An Open Letter to Dr Fabian Pok by Hela Governor Philip Undialu


I have some real issues for your clarification and they are;

1. Why did State ignored recommendations or proposal by State Negotiation Team or SNT backed by Ashurst, KBR, Wood Mackenzie, and signed a completely different agreement? I have confirmed with some SNT members and let's not fool fellow leaders, professionals and our peoole in general.

2. Why did State signed an agreement when Total failed to submit important requirements of law? I have confirmed that the from Acting Secretary Petroleum to Chief Secretary as Chairman is real, there exist such a signed letter and State brushed that and signed.

3. Why did State ignored StateSol advice on serious implications? His media statement this week Wednesday confirms that Gas Agreement is subject to Total fulfilling necessary requirements. What do you think those necessary requirements are? And are those requirements not necessary to be complied with first? Why did we ignored advise for six months adjournment?

4. Why did State ignored 3 consecutive letters from Governor of Central Bank not to sign the Agreement until our Monetary regulatory requirements are complied with? In the letter, he warned that he let go the the first LNG project though fundamentally flawed GA but will not be allowed again.

5. Why did State give Tax Exemptions having known we lost K6.0 billion from PNGLNG? PNG stand to loose another K6b or more because of the GST and other exemptions.

6. Corporate Tax used to be 45% since first Oil Project in 1990 but reduced to 30% under PNGLNG. Why did State ignore SNT reccommendation to bring back to 45%? A lost of 15% is a serious question State need to be responsible because we will again loose Billions of Kina every yeat.

7. If we can reduce Tax exemptions and reduce Corporate Tax, why didnt we ask for exemptions on Sunk Cost as recommended by SNT? As announced by DPM , we will pay our sunk costs after first sale of gas. Remember, any capital cost you want to pay after project construction will apply Premium costs ranging 10-30% on the principle amount.

8. On one end, we talking about better deal on DMO but I think developers playex dump fool on us. Why I say this? Because currently for NiuPower and Dirio Power, we are paying gas price at 9% Japanese Crude sales price or US$5/mmbtu. The Papua LNG agreed pay around US$5/mmbtu. That is, 9% of JCS is same as $5. Therefore, i think we have been fooled.

Why did we ignore SNT recommendation for 2% JSC and went for $5/mmbtu or 9% JSC which means the same thing?

9. Why Central Provincial Government, very host of pipeline and LNG facilities NOT invited to be a party to the agreement?

10. Did we agreed for 2% Gross Wellhead Value payment for Royalty and development Levy? Under the PNGLNG, they are literally deducting 1.6% and paying only 0.4% because of deductions such as Opex, Capex, and Premium on Capital cost. Over the last four years (2014 -2017) we lost K1.2billlion. Did we ever leant from that?

11. The SNT team had a clause called “Lessons Learned from PNGLNG”. One of the lessons learned was the confirmation that PNG lost K48 billion from construction phase to operation phase. What actions have we taken to correct that?

12. State need to explain to the parties affected by PNGLNG project wether or not there will be any implications as Papua LNG likely to share common facilities.

13. I heard that the Financial Model doesn't even incorporated financing and refinancing in their Open Book Economic Model. The numbers used in the economic model is only Class IV - ORDER OF MAGNITUDE COST ESTIMATE of +- 50 %. The likely high case cost estimate for the overall project will be plus 50% of the current estimate of US $13 billion.

14. The Foundation Volume is rumoured to be stated as 10.3 tcf, when their outdated proven reserves is only 6.7 tcf. Where will the extra 3.4 tfc of gas will come from. What's the Basis? For any Petroleum project, the Foundation Volumes determines everything from Field Development Plan to Cost Estimate, Financing. Etc. Also clarify how the treatment of P'nyang and PNG LNG gas will be like if there's shortfall on committed gas supply for Papua LNG.

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