OilSearch Chairman and Senior Management needs to stop shifting blame : Gulf Governor

The Oil Search Chairman and Senior Management need to stop deceiving the media and collectively own up to the processes that were fast-tracked in an effort to capitalise on PNG's resources while leaving the PNG Landowners stranded and little possibility of receiving royalties promptly. These were the sentiments issued from a senior member of the Government and the host province of the 2nd LNG project.

Governor for Gulf, Hon. Chris Haiveta commented, "Oil Search has had a very long
relationship with PNG; over 89 years of history. They have continued to build their empire in
PNG with our rich resources and the on-going acquisitions of major Oil and Gas projects and
concessions from major international brands PNG like Chevron Texaco in 2003. They have
been here long enough to know better than to try and deceive PNG and push false

“Oil Search has been using the Government for its own ends time and again. The transfer of
Orogen Minerals, and along with that the State equity in Kutubu and Gobe Projects, to Oil
Search by Mekere Government was what made Oil Search, not new discoveries by the

“Oil Search’s current equity in Papua LNG Project is not from its own money, but the loan
that Government took to buy shares in Oil Search and to provide it the protection against

"Oil Search chairman Rick Lee is out of line with his comments when discussing the Landowner Groups and Landowners identification process. The entire reason we are now facing the issues with the delayed royalty payments is based squarely on Oil Search lack of ability to correctly communicate and inform both Exxon and the PNG Government of their experience of the process and the requirements of the Oil and Gas Act." Mr Chairman: you are being mislead and fed wrong information to make it look good.

"Oil Search must accept that they continue to generate enormous profits from PNG, they
receive beneficial Tax credits, yet they are trying to push the blame to the PNG Government for their lack of corporate governance in managing the process when it comes to the Landowner identification."

"The fast-track approach to commence the project by Oil Search then opened the doors to
further confusion when they called for a new Landowner identification process for existing
brownfields PDL's when there was already an existing gazetted landowner documentation in place. The determination was only required for the three new PDL's including Hides 4, Angorie, and Juha, plus three new blocks of Hides 1 PDL. The poor corporate advice provided by Oil Search to Exxon has led directly to no beneficiaries being identified."

"Oil Search has sponsored numerous Landowner consultations across PNG. Mr. Lee has concluded that these meetings and discussions over the years have essentially have been a waste of time. Mr. Lee has accepted that they invited non-gazetted landowners, in addition to having other land managers that were not duly appointed managers of the land. Oil Search has in fact created a far greater issue, with people claiming land and rights they are not

"The Government accepts that Landowner identification process was always going to be
complicated if this was not completed before the PNG LNG project commenced. The PNG
LNG project should have never started without the gazetted landowners.
This was an approach pushed by Oil Search and advised to Exxon and the PNG Government that this would not be an issue. They advised the immediate project to start, in a clear desire of corporate greed."

"Oil Search should not be concerned with how the royalties will be used and continuously calling for transparency. There is no issue with Transparency of funds; the PNG Government will work closely with the correctly identified landowners to further improve the provinces and districts.

Under the leadership of this Government, we are now completing the Landowner identification exercise that was ignored by Oil Search and the previous PNG Government. This was a clear breach of the Oil and Gas Act as the final determination and vetting were not completed for the Landowners before applying for the Petroleum Development Licence (or PDL) and the project approval. It was properly done by Chevron in Kutubu, Moran and Gobe and Oil Search knew it.

"In their desire to fast track this project they ignored the PNG Government Oil and Gas Act that was in place and they further ignored they own corporate experience and memory of the existing Oil and Gas regime. They leveraged their power with the previous Government and ignored the development levies and royalty entitlements calculations that were gazette as part of the Oil and Gas Act. They persuaded the previous Government to pass this new contract as an Act of Parliament, which gave way to the Landowners receiving less development levies and royalty entitlements."

Governor for Gulf, Hon. Chris Haiveta concluded by saying, "Oil Search should be more concerned with the fact that under their current contract, royalty payments were changed from calculations based from 93% of export price in Kutubu to effectively 20% of export price in LNG Project. We got less than a quarter of what should have been our royalty and Development Levy.


PNG LNG Benefits (Royalties and Development Levies) Legally Stolen through Flawed Agreements

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