LARGEST SCAM IN PNG HISTORY


by SAM J KAUPA

THE DEMISE OF OROGEN MINERALS AND THE EMERGENCE OF OIL SEARCH
HIGH VALUED PNG COMPANY - OROGEN MINERALS WAS MERGED WITH UNKNOWN AUSTRALIA’S OIL SEARCH TO ACCESS HIGH VALUED PNG MINERALS AND HYDRO CARBON ASSETS – UNDER THE PRETEXT OF THE NOW BOTCHED PNG TO QUEENSLAND GAS PIPELINE PROJECT WITH EXXON MOBIL.

Mineral Resources Development Company Limited (MRDC) was established in 1975 and was 100% owned by the Government of Papua New Guinea.
It was initially established as the State Nominee to acquire the State and Landowner equity interests in mining and petroleum projects and to manage the equity funds for landowner companies from the major resource development areas of PNG.

In 1996, during Sir Julius Chan’s term as PM, the major interests of MRDC were partially privatised, through the creation of Orogen Minerals Limited (OML), of which the MRDC held a 51% controlling shareholding. In April 2002 during the Somare reign, Orogen merged with Oil Search Limited (OSL), but MRDC retained an 18.1% stake in the new company. OSL is now PNG's largest oil and gas producer.
MRDC was again restructured in 2007 under Somare, with the formation of Petromin PNG Holdings Limited, which took control of the last State asset, the 20.5% equity interest in the Moran Petroleum Project. As a result of this restructuring, MRDC's chief role became the management of Landowner and Provincial Government interests
Orogen Minerals Limited at the time was a holding company which controlled stakes in Papua New Guinea resource companies. The Company had a portfolio of high valued assets developed by subsidiaries of major international resources companies. Orogen had interests in oil development, producing oilfields, gold mines and gold deposits including Kutubu, Gobe, Porgera and Moran.

In 2002, Australian firm Oil Search merged with PNG’s Orogen Minerals for a mere $1.4 billion under some dubious deals with those at the helm of Orogen Minerals.
The merger gave Australia's Oil Search a 37-percent majority stake in the US$3.5 billion PNG to Queensland gas project led by Exxon Mobil Corp (NYSE:XOM - news) and access to significant oil and gas assets in PNG including the Moran oil fields. It also created Australia's third-largest energy company with a market capitalisation of A$1.4 billion.
Did this PNG to Queensland gas project ever take off? NO. So who benefitted in this merger? Oil Search Australia and corrupt PNG officials at the time.

So the new group, called Oil Search, became the largest listed company in PNG. ``This merged company had enough muscle and had a real influence on both building up production from the existing oil producing wells in Kutubu and Moran and had a more aggressive exploration programme - Oil Search chairman at the time, Trevor Kennedy told reporters that Oil Search would offer 1.2 of its shares and 45 cents cash for each Orogen share, valuing Orogen at A$1.97 a share or A$632 million.

In summary, Orogen Minerals was merged with Oil Search without any proper valuation. Orogen Minerals had real assets. Oil Search didn’t have assets except a 37% majority stake in a hypothetical US$3.5 billion PNG to Queensland – which never eventuated.

And they were merged for a lousy A$1,4 billion as Orogen's low debt and strong cash position gave Oil Search much-needed access to funds for further expansion which they did.

Oil Search cashed in on that deal, a deal that was EPS (earnings per share) positive and certainly gave them a good production boost. The obvious physical attraction for Oil Search was the cash.
Analysts also said it would make the group more attractive to predators willing to tackle the risky PNG market.
Oil Search's initial priority was the PNG-Queensland pipeline project, with long-awaited agreements with gas suppliers expected to be finalised shortly, as well as plans for PNG equity in the project. ``We believe an imminent announcement on gas agreement fiscal issues is quite possible with the PNG government which will put to bed a lot of the remaining issues surrounding the development,'' Oil Search managing director Peter Botten said at the time.

THE PNG-QUEENSLAND GAS PIPELINE NEVER EVENTUATED. INSTEAD OIL SEARCH AND EXXON MOBIL COLLUDED AND BUILT THE LNG SITE IN PORT MORESBY AFTER OIL SEARCH FRAUDULENTLY MERGED WITH OROGEN MINERALS.
SO WHO LOST IN THE END: PNG PEOPLE through dubious deals of those morons making decisions at the time.

Don’t also forget that the Government owned 25% of Porgera through Orogen Minerals until the merger with Oil Search who offloaded the shares to DRD of South Africa.

