 4.27 per cent of indirect interest in Kroton #2 Limited.

“Kroton is a special purpose vehicle for the State’s interest (16.6 per cent) in the Papua New Guinea LNG project.

“The main reason for giving this Kroton share option was because the 2 per cent free carried equity interest provided for in the PNG LNG project was not enough given five provincial governments, estimated 60,000 plus landowner beneficiaries within the footprint of the PNG LNG project.”

When asked why the Oil and Gas Act was not reviewed or the 2 per cent equity increased before this month’s signing of the gas agreement for the second LNG project, Sonk said: “This question has been asked by a lot of people and it is up to Government and the responsible agencies of government to act on this issue.”

Prime Minister Peter O’Neill said this week the Government would review the Oil and Gas Act.