PRG Chairman sets record straight

Chairman Sisimolu responds to PNGi’s misleading report on Petroleum Resources Gobe (PRG).

Juha Pipeline Los to receive project benefits

Popular community leader Mr Mathew Sisimolu took over the leadership of Petroleum Resources Gobe (PRG) in August 2019. Since then he has been working hard to restore leadership and direction in a landowner trust company that has lost its way, with over 20 years of poor leadership at the board level

Mr Sisimolu says his board has inherited legacy issues that are being addressed, working closely with the Mineral Resources Development Company (MRDC).

The PRG Chairman, who is also Chairman of the Gobe Leadership Committee (GLC), the mouthpiece for Gobe landowners, says most of the legacy issues would have been resolved long ago if only the Gobe landowners cooperated and worked together

“We are our own worst enemies, yet we point our finger at others,” he says. “That is why settling true landownership of the project area remain unresolved to this day.”

He said bad investments like the Boroko Casino Project is blamed on others when the fact is that the PRG Board under the previous leadership defied MRDC advise and went ahead with putting K11 million into the now failed project.

“We are working with MRDC and the government to recover our interest in this disaster, and if it means enforcing our rights in the court of law and holding those responsible to account, we will do it.”

The Chairman said already, his opponents and detractors were using various platforms to unsettle the focus of the PRG Board under his leadership..

A case in point is the misleading article titled ‘Landowner funds mismanaged on a grand scale: Gobe Petroleum Part 2’ that was published by PNGi on its social media page on Friday 28 May 2021, which Mr Sisimolu says cannot go unchallenged. “The author seems to be knowledgeable on issues relating to the Gobe project, but has a malicious intent to distort the truth and make MRDC responsible for the Gobe mess

“The article is grossly misleading, and does nothing but bring disrepute to the integrity and reputation of the current PRG leadership and the board and management of MRDC. “Let me set the record straight on each of the issues raised in the blog article.”

1) GOBE LAND DISPUTE IS ONGOING

Page 2 of 5 The identification of the “project area landowners” is a critical requirement under the Oil and Gas Act. However, for the Gobe Petroleum Project, this remains an outstanding task since the project commenced 30 years ago because of various lengthy and outstanding land ownership disputes in various court cases. Without the identification of the “project area landowners” by the Petroleum Minister, there can be no payment of royalty and equity benefits – this is the law. There have been two attempts made at identifying the “project area landowners” by way of Ministerial Determinations – Hon. Roy Yaki (2002) and Hon. Sir Moi Avei (2003) but various groups of ‘landowners’ challenged each one. There has also been a number of hearings by the Land Titles Commission (LTC) to determine ownership of the customary lands, however, the findings have been challenged in the Courts and remain unresolved. Ministerial Determination pursuant to Section 169A and Section 170 of the Oil & Gas Act can be concluded after the completion of the pending LTC (provided there is no further dispute or contest by the landowners). So this matter is currently before the LTC to determine who the project area landowners are. By law, MRDC is not responsible for the landownership dispute settlement. This is a process outside of its mandate. PNGi’s assertions that landowner dispute settlement is MRDC’s responsibility is incorrect and misleading. It is wrong and irresponsible for PNGi to report that the State has been complacent regarding the settlement of Gobe Land dispute issues, which has spanned almost three decades. The State has demonstrated its commitment to resolving the land dispute through the staging of two Titles Commission, one LTC Review, one Mediation, and one Alternative Dispute Resolution (ADR) in 2009.

 2) PRG ENTITLED TO PURSUE K180M ROYALTY CLAIM

 PRG is the corporate Trustee Company responsible for managing the royalty and equity benefits from the oil project in PDL 3 (South East Gobe) and PDL 4 (Gobe Main) for and on behalf of the beneficiaries (the lawful beneficiaries are yet to be ‘identified’ because of the outstanding land ownership disputes discussed above). The Board of the Trustee which I chair is mandated to make decision for and behalf of the Trustee Company. The assertion by PNGi that PRG has no authority to make or exercise its right to make a claim against the State over outstanding and underpaid royalty monies, is a legally flawed statement.

 PRG is mandated by the State as the corporate trustee, and agreed to by the landowners as captured in the Gobe Memorandum of Agreement signed in 2001. Furthermore, the Oil and Gas Act requires the project operator of the resource project to pay the royalty to the Petroleum Minister on a monthly basis and the Minister is then supposed to pass on the royalty benefit to the corporate trustee. By virtue of the Oil & Gas Act, Section 168 (Royalty Benefit), where the State grants a royalty benefit to beneficiaries identified under Section 169, the benefits are to be held in trust by a corporate Trustee pursuant to Section 176 of the same Act. The law to hold, to manage and pursue its right to claim royalty monies mandates PRG. It is an incorrect statement by PNGi that MRDC has sought to take control of the funds through a legal battle. PRG lawfully exercised its right to claim royalty funds it determined was underpaid – the case reference is WS 1488/2014 with PRG as the first plaintiff and MRDC the corporate manager of PRG as the second plaintiff. The matter is currently before the Supreme Court SCR 83/2018. During the peak period of oil production at Gobe, royalty payments that were held in trust accounts were used to pay creditors, and substantial amounts under the custody of the Departments of Finance and Petroleum and Energy went missing. As the corporate trustee, it is the duty of PRG to initiate actions to recover the missing funds. It is irresponsible to provide misleading information and to make speculations on matters that are still before the court and are sub judice. It will be within PRG’s right to commence contempt proceedings or other appropriate legal action to seek remedy against the publishers of the article on the PNGi page.