AND PETER BOTTEN WAS THERE ON DAY 1 AND SAW IT ALL HAPPEN.
Botten said and he did exactly that. The group focussed on oil and gas and divested Orogen's mineral assets after the merger deal was bedded down. Orogen shareholders held about 34 percent of the expanded Oil Search under the merger, with the remaining 66 percent held by current Oil Search shareholders – an unfair deal when they had no assets at all.

The largest shareholder of Orogen Minerals - PNG government, went into election that year - 2002, with its 51 percent stake in Orogen diluted down to 18 percent in the new group, Oil Search. An existing 15 percent cap on non-government shareholding was removed.
Botten said then that the deal would be earnings per share and operating cash flow per share accretive, but refused to give further details. Orogen chairman Lindsay MacAlister, chief executive officer Francis Kaupa and chief operating officer Jeffrey Quartermaine plan all resigned from the group. Oil Search managing director Peter Botten continued in his current role.

The PNG government through Orogen Minerals had a 6.5% stake in Lihir Gold but sold it for $145.7m. In doing so it booked a profit of $71.2m on the sale. Orogen made the sale to take some of the pressure off the funding requirements associated with its stake in the PNG to Queensland gas pipeline project and to allow it capitalise on other PNG mineral assets that are likely to be up for grabs in the near future.
After the demise of Orogen Minerals, the remaining State's equity has since been transferred to Petromin PNG Holdings Ltd, so the focus of MRDC is now the management of the Landowner equity interests in both mining and petroleum projects.

History of MRDC and Orogen Minerals

MRDC was incorporated on 27th May 1975 under the Companies Ordinance 1966. It was not until 1981 that it became fully functional as a company entrusted with the duty to manage mining and petroleum resource equity interests on behalf of the State and Landowners.
Followings are the major historical events MRDC has gone through.
In 1996 MRDC was subjected to a partial privatization of its major interests resulting in the creation of Orogen Minerals Limited (OML), of which it held 51 percent controlling shares while other major corporate bodies and individuals collectively held the remaining 49 per cent in Papua New Guinea and overseas.
Following this exercise, MRDC was made to settle to its newly acquired role as primarily, the manager of landowner and provincial government interests in Papua New Guinea's major resource projects as well as acquiring interests on behalf of the State and then on-sold the State's equity interest to OML.
However, in mid-April 2002, Orogen merged with Oil Search Limited (OSL) after its shareholders voted in support of the merger. As part of the purchase price, MRDC as majority shareholder of OML, retained an 18.1 per cent stake in the new company.

In 2007, MRDC was yet again made to restructure itself with the formation of Petromin PNG Holdings Limited. This implementation has resulted in the last State asset of 20.5 per cent equity interest in the Moran Petroleum Project transferred to Petromin through the Petromin PNG Holdings Limited Authorisation Act 2007. This left MRDC to settle to its primary role as the manager of Landowner equity interests.

In 2008 one of MRDC's managed subsidiary companies Mineral Resource Lihir Limited exited from MRDC with 4.84 per cent equity interest.

In summary, Oil Search saw the immense opportunity in the PNG oil and Gas industry, cooked up a hypothetical PNG to Queensland Gas pipeline project, colluded with some PNG government officials and merged a high valued PNG people owned company, Orogen Minerals with an Australian K2 company, Oil Search whose only “asset” was a 37% equity in a hypothetical gas pipeline project from PNG to Queensland.
By merging with Orogen Minerals, their market cap increased and they had access to all oil and gas projects, and mineral projects which they later divested.

That was the start of Oil Search and Peter Botten was there from Day 1. So don’t tell me that they were there for the last 90 years and investing heavily in PNG. Chevron did and they later bought out Chevron's share in thos projects. What did they bring? Nothing from the start.

Now Oil Search Limited owns (amongst others):
1. 60.05% of PDL 2 – Kutubu (KPHL – 0%)
2. 49.51% of Moran Unit (PDLs 2,5 &6), KPHL – 11.28% through Eda Oil
3. 22.34% of Gobe Unit (PDLs 3 &4) – KPHL – 21.39%
4. 100% of PDL 1 Hides GTE

This make this Australian listed company the biggest player in the PNG Oil and Gas Industry who started from nothing.

Therefore, Peter Botten shouldn’t be blowing his horn about tough government decisions and start laying off Papua New Guineans crying that it is costing him arm and leg. He should rather shut down that flashy corporate office in Sydney with an extremely high overhead cost, costly drilling ventures in no man’s land in Alaska and put something back into where he started from rather than laying people off and selling exploration assets. Remember where and how you started your maiden voyage to the top echelons of the O&G industry. //End

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