3) 2014 PRG AUDIT REPORT ADDRESSED

 All related audit issues have been addressed and provided to the PRG Board. Where there are audit issues, the PRG Board has taken steps to address them. The issues noted in the 2014 audited Financial Statements have been appropriately addressed in the subsequent audit periods and the audit opinion has significantly improved. For the record, Deloitte are PRG’s independent auditors, and as of 2016 the PRG audits of the three Trusts have improved significantly to unqualified status. The management fee rates charged by MRDC are reasonable and only to recover cost and not to make a profit. The fees charged depend on the company’s financial capacity. The PRG Board has the authority to decide whether to accept the fees rates or not.

 4) PRG INCURS EXPENSES AS A PROJECT PARTNER

 PRG, as an equity joint venture partner in the Gobe PDL 3 and PDL 4, has cash call obligations, mostly charged in US dollars.

As a joint venture partner, PRG has project-related expenses in the extraction/development of the oil in PDLs 3 & 4. Being an equity partner comes with costs. PRG also incurs costs associated with investments in other business opportunities pursuant to the investment mandate given to the corporate trustee by law. The investments provide returns to the company which are in the form of dividends or in the investment value. Like all directors on any board, PRG directors are entitled to a fee. Corporate Trustee directors’ fee is only for landowner beneficiary directors on the Board. The ex officio directors, which include the Gulf Governor, the Southern Highlands Governor’s nominee, and Secretary for the Department of Petroleum receive sitting allowances. The Managing Director of MRDC does not receive any of these fees. The suggestion by PNGi that the MRDC Managing Director has received certain director’s fee from PRG is wrong and intentionally misleading. 

 5) K30 MILLION FRAUD CLAIM UNTRUE

 A commercial transaction between Petroleum Resources Gobe (PRG) and Petroleum Resources Kutubu (PRK) was referred by a former PRG director to police for possible fraud. Following an investigation, the MRDC management and Mr. Mano were cleared of allegations of fraud connected with the K30 million inter–company loan between PRG and PRK. Police wrote a letter to MRDC clearing the management of the allegations, stating there was no evidence of fraud or any criminality involved. At the outset, it must be made explicitly clear that the K30 million transaction in question was a commercial transaction in its entirety. Both PRG and PRK boards have addressed this issue comprehensively. The MRDC Board has also reviewed and dealt with this issue as the shareholder in trust for both companies.

 6) INVESTMENTS IN CAIRNS, AUSTRALIA

 The issue of ownership of the commercial property in Cairns has been properly resolved and is no longer an audit issue. The income from the Cairns property is regularly reported to the PRG Board and properly accounted for. An employee of MRDC was named as a director in the Australian investment holding company at the time this company was set up, at no cost to the company. This was because of requirements under Australian law regarding company directorship. This approach was to minimize costs of paying an Australian solicitor or agent fees for being a director. As Chairman, I am satisfied that PRG is earning good income from its 25% interest in the Cairns property.

 7) THE FUTURE FOR PRG

 The Gobe oilfields have matured and have reached their end of life. From peak production of 25,000 barrels per day (bpd) in 1999, the fields produce 600bpd currently. The Gobe oilfields have been operating at a loss in the last 5 years and is just a question of time before the operator pulls the plug on the dreaded abandonment. It is very unfortunate that during its peak production years, great investment opportunities were missed. Had the trend continued, PRG would have become insolvent 5 years ago. Between 1996 and 2007, 100% of PRG’s income came from oil with nothing from investments. Today, it is the other way around. 100% of its income comes from investment and nothing from oil. It is the revenue from aggressive investments done since 2008 when Augustine Mano was appointed Managing Director of MRDC that keeps PRG operating successfully. In the PNG LNG Project, PRG paid for its interest as Joint Venture Partners in the PNG LNG Project and was never carried by the Government. Petroleum Resources Kutubu and Petroleum Resources Moran also paid theirs upfront. This is a first for landowners in resource projects, and ensured their interests were never diluted, like that of the green fields. That decision has tripled PRG’s revenue from the PNG LNG Project. That is the result of visionary leadership, and sound advice from the MRDC management. PRG is the second largest owner of the Pacific Property Trust, which owns prime real estate in Port Moresby CBD including MRDC Haus and MMI Building, and Gobe Haus in Lae CBD. PRG is a shareholder of Hevilift, and also has a substantial stake with MRDC in the 5 Star Taumeasina Resort in Samoa. These businesses and other blue chip investments are paying dividend and enabling sustainable flow of income for PRG. PRG’s investments were valued at K19 million in 2007. As of last year, the value of their investments stood at K133.5 million. Without investments, Gobe would have become a disaster. Thanks to prudent investment advice from the current MRDC management team, we have grown our investment substantially in the last 13 years. We will continue to invest our revenue from oil and gas wisely because that is the only way we can secure a bright future for our children. The implementation of the different trust structures in 2015 protects the Future Generation Fund, which owns the investments, from the massive costs associated with the Gobe oilfields abandonment

Mathew Sisimolu

 Chairman

 Petroleum Resources Gobe(PRG)

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